Towers Watson Data Services of CEE Reward & Labor Trends Darryl Davis November 13, 2015 Sofia, Bulgaria 2015 Towers Watson. All rights reserved.
Agenda The Challenge of Traditional CEE Reward Analysis & Models Reward Trends CEE Reward Trends & Their Drivers Q&A 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 2
Common EMEA HR/Reward Themes & Strategic Focus Countries appear less & less frequently 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 3
A Generation of Diversity & Change 1991: EMEA is Pieced Together Maastricht Treaty Soviet Union Dissolved Apartheid Ends Operation Desert Storm 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4
Annual GDP Growth % Towers Watson Data Services EMEA,1995 Major Markets 30.00 25.00 20.00 Poland Extreme variation made the learning curve steep for multinationals 15.00 UAE 10.00 Turkey 5.00 UK Bulgaria 0.00-5.00 Germany Saudi Arabia Global Average Nigeria Russia -10.00-50.00 0.00 50.00 100.00 150.00 200.00 250.00 Towers Watson analysis of Economist Intelligence Unit data Annual CPI % Bubble size: relative GDP per head ($ at PPP) 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 5
Annual GDP Growth % Towers Watson Data Services EMEA,1995 Regional Aggregates 10 Central & Eastern Europe 5 Western Europe Sub-Saharan Africa Global Average 0-5 Middle East/North Africa -5 0 5 10 15 20 25 30 35 40 EASTERN EUROPE (AGG.) WESTERN EUROPE (AGG.) SUB-SAHARAN AFRICA (AGG.) MIDDLE EAST AND NORTH AFRICA (AGG.) WORLD (AGG.) Regional grouping facilitated analysis and policy-making Towers Watson analysis of Economist Intelligence Unit data Annual CPI % Bubble size: relative GDP per head ($ at PPP) 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 6
Towers Watson Data Services Why HR Should Care Development-Related Human Capital Implications for Employers Wealth Creation CEE Development Western Europe Labor Pools Sub Saharan Africa MENA Aspirations & Priorities Options, Choices & Consequences Labor Drivers 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 7
ALGERIA DRC MALAWI ETHIOPIA FRANCE UAE SAUDI ARABIA GERMANY ITALY UK UGANDA SOUTH AFRICA WORLD (AGG.) MOROCCO TANZANIA SPAIN ZAMBIA TUNISIA QATAR NIGERIA GHANA HUNGARY NAMIBIA KENYA MAURITIUS GREECE BOTSWANA ROMANIA EGYPT CZECH REPUBLIC SLOVAKIA KAZAKHSTAN BULGARIA POLAND UKRAINE ANGOLA RUSSIA Towers Watson Data Services Middle Class Development & Labor Pool Implications 2000% 1800% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% Growth in Private Consumption per Head 1990-2012 Significant middle classes have developed quickly and sharply So have overall reward & lifestyle expectations 138% 2 X World Average +5000% Towers Watson analysis of Economist Intelligence Unit data CEE is HERE 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 8
Annual GDP Growth % Towers Watson Data Services EMEA, 2015 Major Markets 10.00 5.00 Western Europe Sub Saharan Africa A LOT has changed in the past quarter century Middle East & North Africa - Global Average Central & Eastern Europe (5.00) (5.00) - 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 EASTERN EUROPE (AGG.) SUB-SAHARAN AFRICA (AGG.) WORLD (AGG.) Towers Watson analysis of Economist Intelligence Unit data Annual CPI % MIDDLE EAST AND NORTH AFRICA (AGG.) WESTERN EUROPE (AGG.) Bubble size: relative GDP per head ($ at PPP) 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 9
Annual GDP Growth % Towers Watson Data Services EMEA, 2015 Major Markets 5.00 4.50 4.00 Egypt 3.50 3.00 Poland Nigeria 2.50 Turkey Angola 2.00 1.50 Bulgaria Global Average Does the EMEA model still work for CEE? 1.00 0.50 - (5.00) - 5.00 10.00 15.00 Towers Watson analysis of Economist Intelligence Unit data Annual CPI % Bubble size: relative GDP per head ($ at PPP) 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 10
The Challenge of Traditional CEE Reward Analysis & Models Reward Trends CEE Reward Trends & Their Drivers Q&A 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 11
Median Total Salary Increase Budgets 2015-2016 Central & Eastern Europe A Historical & Developmental General Industry Perspective 49% 2015 2016 20% 15% EU States 20% 15%! Real increases will decline in many places 10% 5.2% 10% 5.3% 5% 5% 0% -5% Non-EU 0% -5% Median Total Increase % 2015 CPI % Median Total Increase % 2016 CPI % Source: Towers Watson Data Services Global Salary Budget Planning Report Summer 2015 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 12
