Accenture C&B

COMPENSATIONANDBENEFITSSTUDY 2011
DevelopmentFinanceCompensationandBenefits Study April2011

CommissionedbytheDepartmentforInternational Development

Contents
1 2 3 INTRODUCTION..................................................................................................................................... 5 GLOSSARYOFTERMS ............................................................................................................................ 6 EXECUTIVESUMMARY .......................................................................................................................... 7 3.1 3.2 Introduction .................................................................................................................................. 7 KeyFindingsandObservations ..................................................................................................... 8 GeneralObservations ........................................................................................................... 8 MarketCompensationAnalysis ............................................................................................ 8 BenefitsAnalysis ................................................................................................................. 11
3.2.1 3.2.2 3.2.3 4
INTRODUCTIONANDBACKGROUND .................................................................................................. 12 4.1 4.2 Purpose ....................................................................................................................................... 12 Scope........................................................................................................................................... 12 ComparableOrganisations.................................................................................................. 12 CompensationElements ..................................................................................................... 13 Positions.............................................................................................................................. 14
4.2.1 4.2.2 4.2.3 4.3
Methodology............................................................................................................................... 14 Contact ................................................................................................................................ 15 Datacollection .................................................................................................................... 15 Dataanalysis ....................................................................................................................... 15 Datareporting..................................................................................................................... 15
4.3.1 4.3.2 4.3.3 4.3.4 4.4 5
Assumptions................................................................................................................................ 15
GENERALOBSERVATIONSFROMSTUDYFINDINGS............................................................................ 17 5.1 Overview ..................................................................................................................................... 17 FixedCashcomponents ...................................................................................................... 17 Variablepay ........................................................................................................................ 17 Benefitcomponents............................................................................................................ 18
5.1.1 5.1.2 5.1.3 5.2
Institutionspecificobservations ................................................................................................. 19 BilateralDFIs ....................................................................................................................... 19 MultilateralDFIs.................................................................................................................. 20 Foundations ........................................................................................................................ 21 EmergingMarketscompanies............................................................................................. 21 Copyright2011Accenture.AllRightsReservedMarch2011
5.2.1 5.2.2 5.2.3 5.2.4
COMPENSATIONANALYSIS ................................................................................................................. 23 6.1 Summarydata ............................................................................................................................. 23 TCC ...................................................................................................................................... 23 TFCC .................................................................................................................................... 24 TVP ...................................................................................................................................... 24
6.1.1 6.1.2 6.1.3 6.2
Positionleveldata....................................................................................................................... 25 CEO...................................................................................................................................... 25 SeniorSupportProfessionals .............................................................................................. 25 MD/PortfolioDirector ........................................................................................................ 25 InvestmentManager........................................................................................................... 26 InvestmentExecutive/Analyst ........................................................................................... 26
6.2.1 6.2.2 6.2.3 6.2.4 6.2.5 7
BENEFITSANALYSIS............................................................................................................................. 28 7.1 7.2 7.3 7.4 7.5 7.6 Pensions ...................................................................................................................................... 28 Health&MedicalInsurance........................................................................................................ 31 LifeInsurance .............................................................................................................................. 32 PersonalAccident/DisabilityInsurance ...................................................................................... 33 Vacation/Holidaypolicy ............................................................................................................. 35 OtherBenefits............................................................................................................................. 36 EducationGrant .................................................................................................................. 37 TelephoneReimbursement ................................................................................................ 37 Rental/MortgageSubsidies................................................................................................. 38 TaxExemption..................................................................................................................... 39 RelocationReimbursement ................................................................................................ 40 TravelInsurance.................................................................................................................. 41 Overtime/NightDifferential................................................................................................ 42 LoanScheme ....................................................................................................................... 43
7.6.1 7.6.2 7.6.3 7.6.4 7.6.5 7.6.6 7.6.7 7.6.8 8
APPENDIX ............................................................................................................................................ 44 8.1 8.2 8.3 8.4 AbouttheParticipantsample ..................................................................................................... 44 DatacollectionQuestionnaire .................................................................................................... 45 CurrencyConversionRatios ........................................................................................................ 45 SummaryDatabyTypeofOrganisation ..................................................................................... 46 Copyright2011Accenture.AllRightsReservedMarch2011
8.4.1 8.4.2 8.4.3 8.4.4 8.5
BilateralDFIs ....................................................................................................................... 46 MultilateralDFIs.................................................................................................................. 47 Foundations ........................................................................................................................ 48 EmergingMarketCompanies.............................................................................................. 49
PositionlevelDataByTypeofOrganisation............................................................................... 50 CEO...................................................................................................................................... 50 SeniorSupportProfessionals .............................................................................................. 51 MD/PortfolioDirector ........................................................................................................ 51 InvestmentManager........................................................................................................... 52 InvestmentExecutive/Analyst ........................................................................................... 53
8.5.1 8.5.2 8.5.3 8.5.4 8.5.5
RESTOFPAGELEFTDELIBERATELYBLANK
Copyright2011Accenture.AllRightsReservedMarch2011
1 INTRODUCTION
