Singapore – Singapore firms are offering executives higher variable pay than Western firms, a Mercer survey has found.
According to the 2011/2012 Asia Executive Remuneration Snapshot Survey, which polled 75 companies in Singapore, Asian firms are much more likely to pay irregular, ad hoc awards outside of the annual grant cycle (32% of Asian firms versus 11% of Western firms) to attract new hires, retain employees and provide special recognition.
“Asian companies based in Singapore prefer more flexible pay structures, which can be adjusted based on business performance, while Western firms have a higher fixed pay component,” said Lee Shiau Fei, principal of ASEAN executive remuneration practice at Mercer, observing the difference in fixed pay in Asian companies (41%) and Western companies (65%).
Asian companies have an increased awareness of current compensation issues and the need for more engagement and communication, she added. In fact, almost half (45%) of the Asian companies surveyed said they plan to explain the rationale for their pay decisions with greater clarity.
The performance metrics on which these bonuses are based are more equally balanced between the top and bottom line measures at Asian firms compared to Western firms, which tend to place a greater emphasis on profit based metrics (83% at Western companies versus 61% at Asian firms). Asian firms also practice a bonus determination process that is less formulaic and more discretionary.
While long-term incentive plans (LTI) are more prevalent in Western firms in Singapore (70% as compared to 54% of Asian firms), the survey also revealed 32% of Asian firms are expecting to make changes in the design of their LTI plans, and to increase the target pay-outs of these awards.
“Asian companies are very active in the redesign and re-evaluation of their long-term incentive practices,” Fermin Diez, the company’s senior partner and Asia Pacific business leader for human capital consulting, said.
“Changes that Asian companies based in Singapore are planning to make include providing a larger grant size and increasing the usage of service based restricted stocks”.
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