Compensation Budgeting: Total Spend Per Employee

Did you know that a 10,000 person company spends roughly $2 billion every year on its people (cash + equity)?

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$2 billion. That’s more than the GDP for about 20 countries (out of ~190 total countries globally).

But interestingly, when I ask most Heads of Compensation, “How big is your budget?” they often think more about their incremental merit cycle budget (i.e. “4.0% for H2”) rather than the sheer magnitude of their company’s total compensation spend profile (i.e. “We spend $2B annually on our 10,000 employees”).

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I encourage all Heads of Compensation and Total Rewards to both internalize and socialize the bigger picture here. Let’s focus on your total compensation spend profile across all employees globally.

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How much is your company spending in total on your employees on an annual basis? And what is the monetary magnitude of the program design levers that you are considering pulling?

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Compensation program design mistakes are costly–on the order of hundreds of millions of dollars over time.

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Let’s take a look at some benchmarks on how much companies spend on their people in Pave’s dataset.

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Compensation Budget Benchmarks for US and Non-US Employees

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When we look at employees in the US, the median total target cash (salary + target variable) is $150k. Additionally, the median value of the next 12 months of unvested equity is $57k. This means that the median US-based employee in Pave’s dataset costs ~$207k annually (cash + equity).

For non-US employees, the median total target cash (salary + target variable) is $95k, and the median value of the next 12 months of unvested equity is $38k. This means that the median non-US employee in Pave’s dataset costs ~$133k annually (cash + equity). 

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Of course, there is a massive distribution of pay differentials from countries like India and parts of Eastern Europe on the lower end, and countries like Singapore and Switzerland on the higher end.

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Communicating Compensation Philosophy & Budgets

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What does this mean for you?

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If you are running compensation and/or total rewards for your company, make sure to internalize (and socialize!) the sheer gravity of the decisions you make around compensation philosophy and program design. 

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For instance, changing your target percentile from 75th to 50th could be well over a $100M decision. To further complicate matters, many decisions you make can be Type-1-Decisions (decisions that are nearly irreversible in the short-run).

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