The world around us changes constantly, so knowing what has changed is an important part of our lives. For businesses, recognizing changes is also crucial. It allows businesses to adapt themselves to the changing market needs.
As mentioned in my last C&T editorial in the July/August edition we spoke of hot spots around the world that are creating a need for talent within the broadcast community based upon the potential driving revenue into the networks.
Well, if you remain inquisitive into the region’s activities, let’s now take the discussion down into the level of Multinational Corporations (or MNCs for those abbreviatorists).
What changes are occurring within MNCs within the region that will influence your salary?

DB vs DC (Not AC/DC)

The first and most obvious is that of a definite shift away from DB (Defined Benefits) to DC (Defined Contributions). Changing to DC shifts the risk from the employer to the employee.
Okay, if you are an Australian resident you are certainly familiar with the standard, and mandatory, 9% Superannuation contribution plan for employees. This “DC” component is an integral part of our package outlined by our employer that provides us with an income at a time when we retire.
In comparison a DB plan is a retirement benefit, sponsored by your employer, that pays a defined amount upon retirement based upon length of service by final average salary times a retirement multiplier. The retirement benefit is permanent and guaranteed, and most will adjust automatically to periodic cost of living increases and protect from inflation. It will more than likely have a survivor’s benefit and a disability benefit to it as well.
FYI. More than two thirds of all public employees in the United States participate in a DB plan.
With the Asia-Pacific region there is an emerging trend towards a DC plan.
China for example leads the trend. In 2004 supplementary pension plans (DCs) were introduced and we believe that within the next 3 years that more than half of the multinationals will introduce a supplementary pension plan or change their existing plan. It’s interesting to note that by the end of 2008 all social security bureaus that have held pension funds to date will need to transfer them into a more secure licensed annuity provider. This is a government driven initiative.
Other driving countries to varying degree are South Korea, Hong Kong, and India where it is seen initially as an attraction and retention tool. The next tier of change will come from within Japan, Singapore & Malaysia, Indonesia and Thailand. Taiwan in 2005 had started to work to similar commitments.
Behind these countries, will be Macau (introducing it this year, 2008), with Vietnam and Philippines following thereafter 2009.

So Why is There a Change to DC?

Besides a shift from countries already with DB carrying responsibilities, there is an interest in International plans to be adopted due to increased mobility of employees in the region. Also there are an increased number of locally hired foreigners.
As a foreigner working in Singapore, China or Taiwan you cannot participate in local statutory plans, so your retirement contributions are not addressed. This will of course have long term financial implications unless you make alternative contributions elsewhere.
The support to DC will continue to roll-out within the region, but the challenge even for some Multinationals in smaller locations is simply economies of scale that are brought about by limited HR and finance support. To address this, there are plans within the MNCs to bring them in to a region stand alone vehicle.
Remuneration packages
Due to changes in the world today that bring financial demands and subsequent increased costs on MNCs the focus is now on the value of employees, and how to recognise and remunerate them.
Whether it’s common knowledge or not, there is a grading system that most employers use to assess top performers. In short, the grades are categorised as high, medium and low performers.
The employee’s remuneration package is therefore a reflection of their value to the company.
Now, this is not a revelation, however the way in which packages are constructed may well create a tighter definition.
One trend that is moving across Europe is that although benchmarking has and will remain a popular guide for  remunerating staff and executives, it is now moving towards benchmarking with International Peer groups rather than to country specific groups.
This trend serves well for the employee by creating a level playing field, whilst providing employers a standard by which to invite International applicants to join them.
However, outside the Asia-Pacific region the pace of salary increases has significantly slowed in 2008 in Eastern Europe as companies seek to control their fixed costs and focus their remuneration spend on high performers.
The interesting point is that Continental Europe have significantly increased target and maximum annual bonus levels which have now caught up or surpassing bonus levels in the UK and the US.
So, in a similar move within Asia in terms of DC, what is evolving is now an emergence of a Pan-European bonus plan with uniform bonus levels.
It’s forecast that a similar mind-set will flow though Asia.
So, where will these changes occur? Mostly at the Executive level where Share options and performance shares are more popular these days than a cash plan.
As a matter of interest most CEOs are on a base salary of a third of their expected packages with the remainder made up of target bonus and LTI (Long Term Investment), and in most cases the LTI component is greater by percentage than the target bonus.
As expected, KPIs at a senior level are cascaded down to departmental KPIs and individuals objectives, where a line of sight is established. Whether it’s a Business unit or team it’s linked to corporate portions. Changes to Executive remuneration structures will be reflected through the company’s objectives, so, depending upon what part of the globe your financial year ends, most MNCs will filter through changes to individual bonuses.

Karl Jansson
Managing Consultant
Broadcast Technology
Beilby
Level 9, 255 George St
Sydney NSW 2000

e: karl.jansson@beilby.com.au
w: www.beilby.com.au