UK lags way behind in terms of managerial pay

INTERNATIONAL REWARD

UK lags way behind in terms of managerial pay

Disposable income levels of UK managers are currently placed well behind those of their counterparts in less developed economies, according to a recent report from management consultancy Hay Group.

UK managers’ real disposable income, at $86,367, is placed just 40th in the global pay league, compared with an equivalent figure of $220,000 for the highest-paid locations.

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Based on the results, Hay Group concludes that the shift in the relative fortunes of different locations is having a profound effect on the global market for managerial talent.

As Steve Marsden, global director of reward information services at Hay Group, comments: “The continued growth of emerging markets is creating unprecedented demand for senior talent”. He adds that the resulting talent shortage, plus the premiums paid to managers in these "hot" markets, is inflating management pay in less advanced economies.

Oil nations top the pay league

• Topping the pay list are managers in the oil-rich, tax-free states of Saudi Arabia and the United Arab Emirates with disposable incomes equating to buying power in excess of $220,000.
• Next are those in the international finance and trade centre of Hong Kong with an equivalent figure of $203,947.
• Closer to home, managers in emerging economies such as Russia, Turkey and Ukraine are enjoying far higher levels of buying power than their counterparts in advanced economies such as the UK, USA and other countries in Western Europe.
• Indeed, Switzerland, Germany and Ireland are the only European countries to make it into the top 20 countries, with the USA lagging at 24th and the UK, 40th.

China and India

Despite much media attention focusing on the twin giants China and India, neither country features in the top ten:

• Nevertheless, China’s rapid economic development is reflected in disposable incomes at management level averaging $126,281 – placing the country in 14th place.
• In contrast, India is significantly lower, positioned in 36th place with buying power of $92,750.

Hay explains that whereas Chinese companies have realised the need to attract management talent as economic acceleration continues apace, India benefits from a large tier of well educated, English-speaking local talent, making management pay more immune to the international market.

That said, Indian managers’ pay is increasing at double-digit rates – between 15% and 20% – so it is unlikely to stay low down in the pay table for long.

A final word

“Companies are operating in an increasingly open and competitive global economy, and emerging markets are offering managers higher disposable incomes than established countries – which is making these locations an attractive prospect for management talent.

This makes sobering reading for companies in Western Europe and the US, who face not only local competition for managerial talent, but an increasing threat from buoyant new economies.” - Iain Fitzpatrick, director reward information services for Hay Group North America.

Pay league table for managers (corrected for tax and cost of living)

1. Saudi Arabia $220,000

2. United Arab Emirates $220,000

3. Hong Kong $203,947

4. Russia $157,348

5. Turkey $154,762

6. Mexico $152,283

7. Ukraine $149,118

Selected other countries

11. Poland $128,537

12. Spain $128,197

19. Germany $122,427

24. USA $104,905

28. Italy $101,487

31. France $98,117

40. UK $86,367

Note: Pay is defined as total cash, which is equal to base salary plus any annualised short-term variable incentive.

Manager is defined as a role at Hay Group reference level 20, which equates to head of function or head of department level.

Want to know more?

Title: World Pay Report, Hay Group.

Survey methodology: The findings are based on the remuneration of senior executives across 46 countries. The 46 countries covered were from North America, South America, Middle East, Africa, Europe and Asia Pacific.

To make fair comparisons, Hay standardised pay levels by taking account of national tax and cost-of-living differences.

The report was compiled by comparing detailed cross-country pay information from Hay’s PayNet service. Positions covered were at management level (head of function/department) and the study used Hay Group’s globally consistent data. This allowed meaningful comparisons across different countries to be made and once cost-of-living and tax were then taken into account, the true purchasing power of managerial pay is revealed.

Availability: Visit the Hay Group web site at www.haygroup.com

Hay Group is a global management consultancy, working with “leaders to transform strategy into reality”. It has more than 7,000 clients around the world, with 88 offices in 47 countries. To find out more about the UK offices visit www.haygroup.com/uk