CDC Group PLC (CDC) is a bilateral development finance institution (DFI) owned 100% by the UK government through the Department for International Development (DFID). The purpose of CDC is to contribute to economic development and poverty reduction in developing and emerging countries throughinvestmentinprivatebusinesses.DFIDsetsinvestmentpolicytargetsforCDCandanapproved Investment Code around environmental, social and governance standards. CDCs board is responsible foralloperationaldecisions. DFID is undertaking a review of CDCs strategy, operations, target markets and investment vehicles aimedatradicallyincreasingitsdevelopmentimpact.Inparalleltoapublicconsultation,anumberof studiesarebeingcommissionedtoexaminehowDevelopmentFinanceinstitutions(DFIs)canbemost effective. Inlinewiththesebroadergoals,DFIDhascommissionedAccentureDevelopmentPartnerships(ADP)to conductanindependentstudytosummarisetheremunerationlevelsandstructuresfrompublic,private anddevelopmentsectororganisationswithasimilarorcomparablepurposetoCDC. AbouttheAuthors Accenture Development Partnerships (ADP) channels Accentures skills and capabilities to the development sector on a nonprofit basis in order to advance sustainable solutions to global development challenges. ADP combines skills, expertise, and tools from the private sector with experienceofworkingwithinthedistinctcontextoftheinternationaldevelopmentsector.
2 GLOSSARYOFTERMS
Term CSuite MarketDifferential P10 P25 P50/Median P75 P90 Participants/ Comparable Organisations PayAnchor Percentile positioning PositionGroup Spread TCC TFCC Definition Term used to represent the senior management or leadership teams for an organisation, typicallycomprisingexecutivepositionsandofficerswhohavewordChiefintheirtitle. Difference between the CDC median and target market percentile expressed as a percentageofthemarketpercentile. Thevalueorlevelbelowwhich10%oftheobservationsfallwhenthedataisarrangedinto anarray(ascendingordescending).Thisvalueisalsoknownasthebottompercentile. Thevalueorlevelbelowwhich25%oftheobservationsfallwhenthedataisarrangedinto anarray(ascendingordescending).Thisvalueisalsoknownasthelowerquartile. The value or level at the midpoint of series of data arranged into an array (ascending or descending).50%ofthedataliesaboveandbelowthispoint. Thevalueorlevelabovewhich25%oftheobservationsfallwhenthedataisarrangedinto anarray(ascendingordescending.Thisvalueisalsoknownastheupperquartile. Thevalueorlevelabovewhich10%oftheobservationsfallwhenthedataisarrangedinto anarray(ascendingordescending).Thisvalueisalsoknownasthetoppercentile. Theorganisationsthatareparticipatinginthestudy.16organisationshaveparticipatedin thisstudyotherthanCDC.AlsoreferredtoasParticipantsampleorMarket. Representsany/specifiedcashcomponentsi.e.TFCC,TVPorTCC. ThepercentilevalueoftheCDCdataoverthemarketdataset.Itprovidesanindicationof thepercentageofthedatathatliesabove/belowaparticulardatapoint Asetofpositionsthathavebeenmatchedandcomparedacrosscomparatororganisations The spread of the maximum and minimum values in the data set as a percentage of the minimumvalue ThisstandsforaTotalCashCompensationandisasummationofthefixedcompensation andvariablepayi.e.TFCC+TVP ThisstandsforTotalfixedcashcompensation.ItisthesumofBaseSalaryandAllowances (excludesanyallowancesthatvarywithindividualdemographicsandlocationofoperation)
TVP
ThisstandsforTotalVariablePayandincludesallincentiveslinkedwithindividualand/or organisational performance. Typical incentives are Short term incentives (bonus/ sales Incentive)andLongtermincentives(profitsharing/stockpurchaseschemes)
3 EXECUTIVESUMMARY
3.1 Introduction
The objective of this study is to provide insights into the remuneration and benefits structure and compare the existing compensation package for various private and public organisations operating in thedevelopmentfinancespace.Thisinvolvesexaminingbothcashandbenefitscomponentsofoverall remunerationforthejobpositionsthataretheprimarydriversofcompensationlevels. The scope of the study is not to review or assess CDCs current remuneration structure, practices or comparatorgroupormakerecommendationsthereon. TheorganisationsincludedinthisstudyhavebeenclassifiedbyDFIDintofourgroupsfortheanalysis Development Finance Institutions (DFIs), Foundations, Emerging Market Funds and Social Investment Funds.OutofthefortyorganisationsagreedwithDFIDattheoutset,sixteenagreedtoparticipateand provided data for the analysis. These represent a small but valid sample of the organisations that operateintherespectivemarket,andconclusionsfromtheresultsoftheanalysisshouldbemadewith thatinmind.ItshouldbenotedthatnoSocialInvestmentFundstookuptheopportunitytoparticipate inthestudy. CDC has traditionally benchmarked remuneration against the private equity fundoffunds market on therationalethat(i)itoperatesinasimilarfashiontoorganisationsinthismarket,and(ii)ithastypically recruited from a similar pool of talent, from a skills, experience and geographical perspective. These organisations are not typically involved in development finance; as a result, DfID concluded that they shouldbeexcludedfromthisparticularstudy. The study comprises two elements. Firstly, a quantitative analysis of salary (TFCC), variable pay (TVP), andtotalcash(TCC)thatprovidesapercentileanalysisoftheparticipantsampletogetherwithadirect comparisonagainstCDCdataprovided.Secondly,apartquantitative/partqualitativebenefitsanalysis ofpensioncontributions(quantitative)andtrendanalysis(qualitative)ofotherkeybenefitsofferedby thedevelopmentfinanceorganisationsincludedinthestudy. ThepercentiledataprovidedbyCDCandtheparticipatingorganisationsreflectsactualpayrolldatafrom 2010 payroll. It should be noted that there was noLTIP payout in 2010 forCDC as the target rate or returnwasnotachieved.ThereforetheCDCvariablepaydatareportedheredoesnotreflectanylong termincentivepaycomponentthatmaybepresentinpreviousorfutureyears.
3.2 KeyFindingsandObservations
3.2.1 GeneralObservations
Basic salary is the fundamental element of the fixed cash component of compensation packages of participantorganisations.ExamplesofadditionalfixedcashincludeCostofLivingAllowanceandFamily Allowancebeingofferedinaminorityofcasesasuplifttobasicsalary. Variable pay generally provides an important element to development finance organisations participating in the study, with three quarters of participants offering a shortterm incentives scheme (typicallyannual)andalittleunderhalfofparticipantsofferingalongtermincentivesschemegreater than a year. However, there are organisations that do not offer variable pay to certain positions. EmployeeProfitSharingplansaremoreprevalentintheprivatesectorEmergingMarketorganisations, whichtendtofocusprimarilyonannualbonuspayoutsbasedonapercentageofbasesalary.TheCEO positionisoftenexcludedfromvariablepay,althoughgeneralpracticeisinconsistentacrossparticipants withinthesample. Thewiderbenefitspackagesplayanimportantpartinoverallremuneration.Thisisparticularlythecase withMedicalInsuranceandHolidayentitlementwhichallparticipatingorganisationsprovidetothejob positionsincludedinthestudy.LifeInsuranceandPensionContributionsarealsoprovidedbythelarge majorityofparticipants.Almosthalfofparticipantsalsoprovideaneducationgrantforthefullorpartial costincurredonchildrenseducation. Therangeofpensioncontributionsvaryconsiderablywithineachparticipantsample,withMultilateral DFIsprovidingthehighestpercentagecontributiononthetopendoftherange(29%ofbasesalary)and Emerging Markets companies providing the lowest percentage contribution on the bottomend of the range(5%ofbasesalary). The relatively small number of participants from each type of development finance institution (35 within each) should be borne in mind when interpreting and drawing any conclusions from analysis whichfocusesondifferenttypesoforganisations.Thelargersampleacrossallparticipants(16)provides agreaterdegreeofrepresentationstatisticallyofthedataobtainedandishencethefocusofthestudy. 3.2.2 MarketCompensationAnalysis
The market analysis has been calculated with CDC data points excluded from the participant range in ordertoaccuratelycompareCDCspositioninginrelationtoparticipatingorganisations.Datahasbeen provided as percentiles rather than actual pay data to comply with data confidentiality requirements. Therefore, the study positions the CDC median pay data (P50) against the data obtained from the participating organisations split by job position. 1 All participating organisations, including CDC, have providedactualpayrolldataannualisedasattheJanuary2011payroll. In comparison to the participating organisations, CDC median total pay percentiles are generally positionedatorabovethemedianofthesampleacrossthefourtypesoforganisationsandinscopejob positions.ThisismostnotablytheCEOandMD/PortfolioDirectorpositions,wheremediantotalpayis positioned around the upper percentile, at over 100% higher than the participant median. The other investment positions (Investment Manager and Investment Executive/Analyst) are around 50% above the median of participants sampled. The Senior Support Professional roles are closest aligned to the participants,at1%abovetheparticipantmedian.
ThevariancebetweenCDCandtheparticipantsisdrivenprimarilybyhigherlevelsofvariablepayrather than base salary, although median fixed pay is often also higher than the participant median. The exceptionistheEmergingMarketcompanieswhereitcan,insomecases,beattributedmoretoahigher orequivalentbasesalarythanvariablepay.Themajorityofparticipantsoffervariablepayscheme,but someparticipantsdid notoffervariablepaytocertainpositions.Therewasnotrendto thisbasedon
Itshouldbenotedthatinsufficientvariablepaydatawasobtainedtoprovideaseparateanalysisoftotalvariable payintheMultilateral,FoundationandEmergingMarketgroups.Wheredatawasnotobtained,thisismainlydue to participants not offering variable pay schemes to all or some positions. Drawing conclusions from the data shouldthereforebemadewiththatinmind.
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typesofdevelopmentfinanceorganisations;atleastoneofeachofthefourorganisationtypesprovided variablepay. ThereareexceptionswhereCDCmedianpayislowerthanthemedianparticipantdata.Thisiscasefor median fixed pay for Senior Support Professionals and Investment Managers, which are 15% and 7% belowtheoverallparticipantmedian. In the case of Senior Support Professionals, this is due to a large disparity when compared to their equivalentsatMultilateralDFIsandFoundationparticipants.CDCfallsclosertothelowerquartile(P25) fixed pay for these roles, 27% and 34% below the participant median respectively for these types of organisations.VariablepayupliftsCDCagainsttheMultilateralDFIsto3%abovethemedian,buttotal pay for Senior Support Professionals remains below the median when compared to the Foundations participating(12%belowatP28).Althoughfixedpayisslightlyabovethemedianforthispositionwhen comparedtoEmergingMarketcompaniesmedian(4%above),thehighervariablepayelementforthe participantsresultsinthetotalpaymedianforCDCbeingpositionedatP32,37%belowtheEmerging Marketfigure. InthecaseofInvestmentManagers,the7%belowpositioningislargelyduetobeingpositionedaround and within the lower quartile percentile against the Multilateral DFIs (15% below the participant median)andFoundations(7%belowtheparticipantmedian). The Investment Executive position is also within the lower quartile of fixed pay for participating MultilateralDFIs(19%lowerthanthatgroup),asisthecaseforMD/PortfolioDirectorincomparisonto EmergingMarketequivalents(8%belowthemedian). Inallcases,variablepayprovidedanuplifttopositiontotalmedianpayatorabovethemedianforthe overallparticipantsampleofalldevelopmentfinanceinstitutionstakentogether. VariablepayschemesdifferedwidelyatparticipatingEmergingMarketorganisations.Thosethatoffered variablepayoftendidsoonthebasisofafixedsumbasedonagroupbonuspoolorprofitsharesrather thanasapercentageofbasesalary.ThismakesdirectcomparisonswithCDCchallenging. It should be noted that there were generally fewer direct job matches between CDC and Emerging Marketcompanies.InthecaseoftheCEOposition,thecompanyorfundsstatedthattherewasnota matcharepartofalargerinvestmentgrouporbankwheretheCEOhadbroaderresponsibilitiesthanat CDC.WhileforsomeothercompaniestheCEOpositionisoccupiedbypartnerswhosesalarystructures arenotcomparabletoCDCsincetheyreceiveashareofthecompanyprofitsasremuneration. In the case of the Investment Manager and Investment Executive positions, those company or funds statedthattherewasnotajobmatchastheyaresmallerorganisationswherenotallofthesepositions existedandtherolesandresponsibilitieseitherlayelsewhereordonotexistatall.Wheretherewasa match,itwasonepositionortheotherratherthanofferingboth.
