Towers Perrin: Employers Adapt Global Pay Plan to Local Markets

Also, CEOs in the United States continue to enjoy the largest and most comprehensive pay packages, both in terms of base compensation and total remuneration while CEOs in France, Germany, Italy, Switzerland and the United Kingdom command higher levels of total compensation than their peers in the rest of the world.

That was a key finding of the Towers Perrin 2005 – 2006 Worldwide Total Remuneration study, according to a Towers Perrin news release.

The Towers Perrin research also found that as part of their efforts to further adapt their compensation programs to employees’ performance, multinational companies are using a global compensation framework that is adapted to the particular needs of each market.

“As companies continue to shift the pay mix in favor of performance pay, it implies that an HR strategy should – at a minimum – articulate the company’s desired pay mix and competitive positioning against the market,” said Martine Ferland, principal and head of Towers Perrin’s HR Services business Global Consulting Group, in the news release. “It should also state whether target levels will be set locally, regionally or at a global level, and identify how performance will be measured.”

Towers Perrin researchers said this approach can help companies cut costs and bring more consistency to their compensation practices worldwide, at the same time remaining competitive by varying performance pay and other types of remuneration by country and region based on regulatory and cultural differences.

The survey found that performance-based (variable) pay as a share of total remuneration for chief executive officers (CEOs) worldwide ranged from 14% in India to 62% in the United States. Variable pay as a share of total remuneration for accountants worldwide had a much smaller variation, ranging from none in countries like Sweden, Switzerland and Venezuela to about 10% in Mexico and South Africa.

However, many US-based multinationals are moving toward the European-based company approach of developing LTIs that customize award size by geography or group of countries, and this will require them to articulate the company’s position on long-term pay and, more broadly, pay for performance.

On the company-sponsored benefit side, the report shows how these plans are under pressure as a result of two powerful forces acutely present in the developed economies: increases in the cost of health care and the general aging of the population. Towers Perrin said that social security programs are under increasing demographic stresses, resulting in steadily deteriorating finances. Since employer-sponsored plans traditionally offset government-provided benefits, the net result is higher costs for the employer, the study said.