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BioPharma and Life Sciences Year-End Cash Compensation Planning survey results released

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In late 2017, Willis Towers Watson conducted its annual Biopharma and Life Sciences Year-end Cash Compensation Planning survey. As in previous years, the survey focused on actual and projected salary increase expenditures, short-term incentive plan funding and other short-term incentive plan design topics. Although we have observed a number of companies moving away from regular annual merit increases, our experience is that this continues to represent majority practice for the time being.

The results report, which is complimentary to participating organizations, is a helpful tool for companies’ year-end compensation planning process and was published in December 2017. Participation was strong in 2017 with over 35 companies, ranging from smaller, high-growth organizations to larger multinationals. While the survey has historically focused on U.S.-based employees, this was the first year it was also extended to Europe.

Key findings

U.S.

In the U.S., the 2017 merit salary increase expenditure was 2.8%, and total salary increase expenditure was 3.5% at median. The 2018 projected increase at median was slightly higher at 3.0% for merit and 3.9% for total salary. We also saw larger increases for biotechnology companies versus pharmaceutical companies, though the difference was less pronounced than last year. From a short-term incentive plan design perspective, we saw companies continue to maintain eligibility across the broad-based employee population, though they are differentiating target bonus funding more by performance level than observed in the past. The majority of the U.S. participants also expect to pay out at or above target for their annual incentives in 2018 (for performance in 2017).

Europe

In Europe, the findings were broadly consistent with the U.S. The 2017 merit salary increase expenditure was 2.5%, and total salary increase expenditure was 3.5% at median. The 2018 projected increase at median was 2.3% for merit and 3.6% for total salary, which are slightly lower than our findings in the U.S. Similar to the U.S., we saw companies maintain short-term incentive plan eligibility across the broad-based employee population. Differentiation of target bonus funding by performance level is materially less in Europe than the U.S., which is consistent with our observations that U.S. companies tend to rely more heavily on performance-based compensation to vary compensation internally. The majority of the European participants also expect to pay out at or above target for their annual incentives in 2018.

A chance to share insights

This annual survey is a valuable opportunity for Willis Towers Watson to collect and share insights in the Biopharma and Life Sciences industry, which participating organizations can use to guide year-end cash compensation planning decisions.

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