The base salary increases for all financial services roles are expected to be between 1.9% and 2.4% on average in 2017, according to Mercer's “Global Financial Services Executive Compensation Snapshot Survey.”
The research finds that the majority of organizations predict 2017 annual incentive levels to remain similar or unchanged to 2016.
“Salary increases are set to be modest in 2017 as financial services companies worldwide feel the impact of slow economic growth, low inflation as well as continued low interest rates,” says Hans Kothuis, Partner, Executive Rewards Practice Leader, AMEA.
Asia’s average salary increase stands at 3.8% highlighting the continued growth momentum in the region. With 6% projected average increase, India’s average salary uplift is the highest globally in 2017 thanks to the country’s continuous growth and reforms in place.
“With relatively flat compensation, firms are expected to go beyond pay and prioritize engaging and retaining talent, emphasizing their broader value proposition,” says Kothuis.
Highest 2017 base pay increases projected in Asia
Forecasted base salary increases are expected to be lower in Europe (1.4% to 2.0%) than North America (1.6% to 2.6%). Projections for India (6.0% average salary increase) are higher than any other growth market across Latin and South America (3.5%) and Asia (3.8%).
Almost 1/4 of companies surveyed predict the actual 2017 incentive pool to be significantly lower than 2016 levels, while only 11% predict it to be significantly higher. A similar trend was observed last year. Around 2/3 of organizations predict that the 2017 actual corporate incentive pools will be similar (within +/- 5% range) or unchanged to 2016 levels.
A growing number of organizations are implementing the use of non-financial performance measures as a way of aligning performance with sound risk-taking.
Non-financial performance measures of conduct, compliance and risk management are increasingly being allowed to override financial outcomes.
Approximately 1/3 of organizations allow for non-financial measures to override financial measures in their annual incentive plan (38%) and multi-year incentive plan (32%). This is more common in banks (55%) than insurance firms (15%).
Compensation for control functions
Organizations continue to respond to regulatory developments and talent shortages by increasing fixed pay in the compensation of control functions.
Mercer’s data showed around half (48%) of companies to have increased fixed pay for control functions, 1/3 had decreased variable pay, and 19% showed an increase in total compensation levels.
Far more European organizations report a shift from variable to fixed pay: about half (52%) of European organizations reported an increase in pay linkage to function performance compared to 21% in North America.
A 1/3 of insurers and banks reported that regulatory impact decreased the link between pay and business performance.