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Are Your Executive Rewards Aligned?

     
October 02, 2018

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.

Salary Adjustments

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.

Looking Beyond Salary

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.

Paid Time Off

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.

Car Benefits

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:

  • 59% said the reason was solely because of the executive employee’s position/job.
  • 41% said it was because of the executive employee’s status or seniority.
  • 29% said it was because of market competitiveness.
  • 27% said it was strictly because of their organizational business needs.

Meanwhile, the exact benefits provided to these executive employees varied from organization to organization. For example:

  • 68% of responders said they offer their executive employees a monthly car allowance.
  • 33% said they offer a vehicle that’s leased by the company.
  • 26% offer a company car.
  • 13% offer gas cards.
  • 10% offer a monthly allowance plus mileage reimbursement.

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:

  • 94% of Western European organizations offer car benefits to their executives.
  • 98% of African organizations offer car benefits to their executives.
  • 69% of US organizations offer car benefits to their executives.

Additional Perks for Executives

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:

  • 37% of organizations still provide their executives with tablet devices, compared to just 17% for management, and 7% for professionals.
  • 7% of organizations offer chauffeur service to their executives, compared to just 1% for all other employees (other than the CEO).
  • 23% of organizations offer estate planning benefits to executives, compared to just 11% for all other employees (other than the CEO).
  • 26% of organizations offer full financial counseling/tax return preparation to executives, but only 5% for all other employee groups (other than the CEO).

Want to Learn More?

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:

  • As you’re now fully aware, attracting top talent is more complex than ever. The US MBD: Executive Survey spans numerous industries, allowing you to easily benchmark your executive compensation against nearly 2,000 organizations and numerous subfamilies. In addition, you can narrow your data by assets, gross premiums, net revenue, budget, years in organization, years in position, and a whole lot more, letting you narrow in on the exact executive compensation data you’re looking for.
  • The Canada MBD: Executive Compensation Survey provides the same comprehensive insights as its US counterpart, only with a refined focus on 700+ Canadian organizations. Again, you can sort through numerous subfamilies, such as administration, legal, manufacturing, information technology, sales, and more, all so you can find the executive compensation data you need for Canada.
  • With data collected from 15 of the most prominent national industries, the US Compensation Policies & Practices survey lets you go beyond the paycheck to explore other areas of your compensation strategy. Check out the latest trends in flexible work arrangements, vacation time, maternity/paternity leave, overtime pay, and more. And the best part? The survey breaks down and analyzes different employee groups in a clear and concise fashion, allowing you to easily hone in on the executive rewards data you need, regardless of industry.
  • From company car allowances to company-provided vehicles (and much more), the Car Benefit Policies Around the World is your go-to source for keeping up with global data on this popular employee perk.

While attracting and retaining top-level positions might seem more complex than ever, harnessing the power of data will help you streamline your efforts.