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3.2.3 BenefitsAnalysis
The study focuses on the most significant noncash components of the benefits package, namely Pensions,HealthandMedicalInsurance,LifeInsurance,PersonalAccidentandCriticalIllnessInsurance andAnnualvacationentitlements.Itischallengingtomakedirectcomparisonsacrossorganisationsas subtle differences and nuances exist in the features, eligibility and characteristics of the benefits packagesfromorganisationtoorganisation. IntermsofPensions,thevastmajority,butnotall,participants(c.90%)providesomeformofpension schemeforstaff.Ofthoseorganisations,morethan30%contributebetween20%25%andnearly20% oftheorganisationscontributebetween10%15%ofbasesalarytoapensionfund.Thetopendfigure fortherangeofanyparticularparticipantsampleis29%(MultilateralDFIs)andbottomendfigure5% (EmergingMarkets).Ascomparison,thecontributiontotheseschemesrangesfrom6%foremployees upto29yearsofageto15%foremployeesaged50yearsandabove.InlinewithotherDFIs,CDCoffers bothdefinedbenefitanddefinedcontributionschemes,althoughthedefinedbenefitpensionschemeis onlyapplicableto5employeesincludingtheCEOandhasbeenclosedtonewemployeesfortenyears. Intermofhealthandmedicalinsurance,allparticipantorganisationsprovidedaprivateschemeforits employees. Like its peers, CDC offers private medical insurance cover for each employee and dependents.CDCalsoprovidesfreemedicalcheckupsforemployeeswhofrequentlytraveloverseas. Participating organisations will contribute different percentage premiums, and coverage of conditions alsodiffersslightly,butverylittleinwayoftrendscanbededuced. A similar conclusion can be made with life insurance, with fewer than half of participants offering life insuranceprovidingalumpsumamountcomputedasamultipleoftheannualsalary.Thesemultiples differ,butitcanbenotedthatCDCappearsatthetopoftherangeofferingapayoutacrosstheboard equivalenttofourtimesbasesalary. CDCoffersbetween2530daysofregularvacationentitlementdependingonlengthofservice,whichis neithersignificantlyaboveorbelowthemajorityofparticipantorganisations.Otherfeaturesofvacation entitlementincludedaysbasedonage,lengthofserviceandsalary. Additional benefits observed include rental/mortgage subsidies, education grants for children and relocation expenses. One notable observation is that two Multilateral DFIs offer tax exemption on incomeforemployees,whichisasizabledirectbenefittoemployeeswhencomparedtotheratesofUK incometaxthatCDCemployeeshavetobear.
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4 INTRODUCTIONANDBACKGROUND
4.1 Purpose
Theobjectivesofthisstudyistoprovideinsightsintotheremunerationlevelsandbenefitsstructures, and compare the existing compensation packages, for various private, public and development sector organisationsoperatinginthedevelopmentfinancespace.ThefindingsofthissurveywillhelpDFIDgain aperspectiveonhowbesttoattractandretainabestinclassandrobustworkforcewithinCDCthrough acombinationofcompetitivefixedpayandattractiveshortorlongtermincentiveschemes 2 .
4.2 Scope
This study contains a quantitative analysis of core compensation elements, pensions and a qualitative analysisofbenefitsfororganisationsprimarilyfocusedonsupportingprivatesectorinvestmentswitha developmentpurpose. Thisstudyessentiallyincludesapositionwiseratherthangradewisecomparisonofcompensationand benefitsacrossdifferentparticipantsample.Thefollowingsectionsconstitutetheinscopeelementsof thestudy: 1. Comparableorganisations 2. Compensationelementsquantitativeandqualitative 3. Jobpositionsandgrades The scope of this Study does not include any review or assessment of CDCs current remuneration structure,practicesorcomparatorgroupormakerecommendationsthereon. 4.2.1 ComparableOrganisations DFIssuchasCDCareuniqueorganisationsthatspanmanymarketsintermsoforganisationsthatcanbe consideredpeers,competitorsorcomparablewhenitcomestoeithercoreoperations,talentorboth. Therefore, considering more than one market is sensible to provide a more broad and wellrounded viewofcompensationpracticesandlevels. Thisstudythereforeexaminesasampleoforganisationsspecialisingindevelopmentfinanceinoneform or another. In general terms, these organisations can be classified into four groups Development FinanceInstitutions(DFIs),Foundations,EmergingMarketFundsandSocialInvestmentFunds.
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ItshouldbenotedthatDFIDarenotresponsibleforrecruitment,retentionorsettingpaywithinCDC,Thatisthe responsibilityoftheCDCBoard.DFIDassistCDCleadershipinsettingtheremunerationframeworkforCDC
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1. DFIs:DFIsaredefinedasmultilateralandbilateralagencies,whicharemajoritypubliclyowned and/orpubliclycontrolledandwhichinvestinprivateenterprisesindevelopingcountries.Also includedinthedefinitionofDFIsforthepurposeofthisstudyaretheprivatesectorunitsofthe MultilateralDevelopmentBanks(MDBs). 3 2. Foundations: The participant sample includes private, notforprofit foundations and agencies thatareengagedindirectorindirectinvestmentinthebusinessesofdevelopingcountries. 3. Emerging Market Funds: These are other commercial financial organisations that invest in emergingmarkets,eitherdirectlyorthroughintermediaries. 4. Social Investment Funds: These include the emerging class of social impact investment organisationsincludingmainstreamfinancialinstitutionsthathaveestablishedsocialinvestment activitiesinemergingcountries. It should be noted that no Social Investment Funds agreed to participate in the study and have, therefore,beendiscountedfromthestudy. AlthoughitisrecognisedthatsomeorganisationsmaybemorecloselymatchedtoCDCthanothers,no weighting has been provided to the results of any particular group of organisations in this study. By nature,thiswouldbearbitraryandthereforemathematicallyunsound. CDC has traditionally benchmarked remuneration against the private equity fundoffunds market on the rationale that it operates in a similar fashion to organisations in this market, and it has typically recruited from a similar pool of talent, from a skills, experience and geographical perspective. These organisations are not typically involved in development finance; as a result, DfID concluded that they shouldbeexcludedfromthisparticularstudy. 4.2.2 CompensationElements Thestudycomprisesaquantitativeandqualitativeanalysisfocusingonthefollowing: 4.2.2.1 Quantitativeanalysis Thisanalysisislinkedtothefollowingpayanchors: 1. Total Fixed Cash Compensation (TFCC): this is a summation of basic salary, all fixed cash allowancesandanyguaranteedpaymentsmadetoemployees. 2. Total Variable Pay (TVP): this refers to any bonus, long term/ short term incentive payments madetoanindividualdirectlylinkedwithcompanyand/orindividualperformance. 3. TotalCashCompensation(TCC):thisisasummationofallpaycomponentspaidincashwhether fixedorvariableandiscomputedbyaddingupTotalFixedCashComponentandTotalVariable Pay.Allbenefitspaidtotheemployeesareoverandabovethis. 4. Pensions: this includes any longterm contributions made for a retirement or superannuation plan
Forthepurposeofthisstudy,DFIswillbesplitintoBilateralandMultilateraltorepresentthediffering characteristicsintermsofremunerationandrecruitmentofthesetypesoforganisations.
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ThepercentiledataprovidedbyCDCandtheparticipatingorganisationsreflectsactualpayrolldatafrom 2010payroll.Itshouldbenotedthat,in2010,nopayoutwasmadeinitslongtermincentivepayment (LTIP)planasCDCdidnotachieveitstargetedhurdlerateofreturnoninvestments.Thetotalvariable payfiguresreportedherethereforedonothavealongtermvariableelementthatmaybepartofactual payinpreviousandfutureyears. 4.2.2.2 QualitativeAnalysis In addition to the quantitative analysis, there is also a qualitative trend analysis on overall benefits packages, excluding pensions, from the participating organisations. This is primarily life, personal accident/disabilityandhealthinsurancebenefitsofferedtoemployeesaswellasholidayentitlement. 4.2.3 Positions Thestudyfocusesonspecificjobpositionsidentifiedasbeingthetypicalprimarydriversandinfluencers of remuneration within development finance organisations. These positions broadly sit within the C Suiteandequivalentexecutiveandleadershipteams,andthefrontofficeinvestmentteams. Most target comparator organisations are not of sufficient size in terms of employee numbers to possessadefinedgradeorbandstructure.Therefore,noanalysisofcompensationbygradehasbeen undertakeninthisstudy. Generic job positions have been created to match the inscope positions in CDC with the equivalent rolesandresponsibilitiesfromthecomparableorganisations.ThegenericpositionsagreedwithDFIDare asfollows: 1. 2. 3. 4. 5. CEO Seniorsupportprofessionals ManagingDirectorsandPortfolioDirectors InvestmentManagers InvestmentExecutivesandAnalysts
4.3 Methodology
The life cycle of the study, from initial contact with prospective organisations through to the final reportingoffindingstoDfID,consistedoffourstages:
4.3.1 Contact
4.3.2 Collect
4.3.3 Analyse
4.4.4 Report
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4.3.1
