Hay Group World Pay Report



    Global management spending power

    TORONTO, Sept. 11 /CNW/ -

    The global talent quest

    The market for management talent is now undoubtedly global. At Hay Group
we consistently see developments in one region having a flow-on effect to
others - whether it is the rise of the Indian rupee impacting on salaries in
the Middle East, where much management talent is sourced from the
subcontinent, or China's white-hot economy pulling up-and-coming managers away
from the established markets of Western Europe.
    The factors that influence individuals' decisions on where they pursue
their careers are many, but a key one is the powerful link between earning
capacity and lifestyle. The World Pay Report examines the average salary of a
management level employee (Hay Reference Level 20, roughly equivalent to a
head of department or function in a large multinational company), applies the
relevant tax rate for that salary, and subtracts a generic 'cost of living'
measure, to reach a ranking of the relative spending power of managers in
51 countries around the world.

    Overall findings

    Managers in the fast-growth economies of the Middle East, Asia, and
Eastern Europe tend to have the highest spending capacity. The demand for
management talent far outstrips supply in these markets, meaning that
companies need to compete with developed economies for the talent they need.
At the same time, the cost of living is determined more by local factors,
keeping the relative value of management salaries high.

    Spending power of emerging economies continues to grow

    In general, managers' spending power appears to have grown over the past
year, even once the potentially inflationary impact of the drop in the
US dollar is taken into account(1). Not surprisingly, the highest growth in
spending power is usually correlated to a growth in the economy of that
country. As the global economic slowdown continues to bite, we anticipate the
growth of spending power to slow. This may also be exacerbated by the rising
cost of food, fuel and, in some key markets such as the Middle East,
accommodation.

    A note on methodology

    Hay Group's World 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 and benefit
values.
    The study used Hay Group's universal definition of what constitutes a
'manager', which ensures that results are consistent around the globe. Cost of
living and tax were then taken into account to reveal disposable income levels
- the true purchasing power of executive salaries - for 51 countries in North
America, South America, Africa, Europe and Asia Pacific. The spending power of
managers in each country was then indexed, using the spending power of USA
managers as the base line.
    All local currency figures were converted to US dollars for purposes of
comparison. While the study also shows findings from the 2007 World Pay
Report, year-on-year comparisons need to be treated with caution as
fluctuations in the value of local currencies against the USD can cause
anomalies.

    Region and country trends

    Asia

    Senior managers in Hong Kong continue to dominate the disposable income
rankings in Asia, with spending power almost double that of their
US counterparts. This international trade and finance centre traditionally
enjoys the highest pay - about a quarter more than other Asian countries -
coupled with low taxes. Thailand, China, Singapore and Malaysia also fall into
the top half of the rankings, while the more developed economies of South
Korea and Japan line up with their counterparts from Western Europe and North
America. India is the anomaly, with managerial spending power roughly
equivalent to that of the US.
    Charlotte Park of Hay Group Asia said: "The shortage of management talent
in China's booming economy means companies need to pay over the odds to find
and keep management talent, in comparison with more developed markets such as
Singapore. In addition, the rise in cost of living in Singapore has also
chipped away at managerial spending power."
    "By contrast, disposable income in India is low relative to other
emerging economies, making India a value for money, high-quality talent
destination for employers. However, with a GDP growing at a fast clip and an
average salary increase of 14 per cent, it is likely that disposable income of
managers will continue to grow for the next few years, even taking a high
inflation rate into account.
    "Indonesia is coming off a low base, and still languishes near the bottom
of the global rankings. However, the shortage of experienced management-level
employees in the country has allowed local managers to demand higher wages,
and we may well see this picture start to change in coming years."

    Middle East

    The oil-driven economies of the Middle East are all towards the top of
the table, with Bahrain trailing at 13. Leading the table is Qatar, with
spending power almost two and a half times that of US managers. This is
despite a strong increase in cost of living, which has been more than matched
by the increase in wages.
    As the Gulf economies diversify out of the traditional oil and gas
sectors, the demand for top talent continues to drive salaries higher. Vijay
Gandhi of Hay Group Middle East said: "We are not witnessing economies in the
Gulf region of the Middle East going through a credit crunch. Although their
disposable income has fallen over the last year, managers in most of the Gulf
countries continue to be at the top of the table. However, even at these
salary levels, it's becoming difficult for employers to recruit the 'right'
talent and retain existing top managers, who keep getting lucrative job offers
within the region. On average, over 80 per cent of workforce in Gulf region
are expatriates and as economies continue to expand, employers are finding
there is a shortage of supply.
    "Going forward, we are not going to witness a paradigm shift in rankings
of the Gulf countries in the World Pay Report any time soon. Senior managers
continue to get a salary increase of between 15 to 20 per cent, which is very
aggressive compared to most other countries."

