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- Managerial ‘rainmakers’ awarded higher rises than Executives but salary increases often wiped out by inflation
- Average executive pay rises in companies in the Middle East, Central and Eastern Europe of 5.7%, Africa 8.2%
- UK executives receiving average increases of 3%
Companies across Western Europe have implemented widespread executive pay rises averaging 2.7%, according to pay data released by Mercer, yet these rises have still been amongst the lowest in Europe, Middle East and Africa (EMEA). The data shows that employees in managerial roles have received higher pay rises in 2011 than those in executive positions, as companies target scarce resources towards perceived ‘rainmakers’.
In the UK, executives have received 3% a higher salary increase than the regional average and many of their Western European peers but average increases remain far lower than those received by executives in Africa, the Middle East and Central and Eastern Europe.
Mercer’s Total Remuneration Pulse Survey (TRS) analyses data from 406 subsidiaries of multinational organisations with operations in over 60 European countries. While the data covers median salary increases for a variety of employee groups, this release focuses on executive pay rises as reported by all organisations including those freezing salaries. Executives are defined as employees who lead an organisation, business area or corporate staff function, such as head of IT or Human Resources.
According to Johan Ericsson, Principal at Mercer, “Europe plc has patiently sat through several years of pay freezes so this data is a welcome indication that spring has come. However, the relatively low increases in Western Europe reflect the continued uncertainty in this market compared to other regions. We’ve also noticed two trends emerging as a result of the continued need to keep costs low: Companies are continuing to segment their employees and often weighting scarce resources towards ‘rainmaker’ employees, such as managerial staff. Companies are also increasingly reliant on using non-financial forms of reward to motivate and retain their other employees.”
Broadly, 2011 salary increases were higher among companies in the service, consumer and high-tech industries and lowest amongst the financial services and energy organisations. However, the average salary increases hides great variation in the country by country pay increases and substantial differences across EMEA.
The average salary increases in 2011 for executives was 2.7% across companies operating in the 16 Western European economies. Within this group the lowest increases were for executives in Ireland (2%) and Switzerland (2.2%). Executives in Norway received the highest pay rises in the region at 3.3% followed by executives in companies in Belgium, Italy, Sweden and the UK awarded average pay rises of 3%. Companies in Austria and Denmark awarded their executive staff average pay rises of 2.9%, while those in the Netherlands awarded 2.8% and those in Germany and Greece, 2.6%. France, Finland and Spain awarded average pay rises of for executives 2.5%, while Portuguese companies awarded 2.3%.
According to Mr Ericsson, “A minority of companies in Western Europe are now freezing salaries so there is reason for cautious optimism. However, the rises are less than companies predicted that they would make in our survey at the end of 2010 so the picture is mixed. More importantly, offsetting these salary rises is a high rate of inflation, so in many countries employees, won’t be feeling any wealthier.
“Companies are also segmenting reward to make the most of tight budgets,” he continued. “The highest performers remain the recipients of increased reward packets: in Western Europe, we see managerial positions receive higher pay increase than their superiors. This may also indicate awareness by executives that continued pay restraint on their part is good public relations following a period of redundancies and cost-cutting. Companies are also making the most of non-financial elements of reward, such as work-life balance and training, to retain and motivate their remaining staff.”
Central and Eastern Europe
Salary increases in the 20 countries in this part of Europe averaged 5.8% but this figure masks wide differences across individual countries. Around 10% of respondents stated that they would be freezing staff salaries again in 2011. In contrast, companies in Belarus, Kazakhstan and Ukraine, for example, reported the highest executive salary increases in the region of 12%, 10% and 10% respectively. Companies in Russia (9.8%) and Georgia (9.5%) also reported high salary increases as did companies in Azerbaijan (8.4), Turkey (7.8%) and Serbia (6%). Executives in Romania (5.5%) and Bulgaria (5%) have received pay rises hovering around the average while executives Poland (4%), Slovakia (3.4%) , Slovenia (3.3%) the Czech republic and Bosnia and Herzegovinian both at (3.2%) fared worse that their regional peers. Receiving the lowest pay rises in the region were executives in Croatia (2.9%), Estonia (2.8%), Lithuania (2.4%) and Latvia (1.8%).
“While 10% are continuing to freeze salaries in this region this is down from 60% in the same period in 2010,” stated Mr Ericsson. “The region is still playing catch up with the rest of Europe. Companies here implemented severe salary freezes in 2009. Weak economies and tight budgets are encouraging many to ask how they can make all employee benefits motivate and engage their workforce, not just cash. Companies in this region are starting to use the full spectrum of rewards that Western European multinationals have used for some time.”
Middle East and Africa
Executive salaries are set to increase by an average of 5.7% in the Middle East and 8.2% in Africa. Israeli executives received the lowest pay rises in the Middle East of 3.5%, followed by executives in Qatar (4%), Oman (4.5%), Kuwait (4.5%), Saudi Arabia (5%) and the UAE (5%). Executives in Bahrain and Pakistan have received the highest pay rises in the Middle East with pay rises of 6% and 13.5% respectively.
In Africa, average salary increases (8.2 %) hides wide differences by country. In South Africa for example, companies are anticipating a salary increase of 7.5%, while those in Nigeria, Kenya and Uganda are anticipating increases of 10%, 8.8% and 10% respectively. Executives in Morocco have and Senegal have received pay rises of 5.5%.
“Around 10% of companies are maintaining their salary freezes, down from 20% in 2009,” said Mr Ericsson. “In this region, there is a fierce race for local talent, partly created by the fact that, in a region where companies typically don’t offer retirement packages, expatriate staff view employment in this region as short term, so there is a pressing need to train and develop local staff. Broadly, this is increasing salaries of the managerial level above those of executives, where much of this talent currently resides. In consequence, staff development is becoming more important as part of this trend.
“Given the impact that dissatisfied and unproductive employees can have on a business,” concluded Mr Ericsson, “it is important that companies follow the guiding principals for reward: communicate well, administer efficiently to maximise results and ensure that governance is consistent. With these three elements in place, companies can make the most of the resources that they have while continuing to motivate and engage their staff.”
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges.