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Global Management Pay Report overview
Supply and demand prevails ...................................................
Global Management Pay Report                                            December 2009

Global Management Pay Report ove...
Global Management Pay Report                                           December 2009

Even though managerial-level empl...
Global Management Pay Report                                                            December 2009

Study methodolog...
Global Management Pay Report                                             December 2009

Global overview - pay gap betwe...
Global Management Pay Report                         December 2009

Global overview – senior management spending power
Global Management Pay Report                                             December 2009

Regional and country trends
Global Management Pay Report                                              December 2009

experience in professional man...
Global Management Pay Report                                                December 2009

Tom McMullen of Hay Group US...
Global Management Pay Report                                              December 2009

“The pay gap in the Netherland...
Global Management Pay Report                                              December 2009

He continues, “Switzerland has...
Global Management Pay Report                                             December 2009

“Turkish companies are looking ...
Global Management Pay Report                                             December 2009

The Nordic model maximizes labo...
Global Management Pay Report                                               December 2009

Mexico has a relatively low p...
Global Management Pay Report                                             December 2009

China’s GDP is expected to grow...
Global Management Pay Report                                               December 2009

Australia and New Zea...
Global Management Pay Report                                           December 2009

Table 1: 2009 ranking of managers...
Global Management Pay Report                                          December 2009

Table 2: 2009 Total cash salary ga...
Global Management Pay Report                                           December 2009

About Hay Group
Hay Group is a gl...
Global Management Pay Report Hay Group 2009
Global Management Pay Report Hay Group 2009
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Global Management Pay Report Hay Group 2009


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Global Management Pay Report Hay Group 2009