Contact a. Established contact with prospective companies via letters of invitation and existing contacts b. Ofthe40organisationsapproached,16agreedtoparticipateinthesurvey: i. DFIsBilateral3participants ii. DFIMultilateral4participants iii. Foundations4participants iv. EmergingMarketcompanies5participants Datacollection a. Acomprehensivequestionnaireaccuratelycapturedeachorganisationsdemographics, paystructure(includingbenefits),listofmatchedpositionsandrawcompensationdata. b. Orientationcallsandphoneinterviewsensuredacommonunderstandingoftheprocess andthequalityofthedataobtained. Dataanalysis a. Compensation data was analysed by participant sample, including calculating CDCs positioningagainsteachgroup. b. Basedontheinformationreceivedfromparticipants,arangeofpercentilesP25,P50, P75 and P90 have been provided. CDC positioning has been indicated by using the median(P50)figuresthatwereprovidedbyCDCasreferencepoints. c. Percentileshavebeencalculatedovereachpayanchorseparately.Theresultisthatthe percentile values for TFCC and TVP will not add up to the corresponding percentile figuresforTCC.AnindividualwhoreceivesthelowestTFCCmightnotreceivethelowest TVP;therefore,thecorrespondingTCCpercentilevaluewilldifferfromtheactualsumof thetwofigures. Datareporting a. The presentation of the findings of the analysis phase drew out observations on prevalenttrendsinthedataandorganisationalpractices.
4.3.2
4.3.3
4.3.4
4.4 Assumptions
Someofthekeyassumptionsthatareatthecoreofthisstudy: 1. Participation of target organisations in this survey is voluntary and the analysis has been performedonactualdatareceived.Theaccuracyofthedatacollectedisthereforedependent upontheaccuracyofthedatatheysubmitted. 2. ThecompensationdataisrepresentedhereinacommonunitofcurrencyGBP(sterling) whereas some participants provided their data in another currency. We have converted this datatothecommonunitusingtheBigMacindexforpurchasepowerparity(PPP)orprevailing exchangerateswhereverPPPinformationisnotavailable.TheBigMacIndexisoneofthemost commonly used measures of PPP in different countries. For the
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3. 4. 5.
6. 7. 8.
purposeofthissurveytheratesusedforconversioncanbefoundintheCurrencyConversion Ratiosprovidedintheappendix. Allsalaryfigureshavebeenprovided byparticipatingorganisationsonanannualisedbasisi.e. expressedasifmeasuredoveraoneyearperiod. ForpositionswhereTVPdatawasnotreceived,TCCwillequalTFCC. Tax implications of various pay components are out of scope of this study; hence all remuneration figures have been considered gross or pretax. For the two organisations that offer full tax exemption, the salary figures provided have been multiplied by a factor of 1.377 (estimated based on prevailing UK tax slabs) to make them comparable to the gross (taxable) salaryfiguresofotherparticipants. Boundbytheconfidentialityagreementswithmostofthecomparators,theunderlyingdatais presentedinanonattributablemannerinthereport. The compensation figures received from the participants is as per the January 2011 payroll. Shorttermvariablepaymentfigureshavebeentakenbasedon2010performance. To maintain data confidentiality and to ensure the reported information is statistically significant,wehaverevealedpercentilesvaluesandCDCpositioningonlyif therearethreeor more data matches. For fewer than three data matches the following approach for reporting datahasbeenfollowed: No.OfMatches DataReporting 2 MeanvaluereportedinP50field 1 Insufficientdatatoreportanonymously 0 Nodatamatchobtained
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5 GENERALOBSERVATIONSFROMSTUDYFINDINGS
5.1 Overview
It has been observed that although each organisation in the participant sample follows a different remuneration structure for their employees, there are certain salary components that are common acrosstheindustries.Thesesalarycomponentscanbeclassifiedintothefollowingbroadcategories: 5.1.1 FixedCashcomponents Weobservedthatfollowingcomponentsarepaidtoanemployeeonafixedbasisduringaperformance year: 1. BasePay:isthebasic,monthlysalarycomponentthatisconsistentlyofferedbyallparticipating organisations. In most cases the annual basic salary comprises of 12 monthly payments; however,twoorganisationsoffered13paymentswhileoneorganisationprovided11payments. 2. Cost of Living Adjustment Allowance: Approximately 30% of the participants provide an allowance to employees sent on temporary assignment or posting outside of their home country,tocompensatefordifferenceincostoflivingbetweenthehostandhomecountries. 3. Familyallowance:20%oftheparticipatingorganisationsalsosupportemployeesintheirchild carebyprovidingaflatamounteverymonthforeverydependentchild. 5.1.2 Variablepay Morethan70%oftheparticipantsofferavariablepayschemetotheiremployees.Variablepayoffered canbecategorizedintofollowingtwocategories: 1. Short term Incentives: a majority (73%) of the participants offer annual bonus plans that are linked to individual performance against predetermined goals & objectives. The payout is typicallymadeonanannualbasis. 2. Long term Incentives: almost 40% of the participants offer their employees a profit sharing arrangementorstockoptions/sharepurchaseschemesthataredirectlylinkedtothelongterm performanceoftheorganisation.Thisamountisusuallypaidoffintranchesoveralongertime horizone.g.untilthetimeanemployeestayswiththeparticipant.
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5.1.3 Benefitcomponents KeyBenefitsofferedbytheparticipantsare: 1. Health/MedicalInsurance:Allparticipantsofferfullorpartialcoverageofexpensesincurredon medicaltreatmentand/orregularhealthcheckups. 2. Lifeinsurance:Morethan70%oftheparticipantspaythepremiumforprovidinglifeinsurance totheemployee,intheeventofdeathduringservice. 3. Personalaccident/Disabilityinsurance:60%oftheparticipantsprovideinsurancecoveragefor personalaccidentand/ordisabilitycausedwhiledispensingofficialduties. 4. Pension: Almost 90% of the participants contribute a fixed percentage of the base salary to a pensionschemeorfundonbehalfoftheemployee.Only20%oftheparticipantshavemadeit mandatoryforemployeestotakepartinthisschemebymakingacompulsorycontributionfrom theirsalary. 5. Vacation/Holiday:Allparticipantsprovideanallpaid,annualvacationtotheiremployeesonan accrual basis. Some provide a flat entitlement while others link it to the years of service greaterlengthofserviceentailsahigherleaveaccrualeachyear. 6. Education Grant: Close to 50% of the participants bear the full or partial cost incurred on an eligiblechildseducation,dependingonthelifecyclestageofthechildandcountryofoperation.
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5.2 Institutionspecificobservations
There are broad, industryspecific trends that emerge in the way the compensation and benefits packageisstructured. 5.2.1 BilateralDFIs ThefollowingrewardelementswereencounteredinrelationtoparticipatingBilateralDFIs: 5.2.1.1 FixedCash a. Base pay in the form of 13 monthly instalments (governed by local legislation) or 11 monthly instalmentswith12thmonthsalarypaidasholidayallowanceinJune. b. Companycarallowancethatcaneitherbeusedtoobtainaleasedcaroranannualsubscription offirstclasspublictransportcardsforselfandfamily.Incaseanemployeedoesntavaileither ofthetwo,hereceivesagrossallowanceequivalenttovalueoftransportcardaspartofhis salary. c. A general flat rate expense allowance to sponsor costs incurred on subsistence, clothing and credit card usage. This policy is applicable above a certain level where entitlement amounts foreachlevelarealsospecified. d. Expatriate allowance is also offered wherein house, home travel expenses are borne by the
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employerforemployeesworkingabroad.
5.2.1.2 VariableCash a. Allparticipantsoffershorttermbonuscalculatedasapercentageofthebasesalary. b. Aprofitsharingplanintheformoflumpsumpaymentslinkedtocompanysreturnonequity (ROE).ThepayoutisbasedonapredefinedgridthatvarieswithROEofferingaslidingscale withinthe3%9%range. c. Anannual,averagemeritincreaseof3%onanaverageandanotherprovidesanincreaseof1 1.5% largely on account of cost of living changes determined through collective labour agreement. 5.2.1.3 Benefits a. Medicalinsurance,personalaccidentinsuranceandlifeinsurance. b. Pensioncontributionbyemployerisintherangeof1422%ofannualbasesalary. c. Annualholidayleaveentitlementbetween2532days. Otherbenefitsofferedinclude telephonereimbursement,travel insurance, educationgrant,mortgage interestscheme,overtimecompensationandstaffloanscheme. 5.2.2 MultilateralDFIs ThefollowingkeyrewardcomponentswereobservedamongstMultilateralDFIs: 5.2.2.1 FixedCash a. Basepaypaidoutthemonthlybasesalarycomponentinequalinstalmentstwiceamonth,as wellasthestandardonceendofmonth. b. Costoflivingadjustmenttopreservethepurchasingpowerbetweenhomeandhostcountries; hence,theamountvarieswiththelocationofposting.Usuallythepayoutsarelinkedtothe costoflivinginthehomecountry/countrywithheadquarters. c. Family or dependents allowance to employees with dependent family members. One organisationoffersthisallowanceasaflatpercentageofthebasesalary. d. Anallowancefordependentchildrenasaflatamountpaideachmonth. e. Expatriateallowancetointernationalstaffdeputedtofieldoffices. f. Hardshipallowancetoemployeespostedincountrieswherelivingandworkingconditionsare difficult. g. SpecialOperationLivingAllowanceforcountrieswherenooperationsoroffices. 5.2.2.2 VariableCash a. Anannualbonuspolicytorewardgoodperformerswithpayoutscomputedasapercentageof thebasepay. b. A range of cash rewards as part of the recognition programs that encourage extraordinary effortsbyindividualand/orteaminachievingorganisationalobjectives. c. Long term incentives in the form of long term cash awards that recognizes top performing
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investment projects for new business and portfolio management over a three year performancecycle. d. Ameritincreasepolicywithpayoutsintherangeof36%ofthebasesalary. 5.2.2.3 Benefits a. Medicalinsurance,personalaccidentinsuranceandlifeinsurance. b. Pensioncontributionbyemployervariesintherangeof1629%ofannualbasesalary. c. Annualholidayleaveentitlementbetween2530days. d. Otherbenefitslikeeducationgrantandtaxexemption(partialorfull) e. Mortgageorrentalsubsidyandrelocationexpenses. f. Differentialpaymentsforemployeesworkingovertimeorregularlyworkingatnight. 5.2.3 Foundations ThefollowingkeyrewardcomponentswereobservedamongstFoundations: 5.2.3.1 FixedCash a. Allparticipantsinthisgrouphaveabasepaycomponentcomprisingof12monthlypayments. b. Allowances include general expenses, cost of living adjustment and House rental allowance (HRA). 5.2.3.2 VariableCash a. Abonuspolicycomputedasapercentageofbasesalary. b. Adiscretionarybonusschemethatmaybeawardedforexceptionalperformance. c. Alongtermcashbonusplanwherepayoutisexpressedasapercentageofthebasesalary. d. Increasesintherangeof34%onbasesalarylargelytocompensateforcostoflivingchanges. 5.2.3.3 Benefits a. Medicalinsurance,lifeinsuranceandpersonalaccidentinsurance. b. Pensioncontributionbytheemployerrangesfrom10%12%ofbasesalary c. Annualholidayentitlementisbetween1725days. d. Otherbenefitsincludetelephone&entertainmentexpensereimbursementandeducationgrant providedtoonlyaselectgroupofemployees. 5.2.4 EmergingMarketscompanies ThefollowingkeyrewardcomponentswereobservedamongstEmergingMarketcompanies: 5.2.4.1 FixedCash a. Allparticipantsinthisgrouphaveabasepaycomponentcomprisingof12monthlypayments. b. Anannualbudgetfortravelandtelephoneaspartofthefixedpay. 5.2.4.2 VariableCash a. Anannualbonuspaymentbasedonindividualperformance,eitherexpressedasapercentageof
