Expert: Second World Comes First In New International Pay Stakes

by Ben Frost, Hay Group

Old World Salaries Outstripped by Buoyant New Economies

New research from global management consultancy Hay Group today reveals a new pay world order, with so-called “second world” economies in Asia, Eastern and Southern Europe overtaking developed Western countries as the world’s new pay hotspots.

Hay Group’s World Pay Report, compiled using Hay Group PayNet®, one of the world’s most comprehensive pay databases, compares detailed salary, bonus, tax and cost-of-living information at senior management (departmental head) level, in order to reveal real executive pay levels for 29 countries across the world.

TURKEY TOP OF THE PECKING ORDER FOR SENIOR MANAGERS
Senior managers in Turkey take home the highest real pay levels worldwide, earning an average net salary equivalent to €79,000 when bonuses, tax and cost of living are taken into account. Hot on their heels, riding high on the country’s outsourcing boom, senior managers in India earn the equivalent of €77,700 in real terms, placing them second in Hay Group’s World Pay rankings.

Eastern and Southern Europe dominate the new world pay map, with Russia’s senior managers third in the pay stakes, enjoying salary buying power equivalent to €77,400, and Poland’s senior managers sixth, with salary buying power equivalent to €76,300 when tax and cost of living are taken into consideration.

Brazil comes in fifth, with senior management salaries pitched at around €76,400 in real terms.

The author of the Hay Group study, Ben Frost, said: “The rapid growth of emerging economies such as India, Turkey, Brazil and Eastern Europe is creating unprecedented demand for senior talent. Our findings reflect the knock-on effect of this: rapidly inflating management salaries in countries where the cost of living is yet to catch up.”

Western Europe fares poorly by comparison with new economies, with the UK ranked 23^rd in the senior management pay stakes, offering real pay equivalent to €47,000 once salary has been eroded by tax and cost of living. France is ranked 20^th, with real pay equivalent to €51,000, and Italy ranked 19^th, with real pay equivalent to €53,000. Germany, viewed as the economic powerhouse of Europe, is ranked just 8th, with senior management salary buying power pitched at €75,700.

Meanwhile Spain’s lower cost of living places the country just ahead of Germany at 7^th in the table, with senior management buying power equivalent to more than €75,900.

Switzerland’s status as a high wage nation is confirmed by the study, with the country standing as the lone Western economy in the top five. Switzerland is ranked fourth for senior management pay, with salary buying power pitched at €77,000 in real terms, despite the country’s notoriously high cost of living. “Companies operate in an increasingly open and competitive global economy. Our research shows that emerging economies are offering executives significantly higher disposable incomes than the Old World – which is likely to make these locations an attractive prospect for senior talent,” said Ben Frost.

“This should make sobering reading for companies in Western Europe and the US, who face not only an increasing competitive threat from buoyant new economies, but a cross border war for managerial talent.”

NORDIC SALARY BUYING POWER NEARLY 50% LESS THAN TURKEY
With comparatively heavy tax burdens, Nordic countries are ranked bottom of the senior management pay stakes, paying their senior managers salaries with buying power of just € 42,000 in real terms, the equivalent of half the salaries offered by Turkey and Russia. Sweden is bottom of the table at 29^th, paying senior managers equivalent to just €37,650 when tax and cost of living are taken into account. Finland is ranked 28^th, with senior management wages pitched at €41,000 in real terms. Norway is ranked 25^th, with senior management buying power equivalent to €43,000. Denmark fares best at 22^nd in the table, with Danish senior managers taking home €48,000 in real terms.

“Management talent in the Nordics are not adequately compensated for the high cost of living they face,” said Ben Frost, Reward Consultant, Hay Group. “Companies across the region need to consider their pay packages carefully if they are not to see a brain drain to the buoyant neighbouring economies of Eastern Europe.”

The USA also fares poorly compared to buoyant new economies in Turkey, Russia, Brazil and Poland. The USA is ranked 13^th in the World Pay league table, offering senior managers only average level salaries, equivalent to buying power of €62,000 when tax and cost of living are taken into account.

Despite more than a decade of economic woes, the world’s third largest economy is ranked 9^th in the pay hot spots league, with Japan’s senior managers earning €70,000 in real terms.

“Japan has faced a decade of economic stagnation,” said Ben Frost, Reward Consultant, Hay Group, “But for those senior managers who have retained their jobs, salaries are holding up well and buying power is further boosted by recent years of price deflation, which has reduced the region’s cost of living.”

CHINA OFFERS NO INCENTIVE TO SENIOR TALENT China’s economic development drive is facing a much-publicised lack of senior management talent, yet the country is offering little incentive to managers in order to redress this. China is ranked 26^th in the international pay stakes, offering real senior salaries of just €42,000 – less than a graduate starter salary in Switzerland.

“As an emerging economy, Chinese salary levels remain pegged at a low level, even accounting for the effect of China’s undervalued currency on international comparisons.” said Ben Frost, Reward Consultant at Hay Group. “However, when it comes to attracting management talent, Chinese companies must realise that they are competing in a global market. Ambitious Chinese businesses must develop their own management talent, and be prepared to pay to recruit star players in a tight market.”

Ends

Further Information
For further information about Hay Group, or an interview with Ben Frost, please contact:

Claire Mason/Daryl Newman at Man Bites Dog:
0870 609 4101
claire@manbitesdog.biz / daryl@manbitesdog.biz
NOTES TO EDITORS

Hay Group’s World Pay Report: Key Findings

Rank	Country	Average Real Salary: Senior Managers (€)
1	Turkey	79,021
2	India	77,665
3	Russia	77,355
4	Switzerland	76,913
5	Brazil	76,449
6	Poland	76,269
7	Spain	75,904
8	Germany	75,701
9	Japan	69,634
10	Austria	66,243
11	Portugal	66,191
12	Ireland	62,608
13	USA	61,960
14	Greece	60,785
Average	-	59,651
15	Netherlands	58,915
16	Czech Rep.	57,416
17	Australia	55,505
18	Canada	54,032
19	Italy	53,003
20	France	51,396
21	Belgium	51,196
22	Denmark	48,228
23	U.K.	46,809
24	Slovakia	45,389
25	Norway	42,939
26	China	42,288
27	Hungary	41,406
28	Finland	41,018
29	Sweden	37,652

About Hay Group
Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 85 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential.

For more information about Hay Group, please visit www.haygroup.com

Research Methodology
Hay Group’s World Pay Report, compiled using Hay Group PayNet®, one of the world’s most comprehensive pay databases, compares detailed salary, bonus, tax and cost-of-living information at all levels of employment, from unskilled work to senior management, in order to reveal real pay levels for departmental heads (heads of function) in 28 countries across the world. Cost of living is calculated based on “average” spending patterns within each country.

For more information about Hay Group PayNet®, please visit www.haypaynet.com

 SEND YOUR COMMENTS 

Copyright © 2006 Cezanne Software S.p.A. Cezanne is a registered trademark of Cezanne Software S.p.A.
All other trademarks are the property of their respective owners.

You are receiving this e-mail because you have expressed interest in Cezanne Software and our products and services. To protect your online privacy, we do not rent or sell your e-mail address to third parties. To be removed from our e-mail list click here.
You will receive an e-mail confirmation that your e-mail address has been removed from our list.
To learn more, please visit www.cezannesw.com