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In many ways, managing executive rewards is a different animal than managing rewards for a broader workforce. This is especially true if you are in a public company. You may spend what seems like a disproportionate amount of time scrutinizing public filings and preparing for board meetings to establish the rewards package of the C-suite, while rewards for the broader executive population can sometimes seem like a secondary priority. To ensure your overall rewards strategy for executives is on track, there are still some nuances and trends unique to executive compensation found in published compensation surveys that can prove quite useful when you’re setting and managing executive pay policies.
But first, make sure you’re conscious of the increased scrutiny and calls for transparency surrounding executive pay coming from shareholders and watchdog organizations. Whether your company is public or private, it’s important to stay informed on the comparative relationship between your executive rewards and the rewards of your larger workforce. Keep this in mind as you read on for an overview of trends surrounding executive rewards within the US and Canada, all of which were identified by some of Mercer’s core surveys.
For both the US and Canada, annual compensation planning surveys and year-over-year Mercer Benchmark Database findings confirmed that executive base pay is generally moving at the same rate as the overall market, with very little difference among most of the career streams. For example, it was found that promotional increase percentages for all career streams are on the rise, after a moderate dip in 2016 and 2017, and have now returned to an average of 7.8% with little variation across career streams.
Meanwhile, executives in both the US and Canada are receiving higher promotions than other career streams, but only by a few percentage points. As it turns out, executives in Canada are actually more likely to receive a promotion than their US counterparts. Among the 41% of Canadian organizations who said they budget their promotional increases separately from their merit increases, executive employees were found to be the most likely of all the employee groups to receive promotions in 2018 (10.5%). Conversely, of the 51% of participating American organizations who budget their promotional increases separately from merit increases, executives were found to be the least likely to receive promotions in 2018 (6.7%) compared to other employee groups. In both instances, the other employee groups included office/clerical/technical, professional (sales), professional (non-sales), trades/product/services, and management.
As it turns out, executives in Canada are actually more likely to receive a promotion than their US counterparts.
While executives may be getting higher promotional increases than the other employee groups, there is a downside: executives are also the most likely to have their salaries frozen. Indeed, the 2018/2019 Canada Compensation Planning Survey Report revealed that organizations across all industries froze more of their executive salaries in 2018 than any other employee groups. And even though use of salary freezes as a cost containment or reduction strategy has mostly disappeared in the US, if any group’s pay was frozen, it was most likely to be executives.
Years ago, the benefits being offered to executive employees were vastly different from those being offered to the broader workforce. But as scrutiny from shareholders and regulatory authorities has increased, the variety of these executive benefits has diminished. However, some executive benefits, such as deferred compensation plans, supplemental retirement programs, financial counseling, and supplement life and disability plans, have remained fairly typical offerings. But beyond these and a few other benefits, organizations are now seeing much greater similarity in what’s being offered to executives and to their broader workforce.
As you evaluate your own executive benefits, consider this high-level review of how different policies and practices can fall in line with your overall rewards strategy.
Mercer’s 2016/2017 US Compensation Policies and Practices Survey revealed that, by and large, executives accrue vacation days just like the rest of their organization’s employees. The survey found that a professional or manager with 10 years of service would have accrued the same 20 days of vacation as an executive. When companies use a PTO pool of hours, instead of a defined vacation plan, the comparison yields the same results.
In terms of personal days and sick time, the study found that, again, executives tend to be provided with the same level of benefit as the majority of the organization.
The 2016/2017 US Compensation Policies and Practices Survey found that 48% of organizations provide their employees with company car benefits in the form of a company car allowance, a monthly lease payment, or even an actual car for both business and personal usage. When it came to benefits for executive-level positions, companies allocated these car benefits for a number of reasons:
Meanwhile, the exact benefits provided to these executive employees varied from organization to organization. For example:
The data presented above only reflects US-based executive rewards, however. Keep in mind that company car benefits and trends vary across the globe, as evidenced by the 2018 Car Benefit Policies Around the World report. Here, it was discovered that US organizations are actually less likely to offer company car benefits to their executive level employees when compared to companies in other countries. Take a look:
When it comes to policies surrounding benefits and pay, the typical executive is treated pretty similarly to all other employment levels. However, in a few rare instances, some executives are still offered perks beyond what is available to the broader employee population. For example:
Want to learn more about the topics covered here? Mercer offers a full suite of reports, surveys, and other solutions, each featuring in-depth executive benefits, pay, and other data. Take advantage of any of the following products to better align your executive rewards strategy with your business leadership needs:
While attracting and retaining top-level positions might seem more complex than ever, harnessing the power of data will help you streamline your efforts.