A Historical & Developmental General Industry Perspective EMEA Total Target Compensation (Gross Annual, ) Switzerland Germany Belgium Austria Sweden Netherlands France Qatar Ireland Italy UK UAE Spain Saudi Arabia Kuwait Greece Portugal Slovakia Hungary Kazakhstan Poland Czech Republic Bulgaria Turkey Morocco Romania Russia Egypt Tunisia Algeria Ukraine Admin Support Western Europe CEE MENA 0 20,000 40,000 60,000 80,000 Source: Towers Watson General Industry Surveys, 2015 West CEE Switzerland Germany UAE Belgium Qatar Netherlands Sweden France Austria UK Ireland Kuwait Saudi Arabia Italy Spain Greece Portugal Turkey Kazakhstan Czech Republic Slovakia Hungary Poland Bulgaria Morocco Egypt Russia Tunisia Romania Algeria Ukraine Entry-Level Professional Crossing Borders 30:1 ratio 0 20,000 40,000 60,000 80,000 100,000 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 13
A Historical & Developmental General Industry Perspective Education and Starting Salary Levels Minimum Starting Salary Difference University vs Secondary School Graduates (%) 160% 140% 120%? University graduates in larger CEE economies can expect a ~50% starting pay premium at median 160 140 120 100% 100 80% 80 60% 60 40% 40 20% 20 0% 0 % Difference Secondary vs University Higher education enrolment (%) Log. (Higher education enrolment (%)) Source: Towers Watson Towers Watson Global Starting Salary Report; UNESCO Western Europe CEE MENA 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 14
A Historical & Developmental General Industry Perspective EMEA Total Target Compensation (Gross Annual, ) Switzerland Qatar UAE Saudi Arabia Germany Netherlands Belgium Austria UK Kuwait Ireland France Sweden Turkey Spain Italy Greece Portugal Kazakhstan Morocco Czech Republic Hungary Russia Poland Slovakia Algeria Romania Bulgaria Egypt Tunisia Ukraine Career-Level Professional Narrowing Gap 12:1 ratio Western Europe CEE MENA 0 50,000 100,000 150,000 Source: Towers Watson General Industry Surveys, 2015 Switzerland Qatar UAE Kuwait Saudi Arabia Germany Austria Belgium UK Netherlands Ireland Sweden France Italy Turkey Spain Portugal Greece Morocco Kazakhstan Poland Czech Republic Russia Hungary Bulgaria Egypt Slovakia Romania Algeria Tunisia Ukraine Senior Manager 9:1 ratio 0 50,000 100,000 150,000 200,000 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 15
EMEA Comparative Wealth Saudi Arabia Switzerland United Arab Emirates Germany United Kingdom France Ireland Austria Netherlands Spain Belgium Sweden Portugal Italy Czech Republic Poland Morocco Turkey Greece Finland Slovakia Russia Hungary Kazakhstan Romania Egypt Bulgaria Tunisia Ukraine Algeria Middle Manager Annual Base Salary USD, PPP One reason why much of the West remains attractive to CEE talent 4:1 ratio Western Europe CEE MENA - 20,000 40,000 60,000 80,000 100,000 120,000 Source: Towers Watson Global 50 Planning Report, 2015 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 16
Urbanization and Wealth Distribution $70,000 $60,000 $50,000 $40,000 Wealth distribution tends to be less even in CEE vs Western Europe Metro Area GDP/Capita (PPP, USD) Can drive substantial pay differences in some countries $30,000 $20,000 $10,000 $0 Towers Watson analysis of Brookings Institute data 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 17
A world in motion! Urbanization, growth of urban centers & ruralization impacts how compensation evolves Towers Watson analysis of World Bank data 2015 Towers Watson. All rights reserved. Western Europe CEE MENA Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 18
Switzerland Sweden France Belgium Germany Austria Netherlands Italy Slovakia Ireland Spain Greece UK Hungary Portugal Bulgaria Czech Republic Poland Kazakhstan Ukraine UAE Romania Qatar Tunisia Saudi Arabia Algeria Kuwait Russia Egypt Morocco Turkey Towers Watson Data Services Career Pay Progression and Hierarchy 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - EMEA Career Pay Progression and Hierarchy, TTC Central Europe Southeastern Europe & CIS 1000% 900% 800% 700% 600% 500% 400% 300% 200% 100% 0% Admin Support Entry Level Pro Career Pro Senior Manager % Spread Source: Towers Watson General Industry Surveys, 2015 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 19
