Exploring various aspects of salary planning, including performance management and pay for performance, the report reveals financial services as one of the sectors most prominently using performance based pay. It was also one of the least transparent sectors when publishing salaries.
The report investigates the salary budgets, transparency and performance assessments of 500 organisations in the UK and over 50 countries globally in 2022 and their forecasts for 2023. The report breaks the data down by industry, identifying key differences between sectors, revealing the current state-of-play for financial services businesses.
Collected between 5 August and 9 September 2022, respondents were asked to submit data per country in relation to their pay review budget for 2022 and their forecasted pay review budget for 2023 as a percentage of base salary.
Pay for Performance
Of all organisations surveyed, 97% of financial services organisations used performance based pay. 15% used salary only, 21% used bonus only, and 62% used salary and bonus.
The overall average from those surveyed was: 23% did not link pay to performance at all, 17% linked salary to performance, 22% linked bonuses to performance and 38% linked both salary and bonuses to performance. Linking pay to performance is relatively uncommon among organisations in the charity and education sectors, but most common among organisations in the financial services, manufacturing, media arts and energy/utilities sectors. A slight majority overall link both salary and bonus payments to performance, as opposed to just salary or just bonus. Life sciences and financial services lead the trend in this area.
The report investigated salary increase data from 2022 to assess how the average salary increase budget aligned with inflation, which was at 8.6% according to the CPI (Consumer Price Index). The median pay increase budget for 2022 was 5% in the UK for the financial services sector, which was higher than the median pay increase budget in the UK which was 4%. Other sectors with above average pay increase budgets included tech, and professional services.
The lowest median salary increase was facilities management at 2.8%, and sectors at 3% which included healthcare, education and manufacturing.
The report predicts that in 2023 the median pay budget increase for financial services will be 4.5% making it relatively low in comparison to other sectors.
The report examined pay transparency processes by sector to uncover where the use of financial incentives are most common. The report found that 51% of financial services organisations used salary ranges, but only 11% of this percentage published them. This placed financial services as one of the least transparent sectors, alongside life sciences, retail, engineering and media arts. Among the sectors found to be the most transparent were charity and education in which over 60% of those using salary ranges publicised salaries.
Rameez Kaleem, founder of 3R Strategy comments on the findings:
“Although the financial services sector has forecast a relatively low median pay increase for 2023, variable pay and bonuses are more prevalent in this sector and we have seen many financial services organisations providing one-off payments to their employees to support with rising costs. The lack of pay transparency across various sectors is also interesting, and raises further questions regarding the continued lack of pay transparency we are seeing on a global scale.’’