  1. 1. Contents Global Management Pay Report overview Supply and demand prevails .............................................................................. 1 Study methodology............................................................................................. 3 Pay gap overview……………………………………………………………………...4 Senior management spending power overview…………………………………….5 Regional and country trends Middle East......................................................................................................... 6 Africa .................................................................................................................. 6 North America .................................................................................................... 7 Western Europe ................................................................................................. 8 Central and Eastern Europe (CEE) .................................................................. 10 Nordic region .................................................................................................... 11 South and Central America .............................................................................. 12 Asia .................................................................................................................. 13 Pacific............................................................................................................... 15 About Hay Group.............................................................................................. 18
  2. 2. Global Management Pay Report December 2009 Global Management Pay Report overview The Global Management Pay Report provides a snapshot of two key indicators of the global talent market: managerial spending power and the pay gap between management and blue collar/clerical workers. Supply and demand prevails As the world emerges from the downturn, the majority of managers are feeling the impact of managerial-level restructuring and salary cuts made by organizations in survival mode. However, Hay Group’s new study reveals that in economies where there is a scarcity of senior management talent, the laws of supply and demand have outweighed the crisis’s impact on senior managers’ pay. The disparity between managerial spending power in high and low growth economies is also likely to increase over the coming year. The full brunt of the crisis has yet to filter down fully to managers’ spending power in low-growth established economies and the more vulnerable developing economies. Managers whose governments have increased public spending to help organizations weather the crisis are likely to experience a rise in tax and living costs, and will feel the real impact on their disposable income in the coming years. In markets where demand for managerial talent is greater, managerial spending power tends to be correspondingly high. Where there is an abundance of blue collar/clerical level employees, the wages at this level tend to be low, and the gap between the two levels is greater. The pay gap between managerial and clerical level employees is high across all developing countries, regardless of their current economic state. China, Indonesia and Nigeria top the index with managers earning respectively 17.4, 12.6 and 11.5 times more than clerical level employees. The size of the differential is strongly correlated to GDP per capita and the size of the population, as it reflects the high availability of lower-skilled workers in these markets, and the relative shortage of suitably qualified senior managers. The demand for senior managers remains high in fast-growing economies, although not as heated as in previous years. It is not surprising that the Middle Eastern countries are at the top of the table when it comes to spending power, with their relatively high salaries, comparatively robust economies and low taxes offsetting an increasing cost of living. But countries like Turkey, South Africa and Chile are becoming hot spots for senior talent, featuring in the top 15 countries in the global spending power index. 1
  3. 3. Global Management Pay Report December 2009 Even though managerial-level employees were hardest hit by the economic crisis on a global basis – with 50 per cent of organizations restructuring or considering restructuring at this level1 – fast-growth economies, like Turkey, Brazil, Middle East and South Africa are developing so quickly that the supply of senior talent cannot meet the demand. This has resulted in high salaries being offered to managers to attract the best managerial talent to fill their local deficit. Lower living costs also boosts their disposable income, resulting in Turkish, Chilean and Romanian managers having a greater spending power than those in the UK, the US and Nordic countries. However, the picture is not necessarily as rosy for managers in these high-growth economies as it may seem. Although their disposable cash is greater, salaries for countries at the high end of the spending power index tend to be focused on cash, with fewer benefits being provided either by the employer or by the state. Therefore, to maintain the quality of life which is taken for granted by many of the larger Western economies, managers in many of these countries, for example in Africa, and South and Central America, need to spend more of that disposable income on expenses such as healthcare, pensions and in some cases security and safety precautions. 1 Hay Group Reward in a downturn research, 2009 2