A Historical & Developmental General Industry Perspective How MNC s Differentiate Themselves As Employers in EMEA MNC vs Country Average Wage Multiplier (P3) 7 6 5 4 3 2 1 0 Non-Cash Differentiation Central Europe Cash Differentiation Southeastern Europe & CIS Towers Watson General Industry Compensation Surveys; International Labour Organization 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 20
Earnings & Costs Today and Tomorrow 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Gross, Net and Employer Cost, Career Professionals (TTC, ) Cash Efficient CEE Cash Inefficient CEE Cash Is King Non-cash 120% 100% 80% 60% 40% 20% 0% Net Gross Statutory Employer Cost Total taxes as a % net Towers Watson General Industry Compensation Surveys; Employment Conditions Abroad 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 21
A Historical & Developmental GENERAL INDUSTRY Perspective Company Car Benefit Trends 95% Eligibility; benefit value 13% of ABS 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 22
South Africa Nigeria Kazakhstan Russia Senegal Egypt Hungary Saudi Arabia Bulgaria Poland Turkey UAE UK Germany Israel Switzerland Towers Watson Data Services Public Health and Occupational Benefits Relative Attractiveness of Retirement and Medical Adult mortality rate (probability of dying between 15 and 60 years per 1000 population) Benefit Pressure Impact of High Adult Mortality Rates 500 450 400 350 300 250 200 150 100 50 0 Healthcare Retirement! State-level actions create obligations, needs & motivation Source: Towers Watson analysis of World Health Organization data 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 23
A Historical & Developmental General Industry Perspective Central, Southern & Eastern European Benefits Move Away from Mandatory 2nd Pillar Pension Participation? Do Are employee needs changing? companies & individuals «step in» when states «step out»? 2011 2012 2013 2014 2015 2016 Source: Towers Watson Benefit Profiles 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 24
Demographics and Typical Reward Focus Tomorrow matters Tomorrow s now Retirement Tomorrow isn t promised Tomorrow s far Towers Watson Analysis of CIA Factbook Data, Towers Watson Data Services Research Reports 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 25
Towers Watson Data Services How Today + Tomorrow Equals Different Short & Long- Term Reward Focuses Layers Income benefits Post Retirement Security Health/welfare benefits, long-term direct cash/incentives, Job Security Short-term direct cash, Status perquisites, Development Opportunities Towers Watson Analysis of CIA Factbook Data, Towers Watson Data Services Research Reports 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 26
Summary of General Reward Behaviors & Influences Central & Eastern Europe Reward Area/Influence Central Europe Southeastern Europe Commonwealth of Independent States CPI Low Diverse High Absolute Pay Rank (Career) Close-knit; low Diverse Diverse Pay Hierarchy EMEA median and below Above EMEA median Above EMEA median MNC Pay vs National Market Moderate High Very High Cash Efficiency Low Diverse High Importance of Company Cars High University Pay Premium Diverse but generally at/above EMEA median 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 27
Summary of Reward Behaviors & Influences Central & Eastern Europe Reward Area/Influence Benefit Pressures Area/city pay pressures Central Europe Southeastern Europe Commonwealth of Independent States Highly diverse; applicability varies The region s evolution is far from over But the time for the CEE model is 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 28
How To Find Us Iva Todorova, CTeam Human Capital Towers Watson Data Services Representative in Bulgaria iva.todorova@cteam.bg View our product range: www.towerswatson.com/assets/pdf/twds/ 2015-TWDS-Compensation-and-Benefit-Reports_EN.pdf Towers Watson Data Services EMEA EMEA Customer Services customerservice@towerswatson.com https://www.linkedin.com/ company/towerswatson https://twitter.com/ towerswatson https://www.facebook.com/ towerswatson/ 2015 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 29