2015 saw the world’s financial services continue to respond to regulatory developments by increasing fixed pay, a new report by Mercer has found. This has been done by decreasing variable pay (bonuses), and increasing the emphasis on non-financial performance.
The report also found that while processes to penalize misconduct and non-compliance are widespread, rewarding positive risk behaviors continues to be a challenge.
The data comes in the 11th edition of Mercer’s Global Financial Services Executive Compensation Snapshot Survey, which was conducted in October and November of 2015.
The report found that 61 percent of organisations increased their employees’ fixed pay by more than 5 percent last year, while 58 percent opted to reduced variable pay by more than 5 percent, marking a shift in pay mix.
The report predicts that total compensation levels will remain relatively unchanged in 2016, within plus or minus 5 percent (92 percent) and that most organisations are not planning further changes to their pay mix.
Overall, 2016 projected base salary increases for the sector were modest with average forecasts globally expected to be between 2.0 percent and 2.7 percent. Latin America, South America, and Asia have seen higher average salary increases (4.3 percent) while North America and Europe are forecasting lower average salary increases of 2.4 percent and 2.3 percent, respectively.
The banking industry is generally projecting slightly lower salary increases than the insurance industry. The majority of organisations predict 2016 annual incentive levels to be similar to those in 2015; those expecting change predict that levels will decrease.
When asked how their organisation is fostering a strong risk culture, the most prevalent response was penalising misconduct and non-compliant behaviors (93 percent) followed by the role of risk management in performance expectation setting and evaluation (89 percent). Setting the right tone at the top of the organisation, for example, through top management leadership, communications and real consequences, was also cited by 88 percent, as was training and coaching managers on sound risk culture.