    North America

    In line with other developed economies, the US is ranked firmly towards
the bottom of the table. However, says Iain Fitzpatrick of Hay Group USA,
there are other factors that need to be considered.
    "A management role at this level in the US is likely to be significantly
further down the company hierarchy than a similar role in an emerging
economy," he said. "Managers at this level in the US are likely to be the head
of a division or function, such as the head of marketing or HR. In a smaller
economy, they may well be at CFO or even CEO level."
    This means that managers working at this level in the US are more likely
to be mid-career rather than senior, and will have more prospects for career
advancement within their organization. However, there are many for whom the
lure of a tax-free salary in the UAE or a chance to gain valuable experience
in the fast-growth economy of China may be irresistible.
    "US companies need to recognize that their competitors are no longer
their neighbours," said Iain Fitzpatrick. "Companies from all around the world
are targeting US management talent. As the credit crunch continues to bite,
US organizations have to consider whether they should also look beyond
US borders for talent, and what they might need to do to counteract the
potential appeal of expatriate life."
    Tom McMullen of Hay Group USA said: "In comparing US spending power to
the hot developing markets of the Middle East, Asia, Eastern Europe and Latin
America, we can see an even greater need for a focus on talent management,
succession management and retention of talent in this country.
US organizations would also be well served to ensure that a higher share of
their leadership and talent development investments are channeled to these
developing markets, where there is a high premium paid for management talent
and where the available bench of succession candidates is much more limited."
    Hay Group also expects to see US companies placing a greater emphasis on
effective talent management to differentiate themselves from the competition -
particularly as many organizations face a shrinking capacity to compete on
pay, thanks to the credit crunch.
    "More organizations will follow the lead of the best performing companies
and develop more consistent, centralized reward systems and planned career
assignments," said Tom McMullen. "This allows employees to gain the global
experience needed to make their organization a stronger player on the world
stage, without losing valuable talent to their competitors."

    Western Europe

    Managers in Western European economies tend to have spending power
towards the middle to lower range. The UK registers towards the bottom of the
table, reflecting relatively high tax and cost of living coupled with a slower
rate of growth in the economy than developing economies.
    Peter Christie from Hay Group UK said: "UK companies are generally quite
sophisticated in their analysis of pay market movements, but are likely to be
constrained by tightening budgets over the coming year and greater difficulty
in passing on higher wage costs through higher prices. As a result, pay
increases are more likely to be driven by what the company can afford, given
its business priorities and market position, than the amount it may need to
compete in the market."
    "This means companies will need to get smarter about how they allocate
their resources, as their budgets tighten. Best performing companies will
carefully target pay increases to key roles and high-performing individuals,
and we also expect to see a greater focus on bonuses and other short-term
incentives."
    Austria, Germany and Switzerland perform relatively well, all ranking
towards the top of the European countries for relative spending power.
    "Managers' spending power in Germany has remained relatively robust, with
wage increases keeping pace or even exceeding inflation. Over the last two
years we have seen the market at this level become much more dynamic," said
Siegmar Schultz of Hay Group Germany.

    Central and Eastern Europe

    The gap between the spending power of managers in Central and Eastern
Europe and Western Europe has continued to widen as predicted in last year's
World Pay Report, with a number of CEE economies not only staying at the top
of the table but also showing strong growth over last year. Even once the
potential impact of currency fluctuations is taken into account, the trend
towards growth in managerial spending power is strong.
    Scott Marlowe from Hay Group Czech Republic said: "The strong growth in
managers' pay in most CEE countries is fueled largely by what is perceived to
be a significant shortage of management talent in the CEE markets. There are
certainly no signs of a slowdown in pay nor of an end to the talent shortage.
What's more, these economies are still growing strongly despite the slowdowns
in the US and Western Europe. Combine all of this with incredibly strong local
CEE currencies against the dollar, euro and pound and CEE managers come out
very well."
    Romania, Slovakia, Czech Republic, Turkey, Estonia, Lithuania, Latvia,
Hungary and Poland all rank highly. Russian management salaries perform well
at ninth place overall. In contrast, Ukrainian managers performed poorly,
particularly compared to previous years, reflecting a degree of instability in
the local economy.

    Nordic region

    Once again the Nordic countries dominate the lower end of the table.
Georg Vielmetter, General Manager for Hay Group in Scandinavia, says: "Not
surprisingly, the Nordic countries are at the bottom of spending power for
managers, with Sweden well behind the others. The reason for this is
three-fold: high cost of living, high marginal taxes, and low gross salaries
due to the egalitarian culture.
    "The point about low gross salaries is especially true in Sweden, while
Finland is starting to catch up to international norms. This lack of financial
incentive may be a key reason why we find so few international managers in
Sweden, and which affects international companies in times of a war for
talent."

