Few businesses today can successfully rely on – let alone afford – a one-size-fits-all compensation strategy, as business needs and performance goals typically vary by region, market, business unit or function. The solution: segmentation.

Segmentation involves identifying distinct workforce segments and developing premium, standard or discounted total rewards arrangements for each, based on their relative value creation.

Mercer’s global 2008 Total Rewards Survey of 2,000 participants asked employers whether they use segmentation. The majority of participants – 77 percent in mature economies and 74 percent in emerging economies – offer or emphasize different rewards for different employee groups, most often by job level (for example, within the executive ranks), geographic location and job family (for example, the sales group).

Americas

Eighty-three percent of companies throughout the Americas are segmenting total rewards for different workforce populations according to one or two criteria – the most common being job level and geography. In mature markets, particularly in the US, business unit or product line is also a common criterion.

Frequently, employers use base pay, short-term incentive opportunity and guaranteed allowances to differentiate rewards for these groups. In this region, guaranteed allowances are more often used by companies in emerging markets.

Asia Pacific

Seventy-five percent of companies in the Asia Pacific segment their workforce, most by job level and geography. And in emerging markets, segmentation by job family – specifically the sales group – is very common.

To differentiate rewards for these groups, companies most often use short-term incentive opportunity, base pay and guaranteed allowances. Within the job level executive work group, long-term incentive opportunity is the top total reward component used by companies in both emerging and mature markets.

Europe/Middle East

Sixty-seven percent of companies in emerging European and Middle Eastern economies are segmenting according to one or two criteria, compared to 75 percent of companies in mature economies in those regions.

Throughout Europe and the Middle East, the most common criteria to segment are by job level (specifically, within the executive ranks) and geographic location, followed by job family – most commonly, the sales group.

To differentiate rewards for these employee segments, employers most often use base pay. After that, the component mix becomes more varied and includes short-term incentive opportunity and eligibility, guaranteed top-up allowances and long-term incentive opportunity.