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Bonuses to boost finance salaries in 2007 Back  
Two surveys published this month by Mercer and the Irish Management Institute (IMI) highlight and examine the growth in salaries for finance professionals. Mercer’s salary survey predicts that salaries are set to grow in 2007, and that this growth is largely dependent on increases in bonuses and other forms of remuneration. IMI’s survey focuses on executive salaries, and shows how executives are more likely to benefit from bonuses, than those in less senior positions.
Bonuses and other forms of remuneration are pushing up salaries in financial services as salaries show an increase of five to six per cent in pay levels forecast for Irish financial services companies across all levels in 2007, according to Mercer’s Financial Services Remuneration Guide 2006. This increase has shown even larger growth rates for key skill sets, with up to eight per cent forecast. This projected increase is marginally lower than 2006 financial services increases and other industry sector increases.

Mary McDermott, consultant with Mercer noted, ‘Larger incentives and commissions are driving the increased compensation compared to 2005. This suggests that companies are willing to pay for top performing talent who can help drive revenue and company growth. Average maximum bonus for head of organisation roles has increased to 49 per cent, in line with the general market trend to pay for performance.’

Mercer has observed that companies are increasingly adopting a total remuneration approach to employee compensation. Defined contribution (DC) pension schemes are becoming more and more popular across all sectors. Employer contribution rates have remained steady around 10 per cent and employee contribution rates of five per cent. Private medical insurance has become a standard benefit within the financial services sector, with 89 per cent of companies providing private medical insurance to employees. The provision of paid maternity leave is increasing, with the majority of the larger companies paying 100 per cent of salary. Also, the median number of vacation days has increased to 24.

‘Compensation plays an important role in attracting and retaining talent companies are now recognising that they need to vary the compensation structure and benefits package for employees with specialised skills to show that they value and want to retain key talent in a competitive environment,’ said McDermott.

Fund management companies are paying senior management 10 per cent ahead of other financial services companies. Reinsurance companies are paying administration staff six per cent ahead of other financial services companies.
Administration roles with one years experience are commanding higher starting salaries than those in the roles with two to three years experience, highlighting the tight labour market in certain key areas.

Five per cent increase on average across the board, but 30 per cent for sales roles and 21 per cent for roles in finance departments. Senior management saw increases of approximately six per cent in base salary, but up to an average of 34 per cent increase in actual bonus payouts.

The results of the latest survey of executive salaries in Ireland carried out by the Irish Management Institute (IMI) are contained in the newly published edition of Executive Salaries in Ireland 2006. These show that, on average, managerial salaries increased by 6.3 per cent across all sectors (in the 12 month period to June 2006). The Consumer Price Index rise for the same period was 3.9 per cent (CSO, June 2006). In the previous survey year (2004 – 2005), the average salary increase was 5.5 per cent compared to the Consumer Price Index rise of 2.2 per cent.

Chief executives in banking, finance and insurance earned €207,200 last year. They come in behind building and construction executives, who at €270,000 came second in the survey. Finance executives fall quite far back on IT executives by earing roughly sixty per cent more at €324,000.

The employment background for chief executives in all sectors shows that 23 per cent have previously worked in banking, finance or insurance. The highest shared background is engineering at 28 per cent. Five per cent of accounting professionals go on to become chief executives according to the survey.

In terms of remuneration the higher up the chain of command the more likely an executive is to get a bonus with 82 per cent getting a bonus whereas this drops down to 58 per cent of first level managers who get bonuses.
Of chief executives polled, 40 per cent get less than 20 per cent of their salary as their bonus, twenty 27 per cent get between 20 and 30 per cent bonus and 13 per cent get 50 per cent plus.

Chief executives in finance positions are earing on average €207,500. Heads of function in finance/accounting earn on average €157,000, with sales taking the most of all head of function executives, at €198,000.

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