Job-Changing Executives Saw Big Pay Increases Last Year

During the Great Recession, senior executives who switched jobs got smaller pay bumps

Stephen Miller, CEBS By Stephen Miller, CEBS February 10, 2017

Senior executives who changed jobs last year received double-digit compensation increases, as they increased their cash compensation by 21.1 percent, on average, over what they earned at their previous organizations.

This increase applied to every industry and every functional area, according to executive search firm Salveson Stetson Group, which analyzed compensation data from a representative sample of the firm's senior executive placements among a variety of organizations in 2016. The compensation packages analyzed included base salary and incentive pay awarded last year.

The average compensation increase for a senior-level candidate accepting a new job in 2016 was up slightly from the 18.44 percent increase notched for 2015.

In comparison, salary increase budgets for corporate officers/executives who stayed put in 2016 averaged 3 percent, the same as for other employee categories and no different from the salary increase forecast for 2017, according to WorldatWork, an association of total rewards professionals. These officers/executives also reaped variable pay, such as bonuses, that accounted for 34.5 percent of their overall cash compensation in 2016; that figure is expected to rise to 35.0 percent in 2017, according to the group's forecast.

The higher rewards offered to job-changing executives reflect the continued tightening of the U.S. labor market as the unemployment rates last year held steadily below 5 percent, said Donna DeHart, vice president at Philadelphia-based Salveson Stetson Group. "In an environment approaching full employment, it would be surprising if we didn't see this type of upward pressure on executive compensation," she said.

[SHRM members-only toolkit: Designing Executive Compensation Plans]

"We are now seeing the same type of free-for-all for talent that we experienced in the years immediately prior to the Great Recession," said John Salveson, co-founder and principal at Salveson Stetson Group. "U.S. corporations must not only pay employees competitively to retain them, but must offer a work culture and career development opportunities that outweigh the opportunity to receive better compensation packages elsewhere."

Among other research findings highlighted by Salveson's firm:

  • Executives who switched jobs before the recession—from 2006 to 2007—received an average compensation increase of nearly 25 percent.

  • The average compensation increase offered to new executive hires during the height of the recession—2008 to 2009—dropped to 11 percent.

  • Post-recession compensation packages for executives who changed jobs over the past three years have almost fully recovered to their pre-recession levels.

Related SHRM Online Article:

Top Executives to Get Performance Bonuses Despite ‘Tepid Growth’, SHRM Online Compensation, January 2017

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