For the seventh consecutive year, senior executives who changed jobs received double-digit compensation increases, reports retained executive search firm Salveson Stetson Group. Executives placed by Salveson Stetson Group during the 2016 calendar year averaged an increase in cash compensation of more than 20 percent over their previous roles. This increase applied to every industry and every functional area.
Salveson Stetson Group, which places executives in senior-level roles at corporations and nonprofits, analyzed compensation data from a representative sample of the firm’s senior executive placements in 2016. It found that the average compensation increase for a senior-level candidate accepting a new job last year was up slightly from the prior year – 20.1 percent in 2016 compared to 18.44 percent in 2015. Compensation packages refer to base salary and bonus.
Salveson Stetson Group’s results reflect the continued tightening of the U.S. labor market as the unemployment rates in 2016 held steadily below 5 percent. “In an environment approaching full employment, it would be surprising if we didn’t see this type of upward pressure on executive compensation,” said Donna DeHart, Vice President at Salveson Stetson Group and member of the firm’s Human Resources Practice.
These executive-level trends also seem to be prevailing throughout the entire workforce as the Bureau of Labor Statistics reported a 2.3 percent increase in compensation costs for the 12-month period ending in September 2016. Sally Stetson, Co-Founder, Principal and Human Resources Practice Leader of the firm, states, “Trends that started in 2015 appear to have only increased over the past year as workers are more substantially participating in the wage growth we have seen at the executive level over the last seven years”.
The implications of employers’ willingness to pay more for talent are clear, according to John Salveson, Co-founder and Principal at Salveson Stetson Group. “We are now seeing the same type of free-for-all for talent that we experienced in the years immediately prior to the Great Recession. U.S. corporations must not only pay employees competitively to retain them, but must offer a work culture and career development opportunities that outweigh the opportunity to receive better compensation packages elsewhere.”
Salveson Stetson Group has been tracking executive compensation trends since 2006. Highlights of its research include:
- Executives who switched jobs before the recession – from 2006 to 2007 – received an average compensation increase of nearly 25 percent
- The average compensation increase offered to new executive hires during the height of the recession – 2008 to 2009 – dropped to 11 percent.
- Post-recession compensation packages for executives who changed jobs over the past three years have almost full recovered to their pre-recession levels.
Salveson Stetson Group did not formally track compensation increases prior to 2006, but it says that increases in the early 2000s were in the 20-25 percent range.