  4. 4. Global Management Pay Report December 2009 Study methodology Hay Group’s Global Management Pay Report was compiled by comparing detailed cross-country salary information from Hay Group PayNet. Data in PayNet is based on Hay Group’s global methodologies for measuring job size, compensation and benefit values. Hay Group’s Global Management Pay Report examines the disposable income for a management level employee and the pay gap between a management and clerical level employee in 56 countries around the world. A management level employee (Hay Reference Level 20) is roughly equivalent to a middle- or senior-level manager in a department or function of a large multinational company. In a smaller economy, it is more likely to be equivalent to be a department or functional head. A clerical level employee (Hay Reference Level 12) is equivalent to skilled manual workers and administration support. The study used Hay Group’s universal definition of what constitutes a ‘manager’, which ensures that results are consistent around the globe. The study discusses the findings of two indices: Global management spending power and Global pay gap. Global management spending power is calculated using PayNet data on median total cash, and taking into account cost of living and taxes to reveal disposable income levels for 56 countries in North America, South America, Africa, Europe and Asia Pacific. This year’s cost of living figures2 have changed from previous, similar studies undertaken by Hay Group. The figures are based on a basket of goods that correlates more to a typical lifestyle of a senior manager, rather than a generic cost of living figure. This creates a clearer picture of the relative spending power of managers wherever they are in the world. The spending power of managers in each country was then indexed, using the spending power of US managers as the base line. All local currency figures were converted to US dollars for purposes of comparison3. The Global pay gap index ranks the difference in pay between Hay Group’s universal definitions of what constitutes a ‘managerial’ and a ‘clerical’ role, which ensures that results are consistent around the globe. 2 Economist Intelligence Unit 3 Note: This is a snapshot of spending power. Year-on-year comparisons for individual countries must be treated with caution due to the complexities introduced by the need to convert to a common currency (the US dollar) and therefore the impact of fluctuations in value of local currencies against the US dollar. 3
  5. 5. Global Management Pay Report December 2009 Global overview - pay gap between senior management and clerical roles 4
  6. 6. Global Management Pay Report December 2009 Global overview – senior management spending power 5
  7. 7. Global Management Pay Report December 2009 Regional and country trends Middle East The oil-driven economies of the Middle East are all towards the top of the management spending power index. Hay Group’s analysis has found that there are also significant pay gaps in the region, with managers in the United Arab Emirates being paid up to 6.2 times more than clerical employees. Peter Christie from Hay Group Middle East says, “The region has been less affected by the economic downturn than other parts of the world due to the oil price rebounding relatively quickly and the banks being less exposed to toxic assets than many in America and Europe. Pay increases are still occurring in the region. In Qatar, for example, forecast pay increases are still at a healthy 8 per cent – on par with some of the other Gulf cities such as Abu Dhabi and Riyadh – although these increases are lower than these countries have had in recent years.” “International competition for expatriate managerial talent is another factor impacting managerial spending power in the region,” he adds. “A shortage of management talent and continued growth in the Middle East puts pressure on organizations to attract the top managers from other parts of the world. This trend is most apparent in Qatar, which tops the table for managerial spending power.” Vijay Gandhi from Hay Group Middle East comments, “The shortage of skilled workforce in Qatar combined with the speed of the infrastructure investment in oil and gas is driving the demand for talent. In the last couple of years salaries in Qatar have increased by 12 per cent to 15 per cent per annum.” “But, there are indications that there could be changes ahead,” he adds. “Salaries in the region currently look artificially high as they are more dependent on fixed pay than in other parts of the world. As more organizations in the region move to more performance-related pay, care must be taken to ensure that the make up of the total compensation package is structured effectively to ensure that talent is still attracted to the area.” “Also, the fact that most of the Gulf States have remained free of personal tax and relatively low social security had a significant impact on the relative standing of these countries in our analysis. While many countries are considering raising their tax rates for managerial roles, employees in the Gulf continue to earn tax-free packages.” Africa Africa is well represented at the top of both indices. “The increasingly high demand and the shortage of experienced management level employees means that Nigerian, South African and Egyptian managers enjoy high wages in countries where the cost of living is relatively low. In Nigeria, Kenya and Egypt the large and relatively well-educated populations mean that there is a large pool of talent at the blue collar/clerical level, resulting in a significant pay gap between managerial and clerical levels,” says Ginger Brown from Hay Group South Africa. Nigeria tops the Global pay gap index in Africa with the largest differential between management and clerical level employees. Ginger Brown comments, “Nigeria is a growth economy, with a high demand for managerial talent and a lack of local 6