    South and Central America

    Argentina and Mexico rank highly for managerial spending power, thanks to
a relatively low cost of living. Brazil's results also reflect its continuing
and stable rate of growth, keeping it firmly in the middle of the rankings,
with a spending power roughly 50 per cent above that of the US.
    The position in Argentina is unlikely to change soon, according to Luis
Arispon of Hay Group South America. "Management level salaries in the region
generally increase roughly in line with inflation," he said.
    "Unlike the highly heated economies of China and India, we are not seeing
management level salaries growing exponentially faster than the general
market. While managerial salaries are still significantly higher than those of
blue collar or clerical workers, they tend to increase in line with the cost
of living.
    "This means that companies are more easily able to source high-quality
management talent in South and Central America than in the booming economies
of the Far East," he added. "In times of global economic downturn, this makes
the region a strong prospect for growth, as the relative cost of labour is
lower."

    Pacific

    Not surprisingly, Australia and New Zealand continue to be ranked in the
bottom half of the table with spending power only marginally above that of
US managers. While Australia's strong economy continues to drive demand for
management talent - with a corresponding rise in wages - a relatively high
cost of living and high marginal tax rates eat into the relative spending
power of managers.

    Africa

    The spending power of managers in Egypt is relatively low, coming in
below that of the US. This is due to inflation, which has accelerated over the
last year and has affected the cost of even the most basic commodities.
    South Africa remains firmly in the bottom half of the table at 36th.
Ginger Brown of Hay Group South Africa commented: "The last year has been a
period of high inflation - in double digits for the first time since 2002 -
and low economic growth. In addition, interest rates have risen 4.5 points
over the last 12 months further eroding purchasing power and causing many
people to tighten their belts.
    "It is not surprising that the net take-home position of senior managers
has declined in the last 12 months," she said. "Salary increases are lagging
behind the consumer price index, and we expect to see greater increases at the
beginning of next year. Whether those increases will lead to manager salaries
catching up with inflation remains to be seen."

    
    Table 1: 2008 ranking of managers' spending power by country

    This table ranks management spending power, and provides an index using
the USA as the base point of measurement. The cost of living figures which
these rankings take into account also use the USA as their base point.

    -------------------------------------------------------------------------
    Rank                     Country                                   Index
    -------------------------------------------------------------------------
    1                        Qatar(*)                                  241.7
    -------------------------------------------------------------------------
    2                        United Arab Emirates                      218.2
    -------------------------------------------------------------------------
    3                        Saudi Arabia                              210.1
    -------------------------------------------------------------------------
    4                        Hong Kong                                 199.6
    -------------------------------------------------------------------------
    5                        Turkey                                    189.2
    -------------------------------------------------------------------------
    6                        Oman(*)                                   180.4
    -------------------------------------------------------------------------
    7                        Kuwait(*)                                 179.0
    -------------------------------------------------------------------------
    8                        Romania                                   168.6
    -------------------------------------------------------------------------
    9                        Russia                                    163.7
    -------------------------------------------------------------------------
    10                       Thailand                                  162.0
    -------------------------------------------------------------------------
    11                       Argentina                                 159.8
    -------------------------------------------------------------------------
    12                       Mexico                                    152.2
    -------------------------------------------------------------------------
    13                       Bahrain(*)                                152.0
    -------------------------------------------------------------------------
    14                       Poland                                    147.1
    -------------------------------------------------------------------------
    15                       Austria                                   146.8
    -------------------------------------------------------------------------
    16                       Lithuania                                 145.7
    -------------------------------------------------------------------------
    17                       China                                     145.0
    -------------------------------------------------------------------------
    18                       Germany                                   144.7
    -------------------------------------------------------------------------
    19                       Spain                                     144.4
    -------------------------------------------------------------------------
    20                       Switzerland                               144.2
    -------------------------------------------------------------------------
    21                       Greece                                    141.4
    -------------------------------------------------------------------------
    22                       Singapore                                 141.3
    -------------------------------------------------------------------------
    23                       Brazil                                    134.6
    -------------------------------------------------------------------------
    24                       Malaysia                                  133.9
    -------------------------------------------------------------------------
    25                       Portugal                                  132.1
    -------------------------------------------------------------------------
    26                       Ireland                                   129.2
    -------------------------------------------------------------------------
    27                       Slovakia                                  126.5
    -------------------------------------------------------------------------
    28                       Czech Republic                            122.4
    -------------------------------------------------------------------------
    29                       New Zealand                               114.9
    -------------------------------------------------------------------------
    30                       Netherlands                               113.5
    -------------------------------------------------------------------------
    31                       Latvia                                    113.3
    -------------------------------------------------------------------------
    32                       Italy                                     109.7
    -------------------------------------------------------------------------
    33                       France                                    109.6
    -------------------------------------------------------------------------
    34                       Ukraine                                   109.5
    -------------------------------------------------------------------------
    35                       South Korea                               108.6
    -------------------------------------------------------------------------
    36                       South Africa                              107.8
    -------------------------------------------------------------------------
    37                       Australia                                 107.1
    -------------------------------------------------------------------------
    38                       India                                     106.1
    -------------------------------------------------------------------------
    39                       Japan                                     106.0
    -------------------------------------------------------------------------
    40                       Hungary                                   105.0
    -------------------------------------------------------------------------
    41                       United States of America                  100.0
    -------------------------------------------------------------------------
    42                       Belgium                                    97.7
    -------------------------------------------------------------------------
    43                       Estonia                                    95.9
    -------------------------------------------------------------------------
    44                       Egypt                                      93.7
    -------------------------------------------------------------------------
    45                       Canada                                     93.6
    -------------------------------------------------------------------------
    46                       Denmark                                    90.2
    -------------------------------------------------------------------------
    47                       United Kingdom                             88.9
    -------------------------------------------------------------------------
    48                       Norway                                     84.9
    -------------------------------------------------------------------------
    49                       Indonesia                                  82.1
    -------------------------------------------------------------------------
    50                       Finland                                    78.6
    -------------------------------------------------------------------------
    51                       Sweden                                     75.6
    -------------------------------------------------------------------------
    (*) new entry in 2008