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base salary or treated asa discretionary lump sum payout that is not computed based ona formula. b. Profitsharingplansandstockoptions/sharepurchaseschemetoemployees. c. AnAnnualSalaryIncreasepolicythatislinkedtoeitherMeritorCostofLivingchanges,inthe rangeof316%ofbasesalary. 5.2.4.3 Benefits a. Medicalinsurance,lifeinsuranceandpersonalaccidentinsurance. b. Pensionfundcontributionbytheemployerrangesfrom5%20%ofbasesalary. c. Annualholidayentitlementrangesfrom1030days. d. Other benefits include telephone & entertainment expense reimbursement and education grantthatisprovidedonlybyoneparticipant.
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6 COMPENSATIONANALYSIS
Thissectioncontainsananalysisofthedatabasedonthecompensationinformationreceivedfromthe participantorganisations.Thestudyprovidesthreeviewsofthedata: 1. A summary view of the participating development finance institutions taken across all organisations,consistentofthekeypercentilepointpaydataandthetotalspreadofpay. 4 2. A percentile positioning of the CDC median compensation figures (P50) against the data from theparticipatingorganisations. 3. AdifferentialfigureoftheCDCmedianfromtheparticipantmedianandlowerquartilefigure. Dataisreportedseparatelyforfixedpay(TFCC),variablepay(TVP)andtotalcash(TCC).
6.1 Summarydata
6.1.1 TCC
Thespreadoftotalpayacrossalljobpositionswithinthedevelopmentfinanceinstitutionsis greaterthan500%,reflectingthelargevarianceinlevelsoftotalpayacrossdifferentinstitutions evenforsimilarorcomparablepositions.Thisisdrivenprimarilybyconsiderablevariancesin variablepayacrossthesamplegroup,althoughsignificantdifferencesinfixedpayarealso present(see6.1.2and6.1.3belowformoredetail). ThegreatestspreadofpayisattheMD/PortfolioDirectorandSeniorSupportProfessionals positions. InthecaseofMD/PortfolioDirectors,allparticipants,particularlytheEmergingMarket participants,haveaparticularlylargerangeoftotalpaypackages.Someparticipantsoffer variablepay,withactualvariablepaylevelsdifferingwithinthatsubset,whilstothersdonot offervariablepayatall.
AllinformationhasbeenpresentedwithCDCdatapointsexcludedfromtheparticipantorganisationdatarange inordertoaccuratelycompareCDCspositioningagainsttheparticipatingorganisations.
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AllCDCmediantotalpaydatapointslieeitheratorabovethemedianfortheparticipant organisations. AllpositionsexceptforSeniorSupportProfessionalsitaroundorabovethetoppercentile(P90) formediantotalpay,allbeingmorethan50%aboveparticipants.MediantotalpayforSenior SupportProfessionalsisroughlyequivalenttothatoftheparticipantmedianat1%above participantmedian. TFCC
6.1.2
Thespreadoftotalfixedpayacrossalljobpositionswithinthedevelopmentfinanceinstitutions remainslargeatwellovera300%,butgenerallyspeakinglowerthanthetotalpayspread. TheexceptionisInvestmentExecutive/Analystwherethespreadofmedianfixedpayisslightly higherthanthatfortotalpay. TheCDCmedianfixedpaydataismorealignedtotheparticipantsmedianthanisthecasewith totalpay. Twopositions,MD/PortfolioDirectorandInvestmentExecutive/Analyst,sitcomfortablyabove theparticipantgroupmedian(atP64/30%aboveandP70/24%aboverespectively).Two positions,SeniorSupportProfessionalsandInvestmentManager,sitbelowthemedianforthe sample(bothatP40,15%and7%belowthemarketrespectively).TheCEOpositionsitsalittle abovethemedian(atP56,2%abovethemedian). TVP
6.1.3
Theenormousspreadofdataacrossalljobpositionsreflectstherangeofcultures,focusand missionsoftheorganisationsinvolvedinthisdomainthatismanifestedindiffering remunerationpracticesandcomponentsinrelationtovariablepay.Forexample,some organisationsdonotoffervariablepayforcertainpositionswhereothersdo.Thosethatdo offervariablepayofferdifferingpotentiallevelsofpayment.TheBilateralDFIparticipants tendedtowardssmallerbonuspayoutsacrosstheboard,whereasEmergingMarketcompanies oftenofferhighlevelsofvariablepaypotential. AllCDCmediantotalpaydatapointsabovethemedianfortheparticipantorganisations. Copyright2011Accenture.AllRightsReservedMarch2011
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Themediantotalvariablepayforthreepositions,CEO,InvestmentManagerandInvestment Executive/Analyst,sitabovethetoppercentileoftheparticipantdata.Themedianfor MD/PortfolioDirectorsitsjustbelowthetoppercentile(atP87).ThemedianfortheSenior SupportProfessionalsliescomfortablyabovetheparticipantgroupmedian(atP67).
6.2 Positionleveldata
6.2.1 CEO
TheCEOsamplecontainssignificantspreadofpay,mostnotablytotalvariablepay. ThemedianforCDCisinthetoppercentile(aboveP90)fortotalvariablecashandtotalcashwhen compared to the median of the participating organisations. Both are over 100% higher than the equivalentforthesampledparticipants. The differential value indicates CDCs positioning is driven primarily by CDC variable pay given medianfixedcashiscloselyalignedtoparticipants.Onlytwoorganisationsintheparticipantsample offersvariablepayschemetotheCEO.
6.2.2 SeniorSupportProfessionals
The Senior Support Professional position contains a significant spread of pay, most notably total variablepaywheretherangeisexceptionallyhigh. ThemediantotalcashforCDCiscloselymatchedtotheparticipantmedian(atP51,1%abovethe samplemedian),withtotalvariablepaybeingwellabovetheparticipantmedian(atP67)andtotal fixedcashbeing15%belowthemedian(atP40). Onceagain,thedifferentialvalueindicatesCDCspositioningisdrivenprimarilybyCDCvariablepay givenmedianfixedcashiscloselyalignedtoparticipants.Themajorityofparticipantsoffervariable payschemeforthesepositions,butsomeparticipantsdidnotoffervariablepay.Therewasnotrend tothisbasedontypesoforganisations;atleastoneofeachofthefourorganisationtypesprovided variablepay.
6.2.3 MD/PortfolioDirector Copyright2011Accenture.AllRightsReservedMarch2011
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TheMD/PortfolioDirectorpositioncontainsasignificantspreadofpay,mostnotablytotalvariable pay where the range is exceptionally high. This reflects the nature of these roles as the senior investment executive with responsibility for managing a portfolio of investments in a region or sector. Within the private sector Emerging Market funds, variable pay will often form the largest componentofpaywhereasitwilloftenbeonlyasmallelementofpaywithaFoundationorDFI. The median pay figures for CDC are above the median for participants, with fixed pay at P64, variablepayclosetothetoppercentile(atP87)andtotalcashequaltothetoppercentile(P90). Once again, the differential value indicating CDCs positioning is driven primarily by CDC variable pay, given median fixed cash is more closely aligned to participant data than variable pay. The exceptionallyhighdifferentialpercentagesreflectthesignificanceofvariablepayintheoverallpay for MD / Portfolio Director positions in CDC compared to the equivalent positions in most of the participants.
6.2.4 InvestmentManager
TheInvestment Manager positioncontainsasignificantspreadofpay,mostnotablytotalvariable paywheretherangeisexceptionallyhigh. ThemediantotalfixedcashforCDCis7%belowtheparticipantmedian(atP40),withtotalvariable paybeingwellabovethetoppercentile(aboveP90)contributingtototalfixedcashbeingcloseto thetoppercentile(atP87)and54%higherthantheparticipantmedian. Onceagain,thedifferentialvalueindicatesCDCspositioningisdrivenprimarilybyCDCvariablepay given median fixed cash is closely aligned to (in fact a little below) participants. As with the MD / Portfolio Director position, the majority of participants offer variable pay scheme for these positions, but some participants did not offer variable pay. There was no trend to this based on typesoforganisations;atleastoneofeachofthefourorganisationtypesprovidedvariablepay.
6.2.5 InvestmentExecutive/Analyst
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The median data for Investment Executive / Analyst positions contains significant spread of pay, most notably total variable pay which although remaining high is less extreme than some of the otherpositions.Thisreflectsthefactthesearemorejuniorinvestmentpractitionerswithgenerally lowervariablepayearningpotentialthanmoreseniorpositions. ThemedianforCDCisinthetoppercentile(aboveP90)fortotalvariablecash,and53%abovethe participantmedianfortotalcash(atP83).Fixedcashmedianpayisalittlebelowtheupperquartile oftheparticipantsample,24%higherthanthemedian. Once again, although not as extreme as other positions, the differential value indicates CDCs positioningisdrivenprimarilybyCDCvariablepay.
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7 BENEFITSANALYSIS
InadditiontothecoreCashCompensationpackage,comparableorganisationsofferarangeofBenefits totheiremployees.Thestudyfocusesonthemostsignificantelementsofthebenefitspackages: Pensions HealthandMedicalInsurance LifeInsurance PersonalAccidentandCriticalIllnessInsurance Annualvacationentitlements
The following key observations were made when examining each of the benefits components individually.
7.1 Pensions
Almost 90% of the comparator organisations apportion a percentage of employees base salary to a pensionfundasretirementbenefit.
CertainDFIs(Bilateral&Multilateral)possessesuniquepensionschemesexplainedasfollows:
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Corporate pension scheme comprises of annuity modules that add up to old age, disability or prematurepension. Annuity=pensionsfundcontributionXretirementfactor Thepensionfundcontributionaccountsfor3%oftheshareofthepensionableincome,whichdoes notexceedthestatutorycontributionceilingand10.5%oftheshareexceedingthisceiling. Theretirementfactorisaninsurancemathematicalfactorconsideringmainlytheemployeesage. Theyoungeranemployee,thelongercanhis/herpensionannuitybearprofitableinterestwhichis whytheretirementfactordecreaseswithincreasingage. Indexedaveragesalaryplanwhereinthelastsalaryisnottakenasthestartingpoint(likethefinal salary plan), instead the average salary (corrected by the wage or price index) over the period of employment is taken into account. An accrual rate of 2.25% per year applies. With 40 years of service, this results in a pension of 90% (40 times 2.25%) of the average income. The indexation amountsto1.5timestheregularincomeadjustment.Eachyear,theemployerdeposits2.75%ofthe wage bill as an employers deposit in an indexation account. This participant also has a surviving dependants pension on an accrual basis. This means that on retirement, a surviving dependants pensionisactuallypaidonthebasisofthepastyearsofserviceequivalentto70%oftheattainable pension. 70% of pay is contributed to the fund after pension age (65 years) and 66% thereafter. Minimum workingperiodforfullentitlementis30years. DefinedBenefitPensionPlanisfullysponsoredbytheemployerprovidingabenefitbasedonsalary andyearsofservice.Employercontributes12%ofnetsalarytothisaccount. CashBalanceRetirementPlanexistswhereboththeemployeeandemployercontribute10%and 5%respectivelytotheCashBalanceComponent.Itisanaccountbasedplanwithbenefitsbasedon totalcontributionsmadeplusinvestmentearnings. Lifecoursesavingschemeaimstocreateafacilityforsavingmoneywhichcanbeusedtotakean extended period of leave in the future. Typically if an employee intends to join this scheme, a deductionuptomaximumof12%ofannualsalary(eachyear)ismadeintoanaccountinthename oftheemployee.Howeveronceayear,theemployersupportsthisschemewitheitheraprovision equivalentto1.35%ofthefixedannualsalaryorasagrosspaymentinDecemberattheemployee's discretion. Over and above the employer contribution, some organisations also require mandatory pension fund contribution to be made by employees. Some organisations also offer voluntary plans in additiontotheregularpensionfund. One Bilateral DFI has recently introduced a personal contribution for participants to the pension plan.Inthiscase,theaccrualtakesplaceoveraperiodof5years(20062010)by1%peryeartoa maximumof5%ofthepensionbase. AMultilateralDFInotonlymandatesa5%contributiontoacashbalanceretirementplanbutalso offers a Voluntary Savings Plan with participant contributions of up to 15% of net salary. Other MultilateralDFIsrequireemployeecontributionsintherangeof811%. One Foundation also offers a voluntary pension scheme to employees however there is no subscriptiontothisfundsofar.
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Description Thisprovidesanoverviewofthetypicalrangeswithinwhichemployercontributionsareconcentratedin theindustry. KeyTrends Morethan30%oftheorganisationscontributebetween20%25%andnearly20%oftheorganisations contributebetween10%15%ofbasesalarytoapensionfund.13%oftheorganisationscontributein the15%20%rangewhile6%oftheorganisationsfallin5%10%and>25%range.The<5%rangealso includesoftheorganisationsthatdonotmakeanysuchcontribution. Institutionspecifictrendsinemployerpensioncontributions: BilateralDFIscontribute14%22%ofannualbasesalarytoapensionfund. MultilateralDFIsmakeanywherebetween16%29%contributiontopensionscheme. Foundationstypicallycontributebetween10%12%topensionfund EmergingMarketfundscontributebetween5%20%ofbasesalarytopensionfund.
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CDCObservations CDCcontributestobothdefinedbenefitanddefinedcontributionschemes.Thedefinedbenefitpension schemeisonlyapplicableto5employeesincludingtheCEOandhasbeenclosedtonewemployeesfor tenyears.Thecontributiontotheseschemesrangesfrom6%foremployeesupto29yearsofageto 15%foremployeesaged50yearsandabove.
7.2 Health&MedicalInsurance
Allparticipantssurveyedprovidefullorpartialsupportforexpensesincurredonmedicaltreatmentand examination.
Morethan50%ofthecomparatororganisationsbearorreimbursetheentirepremiumofagroup insurance plan (e.g. BUPA). One Emerging Market player pays 97% of the premium cost which is virtuallyequivalenttothefullamount.OneBilateralDFIhasintroducedacompulsorycontribution inexcessofthebasicinsurancethatismandatedbylaw. Otherorganisationspickupapredefinedfractionoftheinsurancecost.OneMultilateralDFIpays off 80% premium of group medical insurance covering the employee and eligible family members andtheremaining20%iscontributedbytheemployeehimself.OneBilateralDFIalsobearsapart ofthegrantforprivatemedicalinsurance. AnotherDFIMultilateralbears8%ofthemedicalexpenseswhileafoundationsetsaside8%ofthe base salary of each employee for this purpose. Another Foundation provides medical and life
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insuranceat4timestheannualsalaryofanemployee. Twoorganisationsofferdifferential plansforeachcountry. One EmergingMarket companybears 100%ofthecostaspartofthenationalmedicalprograminonecountrywhilefortherestofthe geographies it contributes 75% with 25% borne by the employee. One Emerging Market player offersbothprivatemedicalinsuranceat0.44%ofemployeesbasesalaryandhealthinsurancecover between4601,400p.a.toallitsUKemployees. A minority of organisations also offer this benefit as a voluntary scheme. One Multilateral DFI provides group insurance at subsidised rates. One Emerging Market company makes this plan optionalsinceitqualifiesasbenefitinkindentailingataxliabilityforanindividual. Two organisations also offer free medical checkups. One Multilateral DFI allows all employees above the age of 40 one check up every year and for everyone else once in every 2 years. All employees of one Emerging Market company are entitled to a confidential annual medical examinationfreeofcost. OneMultilateralDFIalsooffersretireemedicalinsurancebenefitsubjecttofulfilmentofminimum pensionableservicerequirements
CDCObservations Like its peers, CDC offers permanent health insurance that provides coverage in the event that an employee on account of illhealth is unable to continue working for the organisation. Additionally it providesprivatemedicalinsurancecoverforeachemployeeandhis/herdependents.CDCalsoprovides freemedicalcheckupsforemployeeswhofrequentlytraveloverseas.
7.3 LifeInsurance
More than 70% of the participant sample bears the cost of providing insurance to employees in the eventofdeathduringservice.
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40%oftheorganisationsprovidinglifeinsuranceofferalumpsumamountcomputedasamultiple oftheannualsalary.OneMultilateralDFIsetsasideanamountequalto3timestheannualsalary whileanotheroneprovidesacoveroftwicethesalary.AnotherMultilateralDFIallocates3times the salary for single life cover and 8 times for married life cover. One Foundation provides a combinedcoverofmedicalandlifeinsuranceequalto4timestheannualsalary. Twoorganisationskeepasideapredefinedpercentageofanemployeesbasesalaryaslifeinsurance cover.OneEmergingMarketfundallocates0.64%ofbasesalaryforlifeassuranceprogram. One organisation bears the full premium of the insurance cover depending on the age, years of serviceandhealthconditionofanyemployeewhileothersabsorbapartofthepremiumcostone EmergingMarketfundbears97%andanothercovers75%ofthepremiumcost. ForemployeesofoneMultilateralDFIparticipationinsuchaschemeisvoluntaryandthecostsare borneinfullbytheindividual. Another Multilateral DFI also provides an option of additional coverage for a select group of employeesandtheirdependents.
CDCObservations CDCprovidesdeathinservicebenefitbywayofalifeassurancecovercommittingasumequivalentto fourtimestheannualsalaryofanemployee.
7.4 PersonalAccident/DisabilityInsurance
Approximately60%oftheparticipantsamplebearsthecostofprovidinginsurancetoemployeesinthe eventofdeathordisabilitycausedduringservice.
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Almost80%oftheorganisationsthatprovidepersonalaccidentinsurancebeartheentirepremium costoftheinsurancecoveragefortheemployee.OneEmergingMarketscompanypaysoff97%of thepremiumwhiletheremaining3%isbornebytheemployee. Nearly40%oftheorganisationsprovidethisbenefitinlumpsumamountsexpressedasmultiplesof thebasesalary. BilateralDFIsprovidepersonalaccidentbenefitinthefollowingform: a. One organisation bears entire premium cost for a group accident insurance plan that is applicable 24 hours a day. In case of death the sum insured is to the tune of 3 times the annualincomesubjecttoamaximumof544,000.Thisamountislowerincaseofpartial disability.Incaseoftotaldisabilityanamountequalto4.5timestheannualincomesubject toamaximumof816,000isapportionedasinsurancecover. b. Another organisation provides full grant for private accident insurance. It also offers recuperationallowancestosupportemployeesduringillnessoremergencies KeyObservationsobservedforMultilateralDFIs: a. One organisation offers 24hour accident coverage to staff members at 3 times the base salary amount while another one provides accidental death coverage at 4 times the base salary. b. Another organisation provides working incapacity insurance equivalent to 1.168% of base salary. c. One organisation extends this coverage to include spouse/ domestic partner and eligible
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dependent children up to 50% and 25% of employees entitlement respectively. It also provides additional optional coverage to select employees. All employees of this organisationarealsocoveredundertheworkerscompensationinsuranceprogram. d. Foroneorganisation,participationinaccidentinsuranceschemeisvoluntaryandthecosts need to be borne in full by the staff members. However this participant provides free insurancefordisabilityordeathcausedwhiledispensingofficialduties. CDCObservations CDCoffersinsurancecoverwithregardtopersonalaccidentanddisabilitytoitsemployees.
7.5 Vacation/Holidaypolicy
Allorganisationsoffersomeformofannualvacationorpersonaltimeofftoemployeesoverandabove theregularpublicholidays.
Around50%oftheorganisationsprovideaflatnumberofdaysoffeveryyearliketwoBilateralDFIs thatallow25daysand30daysofannualvacationrespectively.ForoneMultilateralDFItheleave balance accrues at the rate of 2 and a half working days for every completed month of service amountingto30daysofannualallowance. Two Foundations provide anywhere between 1724 days of annual leave (depending on the geography) along with paid holiday during the period from Christmas to NewYear. Two Emerging Marketfundsalsoprovide20and25daysofleaveeveryyear. Another40%oftheorganisationslinktheleaveentitlementtotheyearsofserviceandthenumber ofaccruedleaveskeepsincreasingwithtenure. BilateralDFIsofferthefollowingkindofvacationpolicytotheiremployees a. Oneorganisationsleaveentitlementislinkedwithanemployeesageaswellasgradescale
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Age(inyrs) Scale17entitlement(indays) Scale8entitlement(indays) <35 25 28 3545 27 30 4555 29 32 >55 30 32 b. Another organisation provides higher leave entitlement of 6 weeks to all its employees above60yearsofage. IllustrationsofleavepolicyformultilateralDFIs: a. Startingannualleaveat25daystoamaximum30daysfirst3yearsat26days,28days after5years,29daysafter7yearsandafter10yearsat30days. b. <5yrsofserviceat26workingdays(WD),>5but<10yrsat28WDand>10yrsofserviceat 30WD. c. Annualleaveof26,28and30daysayeardependingonlengthofservice.Utilizationof15 daysofleaveinyearmandatoryandmaximumleaveencashmentlimitof60days. OneFoundationoffersthefollowingleavepolicytoitsemployees: First2yrsat20days/year,34yrsat23days/yearand>5yrsat25days/year.Additionally23 dayscompulsorilyoffaroundChristmas. TwoEmergingMarketplayersprovidedifferentkindsofannualleaveaccrualstructure: a. Until1yearleaveaccruesattherateof1dayforeachmonthofcompletedserviceuptoa maximumof10workingdays(2weeks).For2yearsat15workingdays(3weeks),after5 yearsat20workingdays(4weeks),for10yrsat25workingdays(5weeks)andformore than15yrsat30workingdays(6weeks). b. Personal time includes vacation, doctors appointments, or any other personal reason including sickness beyond the sick time allowance. Up till one year of employment 1516 daysdependingoncountryofoperationandfor>1yearat20days/year.Anemployeecan availofleaveonlyaftercompletionof90daysofemployment. c. One player links leave entitlement to an employees base salary < 34,999 base salary entails 20 days leave on joining rising up to 25 days after 5 years continuous service. An earningof>35,000onjoiningentailsaleavebalanceof25days.