  8. 8. Global Management Pay Report December 2009 experience in professional management roles, particularly in a multinational context. Compared to other growth economies such as the Middle East, companies in this region have some difficulties in attracting managerial level employees. This drives up the cost of that talent, while the local market for blue collar or clerical level employees is well met by a strong education system and a large population.” “However, what this disguises is that there is also disparity between individuals within the same organization and even the same level – there can be up to two times difference in their salaries. This is driven partly by generally less rigorous standards around pay governance, and an emphasis on seniority, which means those with longer periods of service are promoted and rewarded with a higher pay scale.” South Africa is showing high spending power resulting in 15th position in the rankings but its pay gap is in the middle range when compared to Kenya. “South Africa has been making strides over the last 10 years to ensure more equitable pay between the highest and lowest levels. Union negotiated salary increases, which represent more of the skilled and semi-skilled workers, have been higher on average than other levels of staff. But with a high unemployment rate of nearly 25 per cent, there is still unmet demand for key skills, including specialized technical skills and senior management experience,” says Ginger Brown. “In Kenya, we are seeing similar internal equity and seniority related pay discrepancies as in Nigeria, which is reflected in a pay gap in the top 20 countries,” she said. “But in contrast to Nigeria, inflation in Kenya has also risen drastically over the last year. This has put added cost of living pressure on employees and managers, which is reflected in the lower spending power position for Kenya’s managers. This year we are seeing that salary increases are lower than inflation and therefore would expect to see Kenya’s spending power drop going forward.” North America In line with other developed economies the United States is ranked in the middle of the spending power and pay gap rankings. A combination of factors including the sluggish economy, relatively low tax structure, and moderate cost of living, results in the US ranking 30th out of 56 countries in the study. In contrast, Canada ranks in the lower half on manager's spending power primarily due to higher levels of taxation. Taxation levels in Canada are well above the median and are due to higher spending levels of governmental services. Iain Fitzpatrick of Hay Group US said, “From a macroeconomic perspective the spending power of the US manager dwarfs many other large developed European countries and Canada, with the US dollar still stretching much further for US senior managers.” “The relative pay gap between clerical and senior manager jobs in the US and Canada is comparable with most other developed economies,” he said. “Overall the pay gap for the US, viewed as a more liberal, flexible labor market, is similar to more regulated social market economies, such as France.” There is of course no denying that 2009 was a painful year for many businesses in the US as the country is in the worst recession in decades and base salary increases are the lowest they have been in years. 7
  9. 9. Global Management Pay Report December 2009 Tom McMullen of Hay Group US said, “Incentive compensation for many people will also be zeroed out this year or will be lower than previous years. Belt tightening is the new normal in most US organizations and all the while everyone is being pushed to do more with less to drive profitability when revenue dollars are tougher than ever to capture.” “Healthcare costs are a particular concern for US employees, as cost increases of 7.4 per cent in 2009 far outpace wage rate increases”, he added. With this backdrop, many organizations are concerned that their best and brightest managers may go in search of a better deal if they receive smaller salary increases and payment checks than they think they should have earned. “The counter-argument of many managers – that people should feel lucky just to have a job – may be difficult to rebut in today’s economy, but organizations need to be mindful that their top talent may indeed leave when the economy turns around,” said Tom McMullen. “This presents a challenge to managers, as maintaining employee engagement is particularly important today as many organizations are caught in the struggle to do more with less, and must rely on the discretionary effort of their employees”. Western Europe Managers in Western European economies tend to have spending power in the middle to lower range, and low pay gaps. But there are a few exceptions; Luxembourg tops the spending power rankings for Western Europe, due to a lower tax burden in comparison with other Western European countries and a cost of living comparatively lower than other countries. Portugal also features in the top half of the spending power index at position 21, suggesting that local managers have a higher spending power than Spain or even Germany and the United Kingdom. According to Rui Luz from Hay Group Portugal, “Portugal’s position is driven by two factors: a significant talent shortage at this level, which reflects the high levels of reward for this type of job and, above all, the relatively low cost of living in Portugal.” “This talent shortage also drives Portugal to a high pay gap between clerical and manager level jobs, when compared to other European countries,” Rui Luz adds. “The shortage of good managerial skills, when compared to the growing market need, has resulted in significant differences in terms of managers' and clerical employees reward.” Another European country that features highly in the spending power index is the Netherlands, which is indexed just one point above the US. “During the past four years, the inflation rate in the Netherlands has on average been lower in comparison to the other European countries, impacting on cost of living. In the Netherlands, salary increases for many organizations are determined by collective agreements and the increase percentages are usually determined in advance. Therefore organizations cannot respond quickly to changed economic circumstances, resulting this year in not that low salary increases. Another important factor to consider is the fact that people in the Netherlands have the benefit of receiving deductions on their tax income payment when they pay interest on their mortgages, therefore they can pay lower tax. These factors may be the reason for the higher level in spending power than other equivalent economies,” says Loek Bosman from Hay Group Netherlands. 8
