Managers in Emerging Economies Winning on Pay: Hay Group Research Finds US Managers Lose out on Disposable Income
17/08/2007
Saudi Arabia and the United Arab Emirates rank at the top of the list, with average salary buying power in excess of $220,000.

Business Wire 16 July 2007

PHILADELPHIA - (BUSINESS WIRE) - US companies face competition for top-talent not only from other US companies, but also from companies in other countries that have a lower cost of living and a lower tax rate, research from global management consultancy Hay Group reveals today.

Hay Group's research showed that management in the US is poorly paid compared to emerging economies. American managers are ranked just 24th in the world pay league table of 46 countries, with a buying power equivalent to an average salary of $104,905 when tax and cost of living are taken into account.

In emerging economies such as Russia, Turkey and Mexico, managers are enjoying far higher levels of buying power for their pay than their counterparts in the US and other developed markets, earning and effective average salary of more than $150,000. Indeed, Switzerland, Germany and Ireland are the only European countries to make it into the top 20 countries for management buying power.

"Companies are operating in an increasingly open and competitive global economy, and emerging markets are offering managers higher disposable incomes than established countries -which is making these locations an attractive prospect for management talent," said Iain Fitzpatrick, Director Reward Information Services for Hay Group North America.

"This makes sobering reading for companies in Western Europe and the US, who face not only local competition for managerial talent, but an increasing threat from buoyant new economies."

Hay Group's World Pay Report was compiled by comparing detailed cross-country pay information(i) from Hay Group PayNet, at management (head of function/department) level(ii). The study used Hay Group's globally consistent data, which means that meaningful comparisons can be made around the world. Cost of living and tax were then taken into account to reveal disposable income levels - the true purchasing power of managerial pay - for 46 countries in North America, South America, Middle East, Africa, Europe and Asia Pacific.

"The continued growth of emerging markets is creating unprecedented demand for senior talent," said Steve Marsden, Global Director of Reward Information Services at Hay Group.

"The resulting talent shortage, plus the premiums paid to managers in these hot markets, is inflating management pay in less advanced economies."

Top of the Tree

Managers in the oil-rich, tax-free states of Saudi Arabia and the United Arab Emirates take home the highest disposable incomes worldwide, with pay equating to buying power in excess of $220,000.

"Managers in Saudi and the UAE enjoy soaring levels of take-home pay, as employers in this region pay more attention to cash rather than performance-based incentives," said Vijay Gandhi, Reward Information Services Manager for Hay Group Dubai.

"But as demand for experienced managers remains high, companies in the region are looking more closely at the use of long-term incentives as a way of attracting and retaining international talent."

The international finance and trade centre of Hong Kong ranks third, with pay buying power equivalent to $203,947.

"Pay rates for management have traditionally been high in Hong Kong - up to more than a third higher than other Asian cities such as Singapore - with management buying power enhanced by low rates of income tax," said Hern Yin Goh, Reward Information Services Manager for Hay Group China.

Western Europe

Management pay in Western European countries fares poorly by comparison.

The UK is ranked just 40th in the management pay stakes, Germany is placed just 19th, with France 31st, and Italy 28th.

Only Spain, where the cost of living is lower, remains reasonably placed, taking 12th spot with disposable incomes of around $128,197.

China and India

In comparison, China's rapid economic development is reflected in disposable incomes at management level averaging $126,281 - placing the country 14th in the world pay table.

However, despite its impressive economic development, the picture is far less encouraging in India. At 36th in the global pay stakes, managers in the country have buying power of just $92,750.

"Chinese companies have realised the need to attract management talent as economic acceleration continues apace, having a significant upward impact on managers' pay," said Hern Yin Goh.

"However, India benefits from a large tier of well educated, English-speaking local talent, making management pay more immune to the international market. That said, managers' pay is increasing at double-digit rates in India - between 15 - 20% - so it is unlikely to stay at the bottom of the pay table for long."

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 88 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 / About Hay Group PayNet

Hay Group's World Pay Report, compiled using Hay Group PayNet(R), one of the world's most comprehensive sources of compensation and benefits data, compares detailed pay, bonus, tax and cost-of-living information at all levels of employment, from unskilled work to senior management, in order to reveal disposable incomes for departmental heads (heads of function) in 46 countries throughout Asia, North America, South America, Europe and Australia. 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  .

(i) Pay is defined as total cash, which is equal to base salary plus any annualised short-term variable incentive.

(ii) Manager is defined as a role at Hay Group Reference Level 20, which equates to head of function or head of department level.

Hay Group Mitch Kent, 215-861-2315 Global Head of Public Relations Mitch_Kent@haygroup.com