The average pay increase executives received when changing jobs has improved since the recession but has yet to return to the levels reached in the years leading up to the financial crisis, according to a recent study conducted by retained executive search firm Salveson Stetson Group.
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The firm, which places executives in senior-level roles at corporations and nonprofits, analyzed compensation data from every senior executive placement over the last 6 years.
“The financial meltdown quashed the boosts in pay that senior executives moving into new roles had come to enjoy and expect in a robust economy,” said John Touey, Principal at Salveson Stetson Group. “Not surprisingly, as the demand for talent dried up through the depths of the recession in 2008 and 2009, so did the premiums companies were previously willing to pay when hiring new executives.”
Salveson Stetson Group’s analysis revealed a dramatic 56 percent reduction in the total pay increases executives received when switching companies in 2008 and 2009, versus the increases they could have reasonably expected in the years leading up to the meltdown.
“But, in an encouraging sign for both the jobs market and the economy, we have seen compensation offers steadily increase for new hires for more than 2 years now,” said Touey. “For companies to compete for the talent they want, they must be willing to offer attractive pay packages, as candidates are more likely to be fielding multiple offers once again.”
In its study of more than 175 senior executive hires, Salveson Stetson Group reported that:
- The market for talent was extremely hot leading up to the financial crisis, raising salary expectations of senior executives nationwide. From 2006 to 2007, executives switching jobs received an average compensation increase of 24.96 percent.
- Total compensation increases dropped dramatically during the recession. The average compensation increase offered to new executive hires from 2008 to 2009 dropped to 11.07 percent as companies tightened their belts on hiring and made the most out of existing staff.
- Post-recession salaries have recovered but not to prerecession levels. Since 2010, executives have received, on average, a 16.56 percent compensation increase when they switched jobs, an improvement from the increases of 2008 and 2009 but still a 34 percent decrease from pre-recession levels.
“The slow bounce-back in pay increases for executives changing companies is emblematic of the sluggish nature of the economic recovery as a whole,” Touey concludes. “If the rate of increase remains relatively constant moving forward, we won’t see a return to the premiums of 2006 or 2007 for another 2 to 3 years.”