  10. 10. Global Management Pay Report December 2009 “The pay gap in the Netherlands is comparable to surrounding countries – Belgium and Germany. They are specifically known for the 'Polder Model' (consensus model); where different stakeholders (government, employers, employees and unions) together reach agreement on issues regarding labor. This could explain why pay differences between higher and lower staff are not significant,” Loek Bosman adds. At the bottom of the spending index, UK, Belgian and Italian managers can expect reduced spending power relative to their other European neighbors’. Belgium and Italy have a significant tax burden in comparison with their neighboring countries. Belgium’s position is impacted by cost of living; high costs are partly driven by a significant number of large multinationals being headquartered in Brussels. Many Western European countries are featured at the bottom of the spending gap rankings. In these countries, especially the UK, regulation and talent availability means that the differentials between clerical and managerial pay are low. Management pay has been largely frozen over the last year due to the economic situation. Mark Thompson from Hay Group UK says, “The UK position in the spending power index is likely to go down in 2010 as tax increases to pay off the Government’s debts will impact on the UK economy for many years to come. Our European neighbors have, on the whole, suffered less partly because the euro remains strong against the US dollar (unlike the pound sterling) but also because, with a few notable exceptions, economies have been less affected by failing financial institutions. Factors of rising inflation and the return to 17.5 per cent VAT are also likely to take their toll. Organizations need to get smarter about how they manage their pay bill so that they keep hold of their key talent.” “The UK position in the pay gap index is the result of several factors,” Mark Thompson continues. “Regulation around minimum wage means that there is only a small gap in pay between senior management and clerical levels. But, if we were to look at the higher Executive Director level, a greater percentage pay gap would be evident.” He adds, “The pay gap between clerical and senior management roles is likely to remain stable in 2010. However, it is highly likely that pay inflation at the most senior levels will return in the UK in 2010/11 as the competition for talent at this level between companies and across national borders is renewed.” Austria, Germany and Switzerland perform relatively well in the spending power rankings. “The ranking between these three countries is not a surprise” says Siegmar Schulz, from Hay Group Germany. German wages are high, but cost of living and taxes have driven Germany down the spending power rankings. “This reflects the relatively regulated nature of the German employment situation generally,” says Siegmar Schulz. “As a result, organizations are less able to make rapid changes to employment profiles than in more volatile employment markets, such as the US. Also, companies can benefit from subsidized short-term work arrangements brought in by the Government. This means the impact of the financial crisis may well be felt for longer, but is likely to be much less severe. Considering the recent economic environment, German managers can still be fairly content, when looking at their yearly salary level.” 9
  11. 11. Global Management Pay Report December 2009 He continues, “Switzerland has one of the highest levels of income for managers in Europe, and has a high concentration of multinational headquarters. In comparison to Germany, Switzerland is expensive to live, but tax and state contributions are relatively modest, which makes Switzerland overall a comfortable place to live and work for managers.” Central and Eastern Europe (CEE) Many of the Central and Eastern European countries feature in the top half of the spending power rankings in Europe. This is also true for the pay gap index compared to Western Europe. Three of the top 11 countries with the most significant pay gaps are from Eastern Europe (Romania, Ukraine and Poland), and all of the Central and Eastern European countries surveyed appear in the top 30. Mirka Straathof from Hay Group CEE commented, “Although, in the CEE countries managerial roles have been hit hardest by the crisis and the majority of managers had their salaries frozen or did not receive bonuses, the shortage of talent in this area is still driving up managerial salaries compared to clerical positions.” Romania tops the spending power table for managers in Europe. It has led Europe in terms of economic growth, which has resulted in salaries and bonuses for managers significantly greater than in other European countries. Romania had one of the lowest salary levels for manual workers compared to other CEE countries. There has been a constant effort to increase salaries for these lower level jobs in the past, but the gap still remains between them and management levels. Alina Popescu, from Hay Group Romania commented, “Two years ago, expatriates filled many managerial positions. What we are now seeing is a shift as these roles are being filled with Romanian managers. This has resulted in organizations making important savings in salaries and benefits