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Survey Report

Why a reward manager’s job is never done

Results from our Global 50 Remuneration Planning Report

Compensation Strategy & Design

December 24, 2018

See the latest results from our Global 50 Remuneration Report, and how reward is affected.

Reward practices are subject to a host of complex forces. Some influences – such as legislative changes and new employer mandates – are immediate and universal. Others – like the introduction of tax-incentivized programs to defer compensation– can be slow to take root and may not necessarily influence all employers. Some – such as a sharp rise in cost-of-living pressures – are temporary, albeit with significant and direct impact on staff which drive employers to make choices and take action. Others still – like median workforce age – result in longer-term influences which can represent significant costs for employers but they have a very small role to play beyond paying contributions.

Among it all there’s one constant to be found: no matter where in the world one looks, the reward landscape made up by the sum of these (and other) forces is in a constant state of flux.

Global Reward landscape 2018

bubble chart showing the median age of relative cpi and efficiency of cash compensation

Sources: Global 50 Remuneration Planning Report 2018-2019; Economist Intelligence Unit, CIA Factbook

In truth, there’s little employers can do to influence the forces which surround them. The best they can do is react in the right way for their organization and at the right time. But in order to do that, the forces at play need to be understood.

For example, take everyone’s least favorite topic. The impact of taxes on operating costs and reward programs can be surprising. The difference between employers’ costs and employees’ net take-home pay can be substantial, as you can see in the illustration below. Well-designed reward policies can offer a win-win deal, helping employees maximize tax breaks and their net remuneration on a basis that’s tax-effective for employers. However, such solutions are not one-size-fits-all and what will work in one market won’t necessarily work elsewhere.

Tax Burden on Pay

tax burden on pay  up to 50,000 USD

Sources: Global 50 Remuneration Planning Report 2018-2019 Note: Based on gross annual pay of USD 50,000 (converted from local currency where required). The results are approximations, reflecting only federal/national income tax, statutory employer/employee social security contributions and employer/employee contributions for certain mandatory defined contribution programs as they pertain to local nationals, and may not fully incorporate all factors (e.g., tax adjustments, allowances or exemptions).

A market’s tax and contribution environment can be a treasure trove of reward information that extends beyond the mere costs and percentages. It can help reveal just how likely a fixed cash spend by employers is likely to satisfy employees. While many companies pride themselves on their bonus programs, staff may feel less than ‘rewarded’ when half (or more) goes to the taxman and are likely to be more focused on their net compensation. On the flip-side of the coin, in markets where employer costs are high (and potentially uncapped), there is often weariness which accompanies voluntary cash payment of any sort. Sometimes, employer and employee scenarios mirror each other, but commonly they don’t, leading to a skewed perception of how cash compensation is perceived.

When additional influences – such as cost-of-living, specific mandated payments or high supplemental reward costs due to the general lack of state-provided benefits – are taken into account, that skewing can be easily amplified. These (and other) influences play a substantial role in the availability and perception of tax-favored reward alternatives (deferred compensation, company cars, meal and other benefits-in-kind) and the extent to which employers leverage them in their packages.

Overall our data continues to paint the pictures of local markets which are easily understandable for a multinational to pick up and get a high level understanding of the market they are in, we are always happy to provide help and advice to organizations, grounded in the facts of the data.

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