Survey of reward in multinational firms

INTERNATIONAL REWARD

Survey of reward in multinational firms

Many multinational organisations now manage their employee pay programmes on a global basis, according to a survey by Mercer Human Resource Consulting. 

The survey reveals that 85% of respondents currently have a global pay strategy in place. About half of these (42% of the total) have had the strategy in place for less than four years, while the remainder (43%) moved to a global approach more than four years ago. Of the 15% of firms that do not have a global pay strategy, all say they intend to introduce one within the next three years.

Mark Edelsten, a European partner at Mercer in London, said: "Increasingly, pay is being managed from a global perspective to facilitate global expansion efforts, better manage labour costs, create internal equity, or ensure effective governance.  In addition, these strategies typically apply to all employees, not just a select group, such as executives.

Global pay strategies -- what is included?

While pay and broader reward strategies can encompass many elements, the survey respondents indicate that their global pay strategies focus strongly on four areas:

• positioning of pay relative to the market (cited by 72% as a component of their global pay strategy)
• short-term incentive design (72%)
• long-term incentive design (68%)
• consistent methodologies for job grading/levelling (64%).

Somewhat less prevalent are strategy elements related to desired pay mix, benefits and consistent methodologies for salary structures.

Elements not commonly found in global reward strategies include: work-life programmes perquisites training and development recognition programmes and career programmes.

Respondents indicated that their global pay strategies are fairly detailed and specific, with most including either fixed guidelines (52%), detailed policies for all employees (22%), or detailed policies for senior employees only (16%).

Monitoring global pay strategies

Despite the prevalence of global pay strategies, the Mercer survey suggests that monitoring these strategies can be a challenge. Only half of the respondents said that the local HR function has a direct reporting relationship to corporate HR. This can make it extremely difficult to monitor pay strategies on a global basis to ensure their implementation and effectiveness.

As a next step in the evolution of global compensation programmes, Mercer expects to see employers devoting more time and attention to these governance issues over the next few years.

Some respondents indicated that monitoring of global pay programmes is achieved primarily through:

• annual budgeting process (42%)
• global HR information systems (41%)
• regular audits of country and business practices (34%).

Other key results

• Survey respondents listed the following as their most pressing global rewards-related issues both now and in the near future: attracting and retaining key staff using rewards to deliver performance and strategic alignment of rewards with business strategy.
• For board members and other roles with global authority, pay decisions are made primarily at the global level. However, decision-making authority begins to migrate towards regional and local control concurrent with a decrease in the global responsibility of the employee segment.
• The majority of respondents indicated that pay mix for board-level employees is the "most aggressive", split 50/50 between base pay and bonus. For global, regional, and country manager roles, most respondents indicated a base/bonus pay mix of 80/20 or 70/30. For local country employees, the most prevalent pay mix is 95/5.

Want to know more?

Title: Pay Management Programmes in Multinational Firms, Mercer Human Resource Consulting.

Availability: Further details are available from client services, Mercer global information services, tel: +41 22 869 3000 or visit www.imercer.com

Survey sample: Mercer's survey includes responses from nearly 90 firms based primarily in Europe and the US. Three-quarters of the respondents have annual revenues of US$1 billion or more, and all are multinational, some with operations in up to 100 countries. The survey was conducted in August 2004.

Mercer Human Resource Consulting is one of the world's leading consulting organisations, and it "helps employers create measurable business results through their people". The company employs more than 14,000 employees, serving clients from some 145 cities in 41 countries and territories worldwide. To find put more visit www.mercerhr.com

Posted 22 March 2005