Popularity of paying for work performance on rise

Wednesday, March 10th, 2004

Popularity of paying for work performance on the rise

The practice of paying by results through performance incentives and bonuses is rising in popularity according to the Employers Salary and Wage Survey carried out nationally by the Employers & Manufacturers Association.

EMA has released data from the 2003 Survey on performance bonuses and compared it with data from 2002, 2001 and 1997.

On average chief executives in New Zealand now earn 21.5 per cent of their salary packages in the form of bonuses and incentives, up from 19.2 per cent in 2002 and 17.1 per cent in 2001; in 1997 the figure was 15.9 per cent.

The figures apply to a total of 470 top managers in six categories (see tables below), from chief executives employing over 200 staff to general managers in charge of less than 50 employees. Their average base salary rose 6.2 per cent from $128,371 in 2002 to $136, 331 in 2003. With the performance bonus element, average salaries went up 9.3 per cent.

The Employers’ Annual National Salary & Wage Survey has been running nine years throughout the country, the longest established. Last year 605 employer organisations participated posting comprehensive remuneration data for 94,043 staff in 208 job types.

Paying for performance resulted in considerable variations between, for example, chief executives of smaller companies (those employing 50 staff or less) whose average bonuses made up 26.7 per cent of their direct income package, and general managers of smaller organisations who recorded 16.5 per cent of their salary as bonuses.

On the other hand, the number of chief executives getting a vehicle as part of their remuneration package is in decline. In 1997, 63.7 per cent had a car provided; by 2003 the number had dropped to 53.2 per cent. Other fringe benefits have tended to decline or remain about the same levels.

“Super performance is increasingly being rewarded by direct pay incentives, but managers also are taking pay cuts when results decline,” commented EMA’s chief executive, Alasdair Thompson.

“The trend to reward staff more with bonus and incentive payments is not restricted to chief executives or general managers; second tier managers are very much part of the trend, as are skilled and semi skilled people.

“Second tier managers such as branch and regional managers, and marketing, sales and IT managers are benefiting strongly, though at lower thresholds.

“The bonus component of their average direct remuneration was 11.8 per cent of their total direct pay in 1997, 13 per cent by 2001, and 14 per cent in 2003.

“The six types of second tier managers in this category covered 800 job positions with average base salaries of $76, 629 last year, plus $12,562 in performance related pay. That represented an increase of $2,483 more than in 2002 or just 2.8 per cent.

“Their base pay in the period declined in real terms with performance related bonuses more than compensating for the drop.

“The trend extends to skilled and semi skilled staff too. Their performance bonuses averaged 6.4 per cent of direct income in 2001, 5.3 per cent in 2002 and 7.5 per cent last year.

“The data for this category covers 7988 job positions in eight job categories from production managers, fitter turners, and warehouse stores people.

“Production managers averaged $8700 in performance bonuses on top of their base pay; semi skilled warehouse staff averaged bonuses of $1000 each.

Senior management analysis
2003
Position No.
Surv’d Basic Salary $ Car Prvded % Perfrmnce
Bonus $ Super $ % Medical Ins $ %
CEO/MD 200+ employees 46 211,184 47.8 54135 21945 23.9 2888 34.8
CEO/MD 50-199 employees 77 139244 62.3 50253 13522 33.8 2963 44.2
CEO/MD under 50 employees 79 103977 64.6 37980 12477 12.7 2530 22.8
GM 200+ employees 54 143216 53.7 39685 13563 31.5 2782 24.1
GM 50-199 employees 95 123276 45.3 23328 9400 24.2 2707 28.4
GM under 50 employees 119 97087 47.9 19267 7974 32.8 2217 25.2
Total 470
Average 136331 53.2 37441 13146.83 26.8 2681 29.4
1997 534 106684 63.70 20297 9906 36.90 1933 32.8
Note: General managers are described as those positions in charge of operating divisions within larger enterprises whereas ceo’s/managing directors have direct accountability to an organisation’s board of directors

