Incentive Programs Differentiate Financial Services Pay

By Stephen Miller, CEBS Aug 20, 2013
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It’s been widely reported that base salary increases for executives in the U.S. have stayed at a median of 3 percent for the past few years. But that doesn’t necessarily mean organizations aren’t finding ways to differentiate pay for their senior leaders.

Hay Group's database of insurance and financial-services companies reveals that over the past three years, base salary pay within the sector has not changed much, with base salary budgets increasing by a median of 3 percent each year. However, in reviewing selected executive positions in the financial-services sector, the data show an increase in total cash payouts. Total cash includes base salary plus any bonus, commission or other short-term incentive pay. These increases were an average of 7 percent from 2011 to 2012 and an average of 11.9 percent from 2012 to 2013.

2012-2013 Insurance/Financial Services Market

Job Title

Annual Base Salary (median change)

Annual Total Cash Compensation (median change)

2013

Number of Organizations

2013 Number of Executives

Chief executive officer

4.4%

31.3%

6

6

Chief financial officer

4.5%

12.0%

6

6

VP of finance

3.1%

6.0%

4

4

Head of HR

2.6%

14.8%

6

6

Actuarial director–life

0.0%

8.5%

3

15

Chief actuary–property/casualty

3.6%

4.5%

5

5



2011-2012 Insurance/Financial-Services Market

Job Title

Annual Base Salary (median change)

Annual Total Cash Compensation (median change)

2012

Number of Organizations

2012 Number of Executives

Chief executive officer

5.1%

11.0%

4

4

Chief financial officer

4.5%

3.8%

7

7

VP of finance

4.2%

15.8%

5

6

Head of HR

5.0%

14.6%

5

5

VP of HR

6.9%

14.2%

3

4

Director of HR

2.0%

2.5%

3

16

Actuarial director–life

2.3%

2.8%

4

48

Chief actuary–property/casualty

2.8%

1.8%

4

4

Source: Hay Group

Hay Group’s data reveal these organizations’ preference to differentiate pay using incentive programs. Some financial organizations, especially those under more stringent regulatory review, have been shifting variable bonus dollars to fixed salary. "While this doesn’t sound like a logical thing to do in most circumstances, one needs to understand the history," Irv Becker, national practice leader of the U.S. executive compensation practice at Hay Group, told SHRM Online. "Many of these firms paid very low salaries, often fixed by level. Most all of the compensation delivered was in variable bonus. As the regulators have pushed back on the extent of the bonuses, due to risk concerns, firms have tried to align more closely with other industries and raise their salaries to more market-appropriate levels. This creates a better balance between fixed and variable pay."

Among other insights the data provide are:

  • Compliance. Opportunities continue to expand for jobs in a variety of compliance roles within financial services. "From experts in different regulatory and legal areas, to jobs that manage compliance processes, to jobs auditing and investigating compliance issues, we continue to see expansion of roles and compensation opportunities in this space," said Vincent Milich, senior principal of insurance & financial services U.S. reward consulting at Hay Group.

  • Mobile technologies. Financial services has been relatively late in moving applications, services and products to mobile platforms, but the migration is inevitable. "There is currently a war for talent in this space, and as financial services joins the fray the pricing for people with these skill sets is likely to accelerate even beyond the premiums paid currently," Milich observed.

Stephen Miller, CEBS, is an online editor/manager for SHRM.​

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