The strategic role of the Chief Human Resource Officer (CHRO) continues to expand as companies get better at measuring the value of human capital to organizational success. What’s more, a competitive talent landscape has elevated the need for the CHRO to focus on total rewards. As such, it’s not a surprise that median compensation for CHROs continues to increase.
We provide a first look at changes to CHRO pay this year using Aon’s 2018 Total Compensation Measurement (TCM) Survey. For our analysis we looked at 105 companies that had the same incumbent in the CHRO role in 2017 and 2018. We grouped the participating companies among five revenue sizes and four industries as described below:
Revenue Sizes:
- Less than $1 billion
- $1 billion to $2.5 billion
- $2.5 billion to $5 billion
- $5 billion to $10 billion
- $10 billion & above
Industries:
- Manufacturing
- Financial Services
- Services
- Utilities
Base Salary
Median base salary for CHROs increased 3% compared to 2017. This aligns with the 3% forecasted salary increases in Aon’s 2017-2018 Salary Increase Survey. Smaller companies tended to have a larger increase than larger companies as seen in Figure 1. The largest increases are in the Services industry (10%) and Financial Services industries (6%).
Figure 1
Median CHRO Base Salary by Company Revenue
Figure 2
Median CHRO Base Salary by Industry
Short-Term Incentives
The overall median target bonus opportunity remained constant at 60%. When looking at target opportunity by company size, only companies with revenue between $5 billion to $10 billion showed any meaningful increase— going from 60% in 2017 to 65% in 2018. Similarly, there was no change by industry except among financial services companies where target rose from 70% to 77% as seen in Figure 4.
Figure 3
Target CHRO Bonus by Revenue
Figure 4
Target CHRO Bonus by Industry
Long-Term Incentives
Out of the 105 participating companies, 88% offered long-term incentives (LTI) to their CHRO in 2018— a slight uptick from 2017. Equity vehicle usage remained fairly steady with restricted stock increasing slightly.
Figure 5
Prevalence of Long-Term Incentives for CHROs
The dollar value of LTI increased by 3%— from $526,035 in 2017 to $543,970 in 2018. Companies with between $5 billion and $10 billion in revenue had the largest increase in value. However, LTI fell slightly among some of the other size groupings. When we look at LTI value by industry (see Figure 7), financial services companies had the biggest increase where LTI value rose from $366,866 to $437,445.
Figure 6
Median Value of Long-Term Incentives for CHROs by Revenue
Figure 7
Median Value of Long-Term Incentives for CHROs by Industry
Target Total Compensation
The median target total compensation (TTC) for CHROs increased by 5% in 2018. Here are the average increases by each component of pay:
- Base salary: 4%
- Target bonus opportunity: No change
- Long-term incentives: 4%
While there was an increase in TTC among all sizes of companies, smaller organizations experienced the largest increase. When looking at TTC by industry, the largest increase was among utility companies at 10% followed by financial services firms at 6%.
Next Steps
The CHRO is considered a strategic business partner at many organizations and compensation reflects this fact. While salary rose a modest 3% this year, total target compensation surpassed this at 5% and more CHROs are eligible for long-term incentives.
With around 800 participants, Aon’s Total Compensation Measurement (TCM) Survey contains comprehensive compensation data for Chief Human Resource Officers so you can ensure you are staying up-to-date on the latest compensation trends in real time. To learn more about participating in the TCM Survey, please contact us.
