2014 Salary Survey: Purchasing Salaries Rise, but Incentive Pay Takes Over
When asked about their base pay earlier this year, purchasing professionals surveyed for Global Purchasing's second annual Salary Survey reported earning an average $85,000 a year--3% higher than they reported in our 2013 survey and double the 1.5% raise they said they expected at the end of last year. Looking ahead, purchasing professionals say they expect their pay to rise an average 2.4% this year. Despite the increase, those surveyed report a general tend toward lower annual raises and an emphasis on performance-based pay increases--all while being expected to shoulder a larger portion of their health care benefits.
"Salary increases have diminished and contributions to benefits have increased," said one buyer who participated in the report, which surveyed 800 purchasing professionals nationwide over the summer. "These seem to be permanent changes."
This is par for the course, as U.S. companies have been moving away from annual raises and toward variable, performance-based pay structures over the last two decades. In 2014, variable pay spending among U.S. employers reached a record high of 12.7% of payroll, its highest level in 35 years according to management and human resources consulting firm Aon Hewitt, a division of Aon plc. At the same time, salaries for U.S. workers rose just 2.9%, reflecting companies' ongoing efforts to control fixed costs. Aon Hewitt's 2014 U.S. Salary Increase Survey polled more than 1,000 companies and found that 91% offer variable pay programs and expect to spend nearly 13% of payroll on variable pay for salaried exempt employees next near. In comparison, 78% of companies offered such pay programs, accounting for 11% of payroll, just 10 years ago.
"Variable pay budgets and spending have nearly doubled in the last 20 years, subsequently emerging as the pay-for-performance vehicle of choice now and for the foreseeable future," said Ken Abosch, compensation, strategy, and market development leader at Aon Hewitt, in announcing the survey results in August. "In a more robust job market, competition for talent exists in every sector. As a result, we are seeing industries that have traditionally shied away from providing bonuses, such as agriculture, higher education, and the federal government, realizing they must establish variable pay programs to compete for and retain the best talent."
The purchasing department is no exception, as more and more buyers report that their companies are focused on variable pay programs across the board as well. Incentive pay based on personal and corporate goals, as well as the performance of the overall economy, is becoming more prevalent.
"[There is a] lot more cost reduction, [and] pay increases are very limited," one buyer explained. "This is the primary reason I negotiated bonuses linked to goals [in order] to supplement salaries."
"There is a greater emphasis on performance goals and bonuses," another respondent said. "We have some staff that could receive bonuses equal to their base salaries. I believe performance-based pay is the trend for the near future."
Buyers surveyed this year reported earning an average yearly bonus of roughly $4,700--an 18% increase over 2013's reported average of $4,000.
"Our bonus program and ESOP change yearly as the company grows and becomes more efficient," another purchasing professional told us. "The more the company makes, the more we make as employees. It's actually a very nice system.
Your Average Buyer
The "typical" purchasing professional is male (72% of respondents), 51 years old, holds a bachelor's degree (60% of respondents), and has an average of 18 years' experience in the field. He will earn an average total compensation of $96,000 this year--$85,000 in base salary and about $11,000 in bonus, stock options, and other compensation (including profit sharing and 401(k) plans, among others).
A closer look at the survey results show that purchasing managers report earning about 34% more than buyers--an average $94,000 total compensation compared to $70,000 for buyers. Managers report an average base salary of $82,000, and buyers report an average base salary of $62,000.
Not surprisingly, buyers with higher-education degrees earn more than those without: Buyers who have a bachelor's degree reported earning an average total compensation of $97,000 compared to an average $78,000 for those who do not have a bachelor's degree.
"Supply-chain management is a strategic element of most businesses and industries," one respondent said. "It provides good opportunities for long-term career growth and job security."
"As businesses increasingly recognize the contribution a professional supply chain/purchasing staff can make to the bottom line, more career opportunities will arise in the field," another respondent said.
What's more, roughly 58% of respondents say they feel they are adequately compensated for their jobs.
Workforce Trends
The changing pace of technology is another issue. Nearly 60% of survey respondents say they are consuming more information on mobile devices today, for instance, compared to 55% last year. Use of social media for work is largely unchanged. Fifty-seven percent of respondents this year said their use of social media has stayed the same in the past 12 months, compared to 60% in last year's survey. Purchasing professionals also continue to use technology to further their professional education. Webcasts, for instance, remain the third most popular method of continuing education, with 49% of respondents listing them as a key way to stay updated, both this year and in 2013. Industry seminars continue to rank highest for continuing education efforts (55% in both years), followed by trade publications (51% in both years).
When asked about the greatest challenges they face in staying current with work-related information, purchasing professionals listed work-life balance as top on the list (58%). They also said it's challenging to sift through the many sources of information related to their jobs (52%). Keeping up with technology changes ranked high as well (44%), followed by the need to stay up-to-date on standards and regulations (37%).
Component Availability, Economy Top Concerns
Purchasing professionals remain concerned about component availability and general economic issues this year as well. When asked about the professional issues that "keep them up at night," they indicated ongoing concern over the slow economic recovery and what some industry professionals describe as an inconsistent business environment. Purchasing professionals listed the following three issues as their greatest concerns:
Component Availability. Fifty-four percent cited component availability as their chief concern. This mirrors what was reported in last year's survey, when 57% cited this as their top issue. It also largely reflects the nature of the job as buyers try to manage demand for new projects and production cycles.
General Economy. Forty-one percent of those surveyed cited the economy as a top concern, also matching what was reported in last year's survey (44%).
Product Quality. Product quality edged out "supply-chain risks" to take the third spot in our top three concerns, with nearly 40% of respondents listing it as a key issue. Last year, 35% of respondents said they were most concerned about product quality, an issue that ranked fourth behind supply-chain risks.
Despite the concerns, most survey respondents say they have a generally positive economic outlook--47% said they have a "somewhat positive outlook" and 17% said they have a "very positive outlook." In general, purchasing and supply-chain professionals have pointed to a slowly improving economy over the last year or so, emphasizing cautious optimism in the wake of the ups and downs of the market since the 2008-09 recession. Their outlook remains largely unchanged at the end of 2014.
"Things are slowly improving but can backslide at any time," one purchasing professional said.
"The economy is improving, just very slowly," another added. "Companies are holding on to cash, just in case there is a decline."