    Table 2: 2007 ranking of managers' spending power by country

    ----------------------------------------------
                             2007
    ----------------------------------------------
    1                        Saudi Arabia
    ----------------------------------------------
    2                        United Arab Emirates
    ----------------------------------------------
    3                        Hong Kong
    ----------------------------------------------
    4                        Russia
    ----------------------------------------------
    5                        Turkey
    ----------------------------------------------
    6                        Mexico
    ----------------------------------------------
    7                        Ukraine
    ----------------------------------------------
    8                        Thailand
    ----------------------------------------------
    9                        Singapore
    ----------------------------------------------
    10                       Argentina
    ----------------------------------------------
    11                       Poland
    ----------------------------------------------
    12                       Spain
    ----------------------------------------------
    13                       Switzerland
    ----------------------------------------------
    14                       China
    ----------------------------------------------
    15                       Greece
    ----------------------------------------------
    16                       Malaysia
    ----------------------------------------------
    17                       Brazil
    ----------------------------------------------
    18                       Lithuania
    ----------------------------------------------
    19                       Germany
    ----------------------------------------------
    20                       Ireland
    ----------------------------------------------
    21                       Portugal
    ----------------------------------------------
    22                       Romania
    ----------------------------------------------
    23                       Austria
    ----------------------------------------------
    24                       United States
    ----------------------------------------------
    25                       Netherlands
    ----------------------------------------------
    26                       Australia
    ----------------------------------------------
    27                       Japan
    ----------------------------------------------
    28                       Italy
    ----------------------------------------------
    29                       South Africa
    ----------------------------------------------
    30                       New Zealand
    ----------------------------------------------
    31                       France
    ----------------------------------------------
    32                       South Korea
    ----------------------------------------------
    33                       Latvia
    ----------------------------------------------
    34                       Czech Republic
    ----------------------------------------------
    35                       Egypt
    ----------------------------------------------
    36                       India
    ----------------------------------------------
    37                       Hungary
    ----------------------------------------------
    38                       Belgium
    ----------------------------------------------
    39                       Slovakia
    ----------------------------------------------
    40                       United Kingdom
    ----------------------------------------------
    41                       Denmark
    ----------------------------------------------
    42                       Canada
    ----------------------------------------------
    43                       Estonia
    ----------------------------------------------
    44                       Norway
    ----------------------------------------------
    45                       Sweden
    ----------------------------------------------
    46                       Finland
    ----------------------------------------------
    47                       Indonesia
    ----------------------------------------------
    48
    ----------------------------------------------
    49
    ----------------------------------------------
    50
    ----------------------------------------------
    51
    ----------------------------------------------


    ----------------------
    (1) 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.
    





For further information:

For further information: For more details about the study, please
contact Karl Aboud in the Hay Group Toronto office at (416) 815-6410, or by
e-mail at karl.aboud@haygroup.com

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