2001
Position No.
Surv’d Basic Salary $ Car
Prvded % Perfrmnce
Bonus $ Super $ % Medical Ins $ %
CEO/MD 200+ employees 45 159,736 44.4 37628 16956 35.6 2237 28.9
CEO/MD 50-199 employees 90 127722 60 34292 12092 38.9 2344 43.3
CEO/MD under 50 employees 77 100054 50.6 20781 11203 13 3058 23.4
GM 200+ employees 34 121605 55.9 15373 12825 44.1 2146 17.6
GM 50-199 employees 100 108025 62 17980 10006 46 2011 33
GM under 50 employees 136 83822 63.2 18741 6032 20.6 2042 15.4
Total 482
Average 116827 58% 24133 11519 31.12 2306 26.97
1997 534 106684 63.70% 20297 9906 36.90 1933 32.80

1997
Position No.
Suvy’d Basic Salary $ Car
Prvded % Perfmnce
Bonus $ Super $ % Medical
Ins $ %
CEO/MD 200+ employees 36 158,872 58.3 36381 15068 52.8 2144 25
CEO/MD 50-199 employees 51 120259 72.5 23403 8621 33.3 2211 47.1
CEO/MD under 50 employees 104 82214 74 22560 8962 24 1476 39.4
GM 200+ employees 59 109301 83.1 9921 11836 52.5 2172 30.5
GM 50-199 employees 117 92687 62.4 14797 8405 36.8 2074 30.8
GM under 50 employees 167 76773 49.7 14718 6541 37.1 1522 28.1
Total 534
Average 106684 63.7% 20297 9906 36.9% 1933 32.8%

Second Tier Management 2003
Position No.
Surv’d Basic Salary $ Car Prvded % Perfrmnce
Bonus $ Super $ % Medical
Ins $ %
Area/Regional Manager 132 83,949 40.9 14192 5996 25.8 4522 18.9
Branch Manager 226 61837 51.8 9286 4134 34.1 1184 30.5
Marketing Manager 122 81860 48.4 15105 7253 34.4 2511 23
Sales Manager 102 83585 78.4 13021 6649 39.2 1992 26.5
Regional Sales Manager 109 67108 79.8 15702 4784 46.8 1320 29.4
Information Services Manager 109 81433 16.5 8065 5740 22.9 959 21.1
Total 800
Average 76629 51.9% 12562 5759 33.6% 2081 25.5%

2001
Position No.
Surv’d Basic Salary $ Car Prvded % Perfrmnce
Bonus $ Super $ % Medical Ins %
Area/Regional Manager 111 72,747 53.2 9627 6897 35.1 1305 34.2
Branch Manager 226 58627 70.4 5863 4588 35.4 1073 40.7
Marketing Manager 95 89047 49.5 19888 7473 28.4 1965 35.8
Sales Manager 98 76644 71.4 11338 6803 26.5 1515 34.7
Regional Sales Manager 142 59546 61.3 11513 3588 59.2 1385 26.8
Information Services Manager 96 76767 16.7 6942 5168 19.8 1086 26
Total 768
Average 72230 57.0% 10862 5753 35.8% 1388 34.1%

Second tier (cont) 1997
Position No. surv’d Basic Salary $ Car
Prvded % Perfmnce
Bonus $ Super $ % Medical
Ins $ %
Area/Regional Manager 172 65,845 52.3 5033 6168 20.9 1767 22.7
Branch Manager 359 49325 60.4 5568 3755 39.8 1091 16.7
Marketing Manager 108 73134 64.8 12239 6220 50.9 1385 52.8
Sales Manager 136 65395 78.7 12500 5802 50 1524 47.8
RegionalSales Manager 143 56043 69.9 9628 4124 46.2 1262 39.2
Information Services Manager 91 66707 25.3 5018 5687 46.2 1142 27.5
Total 1009
Average 62742 60.1% 8331 5293 40.6% 1362 29.9%
Skilled, Semi- skilled 2003
Position No.
Surv’d Basic Salary $ Car
Prvded % Perfmnce
Bonus $
Production Manager 120 77,150 36.7 8772
Production Supervisor 298 48,236 2.7 2806
Production Worker – Skilled 1805 32,559 0 4835
Production Worker – Semiskilled 3507 28,259 0 2862
Maintenance Fitter 299 45,499 0 2129
Fitter Turner 342 44,335 0 3321
Warehouse/storeperson – skilled 785 29,062 0 936
Warehouse/storeperson – semiskilled 832 27,815 0 1552
Total 7988
Average 55,486 0.7% 4536

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