Employee Remuneration Trends in 2011/12 Aon Hewitt | United Kingdom

John PuddephattPrincipal Benefits ConsultantTel: +44 (0)788 940 6624

Nishant MahajanMarket Intelligence ExpertTel: +44 (0)207 086 9184

Andrew MacLeodEMEA Reward Data Services LeaderTel: +44 (0)207 086 9181

Cheryl HinmanSenior Executive Compensation ConsultantTel: +44 (0)207 086 9138

Nikki SeversSenior Global Rewards ConsultantTel: +44 (0)117 900 4435

Aon Hewitt Speakers

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Agenda

• Aon Hewitt Total Reward Survey Methodology

• Key Economic Indicators

• Salary Increases & Budgets

• Bonus Awards

• Long-Term Incentive Trends

• Employee Benefits

• 2012 Reward Outlook

• Aon Hewitt 2012 Survey Calendar

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Survey Methodology – Aon Hewitt’s CareerLink Framework

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Economic Indicators

Source: Office for National Statistics

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-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

2007 2008 2009 2010 2011 2012

CPI Inflation GDP Unemployment

-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

2007 2008 2009 2010 2011 2012

CPI Inflation GDP Unemployment Actual Salary Budgets Projected Salary Budgets Real Increase/Decrease

Salary Increase Trends

Source: Aon Hewitt’s Global Salary Increase Survey and Office for National Statistics

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-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

2007 2008 2009 2010 2011 2012

CPI Inflation GDP Unemployment Actual Salary Budgets Projected Salary Budgets Real Increase/Decrease

Salary Increase Trends

Source: Aon Hewitt’s Global Salary Increase Survey and Office for National Statistics

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-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

2007 2008 2009 2010 2011 2012

CPI Inflation GDP Unemployment Actual Salary Budgets Projected Salary Budgets Real Increase/Decrease

Salary Increase Trends

Source: Aon Hewitt’s Global Salary Increase Survey and Office for National Statistics

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-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

2007 2008 2009 2010 2011 2012

CPI Inflation GDP Unemployment Actual Salary Budgets Projected Salary Budgets Real Increase/Decrease

Salary Increase Trends

Source: Aon Hewitt’s Global Salary Increase Survey and Office for National Statistics

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Source: Aon Hewitt Global Employee Engagement Database

Key Engagement Drivers – Reward is Vital

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Driver Name Global * Asia-Pacific Europe Latin America North America

Career Opportunities 1 1 1 1 1

Brand Alignment 2 2 3 3 4

Recognition 3 3 5 2 5

People/HR Practices 4 5 2

Organisation Reputation 5 3

Managing Performance 2

Pay 4 4 4

Valuing People/ People Focus 5

* Ranking of drivers based on percentage of time the driver appear as one of top 3 opportunity areas in the organisation

Base Salary Increases from 2010 to 2011 (Constant Incumbent & Constant Company Comparison)

0%

1%

2%

3%

4%

5%

6%

7%

Level 11 Level 10 Level 9 Level 8 Level 7 Level 6 Level 5 Level 4 Level 3 Level 2 Level 1

Lower Quartile Median Upper Quartile

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2010 vs

2011 Average Salary Increases (By Industry Sector)

0%

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2011 2010

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2010 vs

2011 Average Salary Increases (By Industry Sector)

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2011 2010

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2010 vs

2011 Average Salary Increases (By Industry Sector)

0%

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2011 2010

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2010 vs

2011 Average Salary Increases (By Industry Sector)

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/ Fin

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2011 2010

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2011 Median On‐Target and Actual Variable Pay as % of Base Salary

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Level 11 Level 10 Level 9 Level 8 Level 7 Level 6 Level 5 Level 4 Level 3 Level 2

On-Target Variable Pay Actual Variable Pay

* Variable Pay includes Performance Bonus and where relevant Sales Commission / Incentive

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2010 vs

2011 Total Cash Compensation Mix

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50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Level 11 Level 10 Level 9 Level 8 Level 7 Level 6 Level 5 Level 4 Level 3 Level 2

Base Salary Annual Variable Pay

2010 vs

2011 Median Long‐Term Incentives % of Base Salary

0%

5%

10%

15%

20%

25%

30%

Level 11 Level 10 Level 9 Level 8 Level 72011 2010

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Top Three Reasons for Providing a Benefits Programme

Source: Aon Hewitt Benefits and Trends Survey 2011

0% 10% 20% 30% 40% 50% 60% 70% 80%

Control costs

Create alignment

Productivity & engagement

Meet market norms

Retain talent

Attract talent

1st 2nd 3rd Number of responses 185

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Status of Salary Sacrifice and Flexible Benefits Schemes

Source: Aon Hewitt Benefits and Trends Survey 2011

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Not considering introducing

Decided not to introduce

Decided to introduce

Introduced

Salary sacrifice Flex Number of responses 100

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Introduce / extend employee self service

Increase employee satisfaction with benefits

To increase employee engagement

To improve employee understanding of total rewards

Tax and NI efficiencies

Retention, recruitment

Organisational change

Inconsistent compensation arrangements

Diverse needs of employees

Competitive pressures

Changes to pension scheme

Very satisfied Satisfied Dissatisfied Very dissatisfied Number of responses 52

Satisfaction with Flexible Benefits Schemes

Source: Aon Hewitt Benefits and Trends Survey 2011

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Insured Benefits Prevalence

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Level 11 Level 10 Level 9 Level 8 Level 7 Level 6 Level 5 Level 4 Level 3 Level 2

Death-in-Service Private Medical Insurance Long-term Disability

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Use budgets wisely

– Differentiate to recognise high performers and ensure alignment with business needs

– Bring the meaning back to variable pay

– Optimise benefits programmes for both employers and employees

Be fair in pay programmes

– Ensure fairness and transparency

– Benchmark to ensure competitiveness

Be creative in what you offer and how you communicate it

– Focus on all elements of the package including benefits

– Communicate and educate employees on the value of their deal

– Understand the critical role of the line manager

– Listen to employee needs and measure impact

2012 ‐

Organisations Have More Reward Options Than They Think

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Total Reward Survey (TRS) and Executive Total Reward Survey (ETRS)• Data collection period : April – July• Reports available: September – October

Benefits & Trends Survey• Data collection period : July – September• Reports available: December – January

Sales Incentive Survey• Data collection period : March – May• Reports available: July – August

We also have three specialist divisions within Aon Hewitt:

• Radford - specialist compensation and benefits data within the Hi-Tech / Life-sciences sector• McLagan - specialist compensation and benefits data within the Financial Services sector• New Bridge Street - executive remuneration data and consulting

Aon Hewitt’s 2012 Survey Calendar

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Sharing our thought leadership with clients

• Aon Hewitt makes a significant ongoing investment in reward, performance, talent and employee engagement research. We regularly publish research reports, white papers and articles that we make available to our clients.

• Our compensation database covers 180 countries, over 680 globally consistent benchmark positions and over 6 million incumbents. That’s more than any other compensation data provider worldwide.

• Below are some of the recent reward research reports we have published. Please click on the images to read more.

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Aon Hewitt Global Footprint

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Aon Hewitt Limited does not accept or assume any responsibility for any consequences arising from any person, other than the intended recipient, using or relying on this material.

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