CDCObservations CDCoffersannualvacationallowanceofbetween2530daystoitsemployees,dependingonlengthof service.
7.6 OtherBenefits
In addition to the primary Benefit elements, additional observations were noted about other types of benefits.
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7.6.1 EducationGrant Nearly50%oftheorganisationssponsorapartoftheeducationexpensesincurredonaneligiblechild.
ThisbenefitislargelyofferedbyMultilateralDFIs,withthefollowingkeyelements: Oneorganisationoffersthisbenefitatdifferentialratesdependingonthecountryofoperation.75% or80%ofeligiblecostssubjecttoannuallimitsforprimaryandsecondaryeducationareborneby theemployeronareimbursementbasis.Theentitlementstructureisgivenasfollows: 5,000lumpsumfortertiaryeducationfornontuitionrelatedcosts 3,500forAfricaandtheMiddleEast 2,000fordutystationaccountingtocompensateforcostdifferentialsinlivingexpenses Anotherorganisationprovidesreimbursementofafixedpercentageofthefeesincurredonasliding scale between 8,500 & 9,500 per academic year depending on the eligible children and type of education. Post secondary i.e. university, maximum reimbursement is 70% of actual fees up to a ceilingof8,500plusacostofliving/accommodationallowanceof2,500. One organisation only covers 75% of the allowable education costs for staff posted out of home country.
7.6.2 TelephoneReimbursement More than 30% of organisations reimburse the expenses incurred on usage of telephone for official purposes.
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ForoneBilateralDFIemployeesonlyusemobilephonesandthebillisreimbursedbythecompany. Theemployeesarealsopermittedtousethesameforpersonalcallsaswell. OneMultilateralDFIprovidestelephonetomanagementandselectedstaffbasedonthenatureof work. One Emerging Market fund also covers blackberry and broadband expenses on reimbursement basis.
7.6.3 Rental/MortgageSubsidies Only 20% of the organisations offer rental or mortgage subsidy especially to employees operating outsideofhomelocation.
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OneBilateralDFIoffersamortgageinterestschemetoallemployeeswhohaveeithermortgagedor intendtomortgagetheirhouseorapartment.Underthisplantheparticipantreimburses25%ofthe mortgage interest, where the amount of the mortgage loan interest which is eligible for reimbursementisamaximumof4timesthebasesalary. OneMultilateralDFIprovidesamortgagesubsidyforemployeesthatarehiredlocallyandpostedin differentlocations. AnotherMultilateralDFIcoversupto80%oftherentdifferentialbetweenminimumthresholdfor anindividualandmaximumrentforfieldlocations.Forheadquartersthissubsidyis80%forfirst4 years,successivelyreducedto60%,40%and20%inthenext3yearsafterwhichitisdiscontinued.
7.6.4 TaxExemption 20% of the participating organisations offer salaries that are either completely taxfree or eligible for heavytaxreliefordeductions.
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TaxexemptionorreliefisessentiallyapplicableforMultilateralDFIs Oneparticipantisgovernedbyasetofrulesthatcontainprovisionsaroundthepaymentofincome taxallowancesandsocialsecuritytaxreimbursementstostaffmembers.Allsalariesarepaidnetof taxeswhileUSCitizensreceiveataxallowance. Incaseofanothercomparator,thesalaryiswhollyexemptfromincometax. Another organisation offers various kinds of tax free abatements for family, dependent children, medicalinsuranceandpensioncontributionsthoughtheentiresalaryisnottaxfree.
7.6.5 RelocationReimbursement 20%organisationsalsoproviderelocationreimbursementtoemployeesoperatingoutsidetheirhome location.
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ThisbenefitisalsolargelyrelevantforMultilateralDFIs: Oneparticipantprovidesrelocationorresettlementallowanceessentiallytoexpatriatestaffandthe same is made available at the beginning & end of employment. Allowance for both is either one monthgrossbasesalaryifsingleortwomonthsgrossbasesalaryifmarried. Two other participants offer full relocation, resettlement and installation cost reimbursement to eligiblestaff.
7.6.6 TravelInsurance Only two participants in the study covered full travel insurance for all employees. Key elements of a grouptravelinsurancecoverofferedbyaBilateralDFI: Grouptravelinsuranceisonlyinforceduringtripswhicharebeingmadeundertheresponsibilityofthe participant.Themaximumcoverincludes: a. b. c. d. e. Travelbaggage3,400 Costsofmedicaltreatmentnolimit Dentalexpenses510 Extraordinarycosts,maximumtotal2468 Cashandchecks510
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7.6.7 Overtime/NightDifferential Twoparticipantsinthestudyprovideddifferentialcompensationforemployeesworkingextrahoursor duringnighttime.
One Bilateral DFI provides compensation for the extra hours worked by way of an additional entitlementof10dayscompensatoryoffinayear.
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OneMultilateralDFIprovidesadditionaltimeofftoemployeeswhoworkextrahours(inexcessof regular work hours) and also offer differential payments for employees who work regular night shifts.
7.6.8 LoanScheme OnlyoneBilateralDFIgrantsloanstostaffmembersatsubsidizedrates.
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8 APPENDIX
8.1 AbouttheParticipantsample
DFIs:isagenerictermusedtorefertoarangeofalternativefinancialinstitutionsthatplayacrucialrole in providing credit for private sector investments in developing countries by way of higher risk loans, equitypositions,andriskguaranteeinstruments.DFIsarebackedbydevelopedeconomiesandhavea general mandate to provide finance to the private sector for investments that promote development. The purpose of DFIs is to ensure investment in areas where otherwise, the market fails to invest sufficientlyhttp://en.wikipedia.org/wiki/Development_finance_institution cite_noteODI1. This group aimstobecatalyststhathelpcompaniesimplementinvestmentplansandespeciallyseektoengagein countrieswherethereisrestrictedaccesstodomesticandforeigncapitalmarkets.(Source:Wikipedia). TheDFIsthatparticipatedinthisstudyfellintotwogroups:bilateralDFIs(operateatanationallevel) andmultilateralDFIs(thatoperateataninternationallevel).ThebilateralDFIswerefromEurope,and themultilateralDFIswerefromAfrica,Europe,andtheUnitedStates. Foundations:thisgroupisdefinedasalegalcategorizationofnotforprofitorganisationsthatmayalso andoftenhavecharitablepurposes.Thesetypesofinstitutionseitherdonatefundsandprovidesupport tootherorganisations,orprovidethesolesourceoffundingfortheirowncharitableactivities(Source: Wikipedia). The foundations that participated in this study were all organisations with a charitable focus.ThefourparticipantswerefromtheUnitedStatesandUnitedKingdomandprovidedsupportin manyofthedevelopingregions. EmergingMarketFunds:thisgroupisdefinedasamutualfundorexchangetradedfundthatinvests majority of its assets in the financial markets of a single developing country or a group of developing countries.ThesecountriesaremostlylocatedinEasternEurope,Africa,MiddleEast,LatinAmerica,and Asia regions. A developing country is characterized as being vulnerable to political and economic instability, havinglowaveragepercapitaincome,andofbeing intheprocess ofbuildingitsindustrial andcommercialbase.The"emergingmarket"labelhasbeenadoptedbytheinvestmentcommunityto identify developing countries with superior growth prospects. The potential for rewarding investment opportunitiesinthiscategoryoffundcomeswithrelativelyhighrisk(source:www.investopedia.com). The five Emerging Market fund organisations that participated in this study were based out of North AmericaandtheUnitedKingdom. SocialInvestmentFunds:thisgroupexistsfortheprovisionanduseoffinancetogeneratesocialaswell aseconomicreturns.Variousformsofsocialinvestmentshaverapidlygrownoverthepasttenyears. Thegrowthofsocialinvestmentsreflectsdevelopmentfromboththedemandandsupplyside(source: open.ac.uk/oubs/socialinvestmentseminars). Social Investment Funds organisations were contacted to
44
participateinthisstudy,howevertheydeclinedtoparticipate.
8.2 DatacollectionQuestionnaire
Thequestionnaireusedforthisstudycontainedatotaloffoursectionsthatneededtobepopulatedby the participants. A summary of each of the sections contained in this questionnaire are highlighted below: 1. TheCoversheetprovidedanoverviewofthestudyandcontentsofthesurvey. 2. The Instructions sheet provided guidelines to participants for completing the survey, included definitionsofkeytermsandstatedanycriticalassumptionsused. 3. The Organisation Questionnaire sheet requested contact, organisation and compensation policy information from the participant. The purpose of this section was to capture basic organisationinformationtoaidthejobmatchingexerciseandalsotogainanunderstandingof meritincreasepolicy. 4. The Salary Structure sheet was used to capture the various components of a participant compensationandbenefitspackage.Aglossaryofpayelementswasalsoprovidedalongsideas anillustrationfortheparticipant. . 5. ThePositionMatchingsheetwasusedtocollectinformationtoaidthematchingprocessofa participantslistofpositionswiththeCDCsbenchmarkpositions. 6. ThePositionRawDatasheetwasusedtocaptureaparticipantscompensationinformationas basesalary,allowancesandvariablepay.Eachparticipatingorganisationwasgivenanoptionto eithersharetheiractualpayrolldataortoprovideminimum,medianandmaximumdatapoints foreachpositionmappedtothebenchmarkpositionsinthepositionmatchingsheet.
8.3 CurrencyConversionRatios
LocalCurrency USD EURO NOK RUPEE UA Conversionrate 0.64 0.68 0.057 0.013 0.98
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8.4 SummaryDatabyTypeofOrganisation 5
8.4.1 BilateralDFIs
8.4.1.1 TCC
8.4.1.2 TFCC
Itshouldbenotedthat,bysplittingthedataintothefourgroups,thesamplebecomesdilutedwithasmaller numberofparticipantswithineachgroup.Conclusionstakenfromandinterpretationofthisdatashouldbemade withthatinmind.
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8.4.1.3 TVP
8.4.2 MultilateralDFIs
8.4.2.1 TCC
8.4.2.2 TFCC
8.4.2.3 TVP
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8.4.3 Foundations
8.4.3.1 TCC
8.4.3.2 TFCC
8.4.3.3 TVP
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8.4.4 EmergingMarketCompanies
8.4.4.1 TCC
8.4.4.2 TFCC
8.4.4.3 TVP
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8.5 PositionlevelDataByTypeofOrganisation 6
8.5.1 CEO
8.5.1.1 BilateralDFIs
8.5.1.2 MultilateralDFIs
8.5.1.3 Foundations
8.5.1.4 EmergingMarketscompanies

