Human Capital & Careers

Incentive Pay Spreads Beyond U.S., E.U.

Many U.S.-based multinationals are developing long-term incentives that customize award size by geography.
Stephen TaubJanuary 18, 2006

Pay for performance is spreading globally. Like the more-developed economies of North America and Europe, Asian and Latin American companies are beginning to tie employee compensation to business results, according to a new study from Towers Perrin.

Worldwide, performance-based pay as a share of total compensation for chief executive officers ranged from 14 percent in India to 62 percent in the United States, according to the study, which highlights compensation and benefit practices in 26 locations around the world. Performance-based pay consists of bonus payouts and long-term incentives, generally in the form of stock options or other equity compensation.

For accountants, these pay structures had a much smaller variation worldwide, ranging from 0 percent in Sweden, Switzerland, and Venezuela to about 10 percent in Mexico and South Africa.

Towers Perrin also pointed out that many U.S.-based multinationals are moving toward the European approach of developing long-term incentives that customize award size by geography or by group of countries.

“The size and frequency of stock and other long-term incentives are on the rise in most parts of the world, although we are seeing a decline in the use of stock options in some developed economies, particularly the United States,” said James Matthews, a Towers Perrin principal, in a press release.

Matthews added that annual bonuses, once mainly reserved for professional-level employees, are now being doled out more broadly at lower levels. “For the first time, in countries like Canada, France, Korea, Mexico, and the United Kingdom, year-end bonuses for this group are the norm and not the exception,” he said.

In Asian countries such as Taiwan, Malaysia, China (Shanghai), and Singapore, annual bonuses range between 10 percent and 15 percent of salary at the professional level. This compares with the 5 percent to 10 percent of salary that is common practice for professionals in North America and Europe.

Not surprisingly, CEOs in the United States enjoy the largest and most comprehensive pay packages, both in terms of base compensation and total remuneration, according to Towers.