HR pulls in big money in U.S.

HR executives earn more than US$1 million on average but discrepancy remains between male, female earnings: Report
By Amanda Silliker
|Canadian HR Reporter|Last Updated: 02/11/2013

As an HR executive, a total compensation package of more than US$1.1 million could be yours — if you work in the United States. That’s the median total compensation — including base salary, cash bonus, performance incentives, option awards and stock awards — for HR executives south of the border, according to a report by Equilar, which gathered information from more than 900 U.S. companies.

“They would be international executives, first of all. They’re seeing them as valuable business partners and obviously they’re extremely competitive if they’re earning that kind of money,” said Pat Allinson, principal of the Compensation Company in Markham, Ont.

“We would never see that in Canada because we just don’t have the same kind of pay scales.”

The median base salary for HR executives in 2012 was $358,001 and the annual cash bonus was $225,000 (all figures in U.S. dollars), found the report.

And these numbers keep going up — the median total compensation increased 11 per cent year-over-year between 2011 and 2012, found the report.

While this large increase is not comparable to Canada, HR professionals have generally been seeing healthy, slightly above average increases of about four per cent or five per cent, said Robert Levasseur, senior consultant and principal at McDowall Associates in Toronto.

One reason for these increases may be the additional responsibilities HR is facing, said Aaron Boyd, director of research at Equilar, a compensation data provider in Redwood City, Calif.

“There’s a lot of positions that are changing, roles are becoming more complex with more rules surrounding companies, more issues with compliance, more things that positions need to take on. And with that, as the job becomes more complicated, more sophisticated, as companies require a higher level of performance, that translates into pay as well,” he said.

HR’s role is becoming more complex as companies are looking to invest more in employees. Employers are looking at companies such as Google and others in Silicon Valley, and turning to HR for help with creating excellent programs for benefits, training, employee engagement and career development, said Boyd.

“The returns you see from those companies that do put an emphasis on their employees, on hiring good people and having good HR systems in place, have benefitted well. And I think companies are following suit,” he said. “The more you do, the more critical it is to have top talent in that position, and the more competitive pay becomes.”

The median performance incentives for HR executives was $169,442 in 2012 — up 23 per cent from 2011. Over the last several years, more companies have moved toward performance-based awards, specifically for high-level executives, said Boyd.

“There’s a lot of talk in executive compensation around pay for performance, the say-on-pay vote that shareholders have, there’s increased media scrutiny around the pay of the top officers, and so (it’s about) making sure the pay being delivered to executives is pay they’ve earned,” he said.

Differences between sexes considerable

But there is still a discrepancy between the median total compensation of male HR executives ($1,681,247) and female executives ($1,347,801) — a 19.8 per cent difference, found the report. While Canada has federal pay equity legislation as well as provincial legislation in Quebec and Ontario, it’s possible this type of wage gap could be found in Canada as well, said Allinson.

“This is historical. There are still gaps between men and women — historical gaps — and these stats are still reflective of that a bit.”

About 60 per cent of HR executives in the U.S. are men while 40 per cent are women, found the Equilar survey. More men may be developing an interest in the top HR spots because they have become higher paying positions, said Allinson.

“The nurses went through this decades ago where they had really good pay and all of a sudden there were more male nurses, so there could be that attraction,” she said.

Health care a well-paying option for HR

Companies in the health care and life sciences industry paid their HR executives more than any other industry, while the business services industry was the lowest paying, found the report.

“The United States health-care system is a very large private sector and it’s hard for us to understand that,” said Levasseur. “It’s a very different environment altogether… they use private sector, very aggressive metrics.”

The level of compensation among industries can vary based on the role of the top HR executive.

“The top HR officer might just be vice-president or senior vice-president, whereas there could be other positions where the demand on the top HR officer is much greater,” said Boyd. “Where you have a chief HR officer, the requirements there, the role is more expansive and that can cause pay to be higher.”

A range of perks offered to HR execs

Nearly two-thirds (63.5 per cent) of HR executives in the U.S. were eligible to receive perquisites in 2012, found the survey. HR executives were eligible for premium executive insurance (32.4 per cent), company-provided automobiles or drivers (21.6 per cent), tax gross-ups (9.3 per cent), aircraft (8.7 per cent), annual club memberships (six per cent) and security (3.3 per cent).

Overall eligibility for HR executives would be about the same in Canada, but the types of perks differ greatly, said Levasseur. For example, aircraft is a lot less prevalent in Canada as very few organizations have private jets, he said.

Automobiles, tax and financial planning, and club memberships are the most common perquisites in Canada, said Levasseur.

“That would be health clubs and social dinner clubs as well — and in most cases you have both,” he said. “If you’re the CEO, you need to take people out, and it’s not a bad idea to have a club membership to do that with. But, then again, you want your CEO to be in shape as well.”

The report also looked at tenure and found 20.3 per cent of HR executives had been with their companies for less than three years; 36.8 per cent between three and 10 years; and 42.9 per cent for 10 years or more.

HR executives who had been at their company for 10 years or more were actually receiving a total compensation package of about $60,000 less than those who had been at the company between three and 10 years, found the report. This is not surprising given all of the changes in the HR landscape and increasing salaries, said Levasseur.

“If you’re hiring a new person you probably need to pay them more because the market is more aggressive, whereas someone who has been there for awhile has been chugging along from a compensation perspective,” he said.

“And what that indicates is that the talented people in this area are rare now.”

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