of up to 30 per cent. Despite the economic downturn the levels of the salaries for Romanian managers remains similar to the past two years. This is explained by the scarcity of experienced managers in the market and the need for talent still at very high levels. Romania’s flat tax structure and lower cost of living has helped people in these positions to have greater spending power than those in the rest of Europe.” Polish managers have a higher spending power due to high gross salaries and a lower cost of living than, for example, Russia. But, Poland’s pay gap ranking is also high, not only in comparison with Western Europe but with countries like the Czech Republic and Slovakia. “High managerial salaries are a result of the rapid economic expansion in the 1990s, where there was a shortage of experienced talent. Salaries went up during that period and have remained high,” says Miroslawa Kowalczuk, from Hay Group Poland. “At the clerical level, we were experiencing an ‘employers’ market’ for many years - this has allowed blue collar and clerical salaries to be kept at low levels resulting in the high pay gap,” she adds. Turkey ranks just behind Romania in terms of managers’ spending power and the pay gap between management and clerical employees is one of the largest. “This is no surprise,” says Aysin Arguden from Hay Group Turkey. 10
  12. 12. Global Management Pay Report December 2009 “Turkish companies are looking to the international markets for growth. Therefore there is high demand for well-educated, competent and experienced management talent. In addition, remuneration packages in Turkey tend to be much more cash- oriented compared to Western European economies, due to social services such as healthcare, education, pension and housing typically being purchased by cash with none or little tax deduction benefits. However, this study paints a rosier picture than reality, as 90 per cent of senior managers live and work in Istanbul, which is one of the most expensive cities in the world, especially for a high quality of life.” In contrast, Ukrainian managers featured at 48th in spending power and Hungary is positioned in the lower level of the spending power figures. Tünde Jakabos from Hay Group Hungary says that “The business strategies and salary policies in Eastern European countries were previously based on considerable and constant growth. When the economic crisis diminished revenues, manager salaries were also hit. For example: bonuses were not paid, management salaries were frozen, reducing managers spending power. This has contributed in Hungary’s lower rankings.” She adds, “This position also highlights how Hungarian wages are competitively low, but are also impacted by the extremely high tax costs and relatively high living costs on managers compared to the other countries from the region.” Russia has been hit hard by the financial crisis and as a result, organizations have been forced to make tough short-term cost-cutting decisions. “Many organizations made instinctive cost-cutting decisions which were often essential for their short- term survival. Staffing levels, remuneration and training budgets were hit particularly hard, with dramatic headcount cuts and wages and training budgets slashed. This has resulted in Russian managers’ spending power being less competitive than those in other developing countries. However, its relatively low tax and living costs has meant that it is in the top half of the spending power index,” says Irina Chernozubova from Hay Group Russia. Nordic region The Nordic countries dominate the lower end of managerial spending power due to their high tax rate and high cost of living. Norway and Sweden feature at 47th and 51st in the rankings. “The main reason why the Nordic countries dominate at the lower end with regards to spending power,” says Sjur Teigland from Hay Group Norway, “is because of the strong roots to the Nordic sociopolitical model. This is the foundation for a strong welfare system which guarantees its inhabitants a generous welfare system for unemployment, retirement and disability. As a consequence, tax rates are high and there are high cost of living standards.” 11
  13. 13. Global Management Pay Report December 2009 The Nordic model maximizes labor force participation and promotes gender equality. In all four countries unions are traditionally very strong and influential. Salaries are most often regulated by collective agreements between the worker unions and employer unions which has a strong impact on minimum wages. “This is especially true for Norway, says Sjur Teigland. The main labor union – LO – is historically linked to Norway’s largest political party and is seen as a major stakeholder here. We can even find some evidence of the union’s influence when we compare this year’s salary increases with last year. Comparing senior managers with clerical jobs we find that jobs in the clerical category received an increase close to last year’s. But, the increase for senior managers’ was nearly halved and – quite unusually – lower than jobs in the clerical category.” “Also, we have a strong governmental ownership in strategic areas of the economy which influences senior management and executive salaries. In Norway’s egalitarian culture one would find it difficult to accept the sort of high salaries for top managers as we see in some other developed economies. So I am not surprised to see Norway at the bottom end when comparing salary gaps.” South and Central America Chile, Panama and Costa Rica have strong positions in the spending power index. This is driven by significant demand for talent at managerial levels, which results in an aggressive approach to managerial compensation. Organizations in these countries look to larger economies in the region, like Mexico and Colombia, for senior management talent. These countries are known within the region for