Vol. 45, No. 10
HR base pay hikes continue to outstrip overall U.S. pay increases, while increased strategic importance yields more HR empolyes incentive pay.
Base salaries for HR professionals continue to climb faster than overall salary increases in the United States, with HR pay rising 5.4 percent in the past year against a 4.2 percent rise in overall U.S. salaries, according to the 2000 Human Resource Management Compensation Survey sponsored by the Society for Human Resource Management (SHRM) and published by HR consulting firm William M. Mercer Inc.
While base pay keeps rising, more HR professionals also are earning incentive pay reflecting their contributions to organizational success, according to the study.
Base pay for HR professionals continues the acceleration it has experienced in recent years, rising an average 5.4 percent in 2000 over 1999 levels.
The 1999 survey showed a 5.3 percent increase over 1998, while in 1998 HR pay was 4.3 percent above 1997 levels. In 1997, pay was 3.5 percent above 1996 levels. By comparison, overall salary increases in the United States have remained level at 4.2 percent for the past five years. ( See Chart 1.)
Strategic Roles Drive Pay
The tight labor market and increased global competition have changed the roles of HR professionals in a growing number of organizations. The most sought-after HR professionals are those who understand the business and are able to think strategically, Mercer consultants find as they work with HR organizations.
The compensation and technical expertise needed for HR have shifted as the responsibilities for HR professionals have become more sophisticated. Today, HR executives deal with diverse, complex issues such as mergers and acquisitions, new technology systems and expanded use of short-term incentives and stock options. To attract and retain the best employees, HR professionals must develop creative strategies for recruiting, compensating and developing employees. HR has joined with senior management in accountability for the employer’s success.
The competition to recruit HR professionals who function as strategic business partners may be a key factor in rising pay levels. Increasingly, operations executives are recruited into HR positions because they have business expertise. Since many of these executives are coming from positions that are more highly compensated than HR positions, they are demanding higher levels of pay, which may be accelerating overall HR pay, according to Mercer’s experience.
Incentives Widely Used
Responding to the tight labor market, companies are paying more to compete for employees—including HR professionals. The trend of shifting a significant portion of additional compensation spending into variable pay programs continues. For employers, the key advantage of variable pay is that these are one-time payments and do not compound over time like base salary increases do.
Among 13 senior HR jobs at roughly the vice president and director levels, 84 percent of employees receive short-term incentives, such as bonuses, as part of their total compensation package. There is more variability with long-term incentives. For example, only half of the top corporate labor relations and industrial relations executives receive long-term incentives, while 86 percent of the top corporate international HR executives receive long-term incentives.
The most common long-term incentives offered to senior HR executives include non-qualified stock options, followed by incentive stock options.
Among manager-level HR professionals, most—from 55 percent to 79 percent, depending on job title—receive short-term incentives as part of overall compensation. However, far fewer—from 15 percent to 44 percent—receive long-term incentives. Again, nonqualified stock options and incentive stock options remain employers’ most popular choices for long-term incentive awards.
Labor Relations Jobs Top Pay List
The survey continues to demonstrate pay differences among HR’s functional areas. The highest-paid HR position is identified in the survey as "top HR management professional with industrial relations experience." ( See Chart 2.) The position’s median total cash compensation is $201,500. The top corporate labor relations or industrial relations executive job is next on the list with a median total cash compensation of $157,000. The top corporate international HR management executive is third, with compensation of $149,000. These pay levels are based on incumbents. Pay for these positions typically would be correlated with organizational size and structure.
Among managers, the survey results show that labor relations managers receive the highest pay, with median total cash compensation of $99,200. HR managers are next, at $86,600, followed by compen-sation managers at $86,000. Median pay for compensation and benefits managers is $82,500. At the other end of the spectrum are safety and security managers, with median total cash com-pensation of $64,500 and payroll managers at $62,600. ( See Chart 3.)
At more junior levels, analysts working in executive compensation and international compensation receive higher pay, at $55,000 and $67,500, respectively. Benefits analysts’ median total cash compensation is $44,700, while compensation analysts’ median compensation is $44,100.
HR generalists’ compensation in 2000 hit $49,000—a rise of 5.4 percent over 1999.
Recruiting salaries also are rising as employers continue to struggle with low unemployment rates. Reflecting the difficulty of finding good information technology workers, the median total cash compensation for a technical recruiter is now $55,000, a 10 percent increase over a year ago. Other recruiting positions have received above average increases as well, with managerial and professional recruiters’ median compensation at $55,100, up 5.9 percent over 1999, and general recruiters at $39,400, up 4.8 percent over 1999.
This year, the survey covered more positions in growing areas of HR such as training. The survey gathered data on positions such as top training executive, training manager, trainer, technical trainer, diversity trainer and instructional designer. The median cash compensation is $124,500 for top corporate training executives, $71,400 for training managers and $42,200 for trainers. Training positions related to technology have higher overall salaries than their non-technical counterparts.
Highest Pay In Utilities, Manufacturing
In addition to scope of responsibility, other factors, particularly industry sector and company size, can affect pay levels for HR professionals.
For example, the median total cash compensation for an HR director varies from a low of $87,300 in the government and nonprofit sector to a high of $129,000 in nondurable manufacturing—a difference of 48 percent. Compensation for an employee relations specialist ranges from $42,700 for government and nonprofit employers to $73,900 for employers in the utility industry, a 73 percent difference. A similar pattern exists for managerial and professional recruiters, whose compensation ranges from $42,800 in government and nonprofit to $69,200 in the utility industry, a 62 percent difference.
Overall, the highest pay levels, in terms of median total cash compensation, are found in the utility and manufacturing industries, while the lowest pay is found in the government and nonprofit, education, and retail and wholesale industries.
Company size also plays a role in determining compensation levels, but pay does not necessarily rise in lock step with company size. For example, total cash compensation is $108,900 for a human resource director at a company with less than $500 million in annual revenue, but compensation rises to $111,400 for a company with $500 million to $1 billion in revenue. In a company with $1 billion to $2.5 billion in revenue, median compensation is $110,000. For a company with $2.5 billion to $5 billion in revenue, compensation is $118,000.
But in the companies with the highest revenues, median total cash compensation for HR director jobs is lower than in companies with lower revenues. In companies with $5 billion to $10 billion in revenue, directors make a median $105,200. In companies with more than $10 billion in revenue, median compensation is $115,500. ( See Chart 4.)
Similar patterns emerge in most other HR jobs included in the survey, with some upward movement in salaries correlating to organizational size, but with the largest companies not necessarily paying the highest salaries.
NOTE: To purchase the survey or get additional information, contact Mercer at (800) 333-3070 or visit www.wmmercer.com/dataandsystems.
Patricia Schaeffer, a senior consultant in the Philadelphia office of William M. Mercer Inc., has managed projects focused on the design of base salary and incentive compensation programs and has extensive experience in job evaluation and salary management. William M. Mercer Inc. is a New York-based consulting firm assisting employers with HR strategy and implementation.