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Report: Pay incentives lower at CROs than in other industries

Monday, December 16, 2013

Employees at CROs receive lower annual and long-term incentives than their counterparts in other industries, according to the 15th annual CRO Industry Global Compensation and Turnover Survey, conducted by HR+Survey Solutions, a compensation consulting and research firm.

CRO industry executives in the U.S. with salaries of $250,000 were eligible for an average annual incentive of 31% of their salary and a long-term incentive (LTI) of 27%. By comparison, similar levels of executives in other industries were eligible for annual incentives of 44% and LTIs of 50%.

Results of the study indicate CRO pay is heavily weighted toward base salary. Salary represents nearly 50% of the compensation package for executives with annual incentives and LTIs of only 19% and 34%, respectively. At the director level, salary amounts to 86% of total direct compensation with only 13% annual incentives and 1% LTIs.

And although employee turnover dropped from nearly 20% in 2011 to approximately 18%, the rate at which employees leave their jobs in the U.S. CRO industry remained high. Conversely, in countries outside of the U.S., the turnover rate rose to 21% from approximately 18%. In some countries, turnover was more than 30% including in Japan, Mexico, China and Singapore, where it reached 40%, 36%, 33% and 33%, respectively.

Incentives at CROs in countries outside the U.S. were similar to those offered in the U.S. For instance, director level positions at U.S. CROs received, on average, an annual incentive of 14% of their salary. Those in Europe, South America and Asia Pacific received remarkably similar annual incentives of 18%, 16%, and 17%, respectively.

“With continued high turnover levels, companies need to take steps to strategically utilize compensation to motivate and retain employees rather than continuing to run fire drills in an attempt to fill open positions,” said Judy Canavan, managing partner, HR+Survey Solutions. “There is plenty of room for increasing incentive targets and the CRO business model is conducive to utilizing metrics for effectively tying incentive awards to performance.”

The study also found executives working for smaller companies in and outside the U.S. are less likely to receive annual incentives than those employed at larger companies. Nearly 75% of director level positions at the larger U.S. CROs received annual incentives versus 48% at smaller companies. Similarly, fewer employees working for smaller companies outside the U.S. received an annual incentive. At the director level, 70% received annual incentives in larger companies as compared to 19% at smaller companies.

“Smaller companies should be using variable pay to help them compete against larger companies for top talent while controlling fixed costs,” said Canavan.

Other findings include the turnover rate in countries outside the U.S. was on average 21%. It reached a high of 40% in Japan and only 10% in Canada, Colombia, Hungary and Chile. On average, turnover among all job families in the U.S. CRO industry was 18.2%, but reached nearly 25% for clinical research associates.

The 15th annual CRO Industry Global Compensation and Turnover Survey was conducted by HR+Survey Solutions in 2013. A total of 20 public and private CROs with fewer than 500 to more than 12,000 employees participated in the niche study. Compensation data was collected and analyzed for 45 countries in addition to the U.S.

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