their higher quality management capability, as a result of there being more relatively larger and global organizations providing enhanced training and development experiences to managers. For Chilean organizations, the limited South American senior management talent market has meant they also have the challenge of competing with the international market for senior management. Brazil sits near the top of the table in terms of spending power and a similar position in terms of pay gap. “Managers in Brazil have greater spending power relative to other fast growing economies like India, Russia and China. Brazil’s currency stability has helped spending power, but the country’s internal economic contrasts keeps the management/clerical gap similar to others in the South American region,” says Carlos Siqueira from Hay Group Brazil. Argentina’s spending power is relatively low compared to the rest of the region. Argentina’s cost of living has grown significantly since 2001. The real inflation rate for 2008 was approximately 20 per cent and in 2009, during the economic downturn will be around 16 per cent. Clerical salaries in Argentina have been driven down by union efforts to keep compensation growth rates aligned with inflation and cost of living increases. Senior managers’ pay is correlated more with business performance than it is with cost of living. Therefore, in a robust market, we would expect the pay gap to widen as business growth and performance increases, as well as resultant demand for talent. 12
  14. 14. Global Management Pay Report December 2009 Mexico has a relatively low position in the spending power tables compared to other countries because of the significant devaluation of the Mexican Peso relative to the US dollar – some 30 per cent in the past year. Whereas previously Mexican senior managers were paid relatively highly compared to the US, they are now on par. Asia Countries in Asia, with the exception of Hong Kong, tend to be in the lower end of the spending power index. Despite the impact of the global financial crisis, senior managers in Hong Kong continue to dominate the disposable income rankings in Asia, with 40 per cent more spending power than their US counterparts. “The international trade and finance powerhouse traditionally enjoys the highest pay in Asia coupled with low taxes and non-existent goods and services tax. Managers in Hong Kong enjoy the best bang for their buck compared to their Asian colleagues,” says William Lo from Hay Group Greater China. Disposable income for senior managers in Malaysia is near the bottom of the global rankings due to Malaysia’s relatively high tax structure, which is among the highest in Asia. Alex Lim from Hay Group Malaysia says, “This is despite the weakening of the Malaysian ringgit against the US dollar and a falling inflation rate. For disposable income to rise, senior managers in Malaysia need to find ways to add value to their organizations to justify higher pay and a higher take home package.” Despite the relative high cost of living, managers in Singapore enjoyed more disposable income this year compared to other Asian countries, thanks to low income tax rates and low inflation. However, the pay gap between the managers and their clerical staff has widened slightly since 2006 (4.9), partly as a result of the economic crisis. “This indicates that lower level staff should continue to upgrade their skills and look for ways to add value to their jobs to attract higher pay,” says Victor Chan from Hay Group Singapore. “Even though Thailand is technically in a recession,” says Thanwa Chulajata, Hay Group Thailand. “Multinational organizations in Thailand continue to pay premium salaries for English-speaking senior managers. With a cost of living that is lower than Singapore’s, it is not surprising for senior managers in Thailand to take home more than their peers in Singapore.” Japan was the first country in Asia to enter into recession, registering an -8.8 per cent annualized GDP growth in the first quarter of 2009. Yasuyo Okada from Hay Group Japan commented, “Stagnant salaries for senior managers has been the trend for the past few years and coupled with a cost of living that is three times that of Hong Kong, it is no wonder that disposable income for Japanese senior managers is 35th in the rankings.” The bottom three Asian countries of Indonesia, Vietnam and India saw wages being eroded by high inflation in 2009. 13
  15. 15. Global Management Pay Report December 2009 China’s GDP is expected to grow by 8.5 per cent for 2009. With this spectacular growth, senior managers, like most other Chinese employees have seen their wages increase by approximately 5 per cent. This has resulted in increasing spending power as inflation is slightly negative. At the same time, high prices for luxury goods and imported cars affect the Chinese senior manager’s spending power compared to their Asian peers. William Lo from Hay Group Greater China comments, “The war for talent continues in China even during the downturn and we expect that the pay market for senior managers won’t cool down anytime in the near future.” Although GDP growth has dropped from 7.5 per cent to 5.8 per cent in 2009, India remains one of the few Asian countries with positive economic growth and managers are enjoying rising disposable income. Oscar De Mello from Hay Group India says, “With a wide pool of English-speaking talent, this makes India great value for the money, and a high quality talent destination for foreign multinationals seeking to invest in India, especially in the Knowledge Processing Outsourcing (KPO) sector.” Nico Kiroyan from Hay Group Indonesia said that “Indonesia may be near the bottom of the global rankings. However, allowances (like cars and housing) are not included in this analysis, and these allowances make up a significant part of a senior manager’s standard package