Short-term incentive payouts up in the UK

UK employers anticipate paying their executives short-term incentives (STIs) equivalent to 23% of base salary, an increase on the 22% paid out in 2011, according to research by Mercer.

The research, Short-term incentives around the world, drew annual incentive information from 21,000 organisations in 62 countries with a total of 7.6 million employees.

The research also found:

  • In the Americas, organisations predict an average 37.5% payout, which is down from 38.9% of base salary in 2011.
  • In Latin America, average payouts predicted for 2012 are 19.7% of base salary, a substantial drop from the 27.5% paid out in 2011.
  • In Western Europe, predicted payouts for 2012 are broadly static, at 19.7% of base salary compared to 19.5% in 2011.
  • In Eastern Europe, 2012 payouts are predicted at 19.5% of base salary compared to 19.7% in 2011.
  • In Asia Pacific, predicted STI payouts for 2012 are 22.1% of case salary, compared to the 23.3% paid out in 2011.
  • In Australia and New Zealand, a marginal increase is predicted for 2012 of 21.9% compared to 21.6% paid out in 2011.

Mark Quinn, partner in human capital at Mercer, said: “An STI is remuneration based on annual performance against set criteria and STIs form an important part of the remuneration package for key employees and senior executives.

“A key criterion for the funding of bonus awards is successful organisation performance. So, if an organisation is predicting that it will pay out less to executives in 2012 than it did in 2011, as our data shows is happening in certain regions, it indicates that organisations expect their financial performance to be worse in 2012 than in 2011. The reverse is also true.

“STI predictions for 2012 are a good reflection of business confidence. Based on our data, there is better confidence in Western and Eastern Europe, but evidence of a weakening in confidence in the Americas and Asia Pacific.

“However, as we know, and are currently experiencing in Europe, business sentiment and economic conditions change rapidly, so we anticipate significant changes in the actual amounts distributed.”

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