It shouldbenoted that, by splitting thedata into the four groups, the sample becomes diluted with a smaller numberofparticipantswithineachgroup.Conclusionstakenfromandinterpretationofthisdatashouldbemade withthatinmind.
6
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8.5.2 SeniorSupportProfessionals
8.5.2.3 Foundations
8.5.3 MD/PortfolioDirector
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8.5.3.3 Foundations
8.5.4 InvestmentManager
8.5.4.3 Foundation
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8.5.5 InvestmentExecutive/Analyst
8.5.5.3 Foundations
53

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COMPENSATIONANDBENEFITSSTUDY 2011

DevelopmentFinanceCompensationandBenefits Study April2011

3.2.1 3.2.2 3.2.3 4

4.2.1 4.2.2 4.2.3 4.3

4.3.1 4.3.2 4.3.3 4.3.4 4.4 5

5.1.1 5.1.2 5.1.3 5.2

5.2.1 5.2.2 5.2.3 5.2.4

6.1.1 6.1.2 6.1.3 6.2

6.2.1 6.2.2 6.2.3 6.2.4 6.2.5 7

7.6.1 7.6.2 7.6.3 7.6.4 7.6.5 7.6.6 7.6.7 7.6.8 8

8.4.1 8.4.2 8.4.3 8.4.4 8.5

8.5.1 8.5.2 8.5.3 8.5.4 8.5.5

6.2.3 MD/PortfolioDirector Copyright2011Accenture.AllRightsReservedMarch2011

CDCObservations CDCprovidesdeathinservicebenefitbywayofalifeassurancecovercommittingasumequivalentto fourtimestheannualsalaryofanemployee.

CDCObservations CDCoffersannualvacationallowanceofbetween2530daystoitsemployees,dependingonlengthof service.

7.6.1 EducationGrant Nearly50%oftheorganisationssponsorapartoftheeducationexpensesincurredonaneligiblechild.

7.6.5 RelocationReimbursement 20%organisationsalsoproviderelocationreimbursementtoemployeesoperatingoutsidetheirhome location.

7.6.7 Overtime/NightDifferential Twoparticipantsinthestudyprovideddifferentialcompensationforemployeesworkingextrahoursor duringnighttime.

7.6.8 LoanScheme OnlyoneBilateralDFIgrantsloanstostaffmembersatsubsidizedrates.

Itshouldbenotedthat,bysplittingthedataintothefourgroups,thesamplebecomesdilutedwithasmaller numberofparticipantswithineachgroup.Conclusionstakenfromandinterpretationofthisdatashouldbemade withthatinmind.

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