in Indonesia.” He adds, “In reality, once we take the entire remuneration package into consideration and the decrease in year-on-year inflation from 11 per cent to 3.5 per cent, senior managers actually enjoy greater disposable income. Indeed, the shortage of experienced management-level employees in the country has allowed managers to demand higher wages, so we expect, barring any unforeseen circumstances, Indonesia to climb the ranks of disposable income over the next few years.” The rankings for the spending power of senior Korean managers have been hit by a double blow. The first is the 24 per cent depreciation of the Korean Won against the US dollar, and the second is the on-going economic recession. “Even though inflation has been falling steadily from 3.8 per cent in January 2009 to 2.0 per cent in June 2009, these have not sheltered the disposable income of senior managers here,” says Irene Kang from Hay Group Korea. Vietnam has been a victim of extreme inflation rates in the past 12 months, creating uncertainties in the senior manager’s disposable income virtually on a month-to- month basis, which employers have tried to ameliorate by providing cost of living adjustments. “Despite the global economic slowdown, many companies still face the same pre-downturn problem of shortage of talent, especially at the middle to top management levels and hence this has supported salaries,” comments Connie Ma from Hay Group Vietnam. 14
  16. 16. Global Management Pay Report December 2009 Pacific Australia and New Zealand are closely matched in the middle of both rankings, marginally below that of US managers. In part, this is due to the global financial crisis hitting the region later and more mildly than in many developed countries. In contrast to many other developed economies, during the crisis Australian companies tended to cut headcounts at the employee level rather than the management level. This means that the impact of the downturn was felt more across the board than just at management level. Cost of living is also less of a factor in Australia due partly to tumbling interest rates and a reasonably strong currency. But, it is interesting to note that in our most recent research senior management salaries have contracted for the first time in recent memory4. New Zealand has been in a prolonged recession, but Australia has fared somewhat better than its closest neighbor. Although the recession has provided some respite to the tight talent market in New Zealand, for those recruiting, there is still a relative scarcity of highly skilled staff. The recession has caused many employees to reign in their job hopping tendencies, and in many cases management level employees have received lower salary increases (in percentage terms) than other groups. Now that signs of a recovery are upon us, we are expecting significant movement in the job market across all levels in 2010 as disenfranchised employees look for alternative opportunities. 4 CEO Total Annual Reward 2009 15
  17. 17. Global Management Pay Report December 2009 Table 1: 2009 ranking of managers’ spending power by country This table ranks management spending power, and provides an index using the US as the base point of measurement. The cost of living figures5 which these rankings take into account also use the USA as their base point. Rank Country Index Rank Country Index 1 Qatar 316 31 Austria 98 2 Kuwait 252 32 Korea 97 3 United Arab Emirates 248 33 Australia 97 4 Oman 228 34 Japan 93 5 Bahrain 222 35 New Zealand 93 6 Saudi Arabia 217 36 Germany 92 7 Chile 158 37 Kenya 91 8 Panama 147 38 Canada 91 9 Romania 144 39 Hungary 89 10 Turkey 143 40 Czech Republic 89 11 Luxembourg 142 41 China 88 12 Hong Kong 140 42 Slovakia 81 13 Costa Rica 135 43 United Kingdom 81 14 Egypt 128 44 Italy 81 15 South Africa 122 45 Norway 78 16 Brazil 120 46 Denmark 77 17 Ireland 119 47 France 77 18 Greece 117 48 Ukraine 75 19 Switzerland 117 49 Belgium 75 20 Russian Federation 116 50 Sweden 75 21 Portugal 112 51 Finland 66 22 Poland 112 52 Malaysia 64 23 Argentina 112 53 Indonesia 64 24 Mexico 110 54 Vietnam 63 25 Spain 106 55 Bulgaria 56 26 Thailand 105 56 India 50 27 Singapore 104 28 Netherlands 101 29 Nigeria 100 30 United States of America 100 5 Economist Intelligence Unit 2009 16
  18. 18. Global Management Pay Report December 2009 Table 2: 2009 Total cash salary gap between senior managers and clerical staff by country This table ranks comparisons of cross-country pay information from Hay Group PayNet, at management (head of function/department) and clerical/junior professional levels. The index uses Hay Group’s globally consistent data, which means that meaningful comparisons can be made around the world. Ranking Country Pay Gap Ranking Country Pay Gap 1 Nigeria 17.4 31 Qatar 5.4 2 China 12.6 32 South Africa 5.4 3 Indonesia 11.5 33 Greece 5.3 4 Thailand 11.4 34 Portugal 5.1 5 Costa Rica 10.5 35 Singapore 5.0 6 Panama 10.3 36 Spain 4.3 7 Egypt 10.3 37 Korea 4.1 8 Vietnam 9.8 38 Italy 3.9 9 Romania 9.7 39 United States of America 3.8 10 Ukraine 9.4 40 France 3.7 11 Poland 9.2 41 Ireland 3.7 12 India 9.1 42 Australia 3.7 13 Turkey 8.3 43 Austria 3.6 14 Russian Federation 8.3 44 New Zealand 3.5 15 Brazil 8.1 45 Japan 3.4 16 Chile 7.8 46 United Kingdom 3.4 17 Mexico 7.7 47 Luxembourg 3.4 18 Kenya 7.2 48 Netherlands 3.2 19 Hungary 6.6 49 Germany 3.2 20 Czech Republic 6.4 50 Belgium 3.1 21 Argentina 6.4 51 Sweden 3.1 22 Hong Kong 6.3 52 Denmark 3.0 23 United Arab Emirates 6.2 53 Finland 2.9 24 Saudi Arabia 6.2 54 Switzerland 2.9 25 Malaysia 6.2 55 Canada 2.8 26 Kuwait 6.1 56 Norway 2.6 27 Slovakia 5.8 28 Oman 5.8 29 Bulgaria 5.7 30 Bahrain 5.6 17
  19. 19. Global Management Pay Report December 2009 About Hay Group Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries and data in over 100 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organizations realize their potential. 18