As we approach the end of the year and companies are busy preparing compensation plans for 2019, we wanted to dig a little deeper and share the year-over-year executive compensation trends among various job families across different components of pay.
Aon’s 2018 Executive Total Compensation results were recently released, and the report is based on compensation information collected for companies that participated in both the 2017 and the 2018 Total Compensation Measurement® surveys. The year-over-year trend is calculated as median of year-over-year percent changes.
The four components of pay include:
- Base salary
- Total cash compensation (includes base salary + actual bonus)
- Long-term incentives
- Total direct compensation (includes base salary + actual bonus + long-term incentives)
Looking at Figure 1 below, the median base salary increased by 3% as compared to 2017. This aligns with the median projection for salary increase in Aon’s 2018-2019 Salary Increase Survey (3%). The median total cash compensation and total direct compensation showed an increase of 4% and 5% respectively compared to last year. Like base salary, long-term incentives have also increased by 3% from 2017.
Year-Over-Year Compensation Growth Across Pay Components
An Industry Breakdown of Pay Trends
The analysis in Figure 2 below focuses on the year-over-year compensation trends for 266 jobs across 20 families. There is virtually no variance in base salary movement across job families with the median salary increase being 3% across all families.
Total cash compensation results vary more since they reflect actual bonus payouts, ranging from +1% for real estate roles to +8% for engineering roles.
As was also seen in our initial look at CEO and CHRO pay, long-term incentives across job families are roughly unchanged year-over-year. Only the research and development, and sales and marketing job families saw increases above 1%.
Considering all elements of pay, total direct compensation levels rose the most among sales and marketing roles at 8%, followed by research and development at 6%.
Year-Over-Year Growth in Compensation by Industry
Contrary to newspaper headlines trumpeting large increases in executive compensation, looking at actual 2018 compensation (salary, bonus paid in 2018 for 2017 performance, and 2018 long-term incentive awards) shows modest year-over-year pay increases. In fact, long-term incentives, typically the largest part of an executive’s pay, remained relatively unchanged from 2017 award sizes. We do see year-over-year change when looking at the impact of larger actual bonus payouts in 2018 compared to 2017.
We used Aon’s Total Compensation Measurement® (TCM) Survey to conduct this analysis, and you can too. Participants in TCM get access to more detailed analysis, including year-over-year change in pay by individual role. If you have any questions for our executive compensation experts or would like to participate in the TCM Survey, please contact us now.