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Sofia, Bulgaria - Learn more from Irena Bushandrova, Country Manager and Borislava Nedelcheva, Research Consultant at Pedersen & Partners in Bulgaria. According to a recent survey conducted by the executive search company Pedersen & Partners, the annual compensation of a top manager in a big multinational corporation averages 1.4 million EUR. But top managers in Bulgaria earn only 72 200 EUR on average – near the bottom of the list.

What are the reasons behind this, what are the global and Bulgarian trends in compensation for top managers, and what are the expectations for 2015? Irena and Borislava comment on these and other topics.

How long have you been conducting this survey, how many global and local companies took part this year and which industries do they represent?

Irena Bushandrova: Two years ago, Pedersen & Partners was delighted to engage an Austrian professional with many years of experience in executive compensation consulting, and he has been in charge of the survey ever since. In 2014 we collected information from 330 companies globally – the biggest employers in the world – from many different industries including pharma, FMCG, IT and manufacturing. The survey also covers about 60 Bulgarian companies.

How would you describe 2014 in terms of executive compensation? Do you observe any new trends compared with previous years?

Irena Bushandrova: The results of the survey show that compensation increases are slowing. We conducted a similar survey in 2012-2013, and then the average annual executive compensation increased by 5.5% worldwide. Currently, the average increase is 3.5%. Bulgaria is also affected by global tendencies – we don’t see a faster increase in top management compensation than the rest of the world. We are observing a trend of a stable to slow decrease compared with five years ago. Before 2008, salaries rose on an average by 6%, 8%, 10%, and in some cases even more, while now the growth rate is slowing down.

How would you explain this?

Irena Bushandrova: Undoubtedly the overall economic situation has an impact. Staff costs are scrutinized and this affects the executive compensation increase rate as well. By “compensation” we mean the whole package – base salary, bonus, stock options, company car, etc.

Do you think that this downward trend will continue? What are the expectations for 2015?

Irena Bushandrova: Yes, we think the downward trend will continue based on what our clients tell us about their compensation plans. They are rather skeptical and don’t expect any dramatic increases. In 2015 the expectations are for similar growth of 3-4%. There will be some increase within the ranges we saw in 2012-14, in Bulgaria as well as globally. Companies will continue to carefully manage staff costs.

Borislava Nedelcheva: Unfortunately, the data doesn’t indicate any opportunities for dramatic increases. Growth levels will be similar.

If we look globally, where do you observe the highest annual compensation growth – in which countries and what kind of companies? What is the situation in Bulgaria?

Irena Bushandrova: According to our survey of around 1700 managers in 17 countries, the highest growth is in what we call emerging markets – countries such as Turkey, Russia and India. It is there that we observe the most significant compensation increases, while raises are smaller in Western Europe. In terms of industries, we cannot pinpoint one single industry, but our observations for the Bulgarian market show that the IT sector is very dynamic when it comes to compensation levels and growth levels are higher than average, compared to other sectors.

Do you have any observations regarding the countries and sectors where compensation is highest?

Irena Bushandrova: Previously, it was always the banking professionals who did best.  Today they are not the only well-paid top managers, with senior managers at FMCG firms and major manufacturers also doing well, as are the leaders of the biggest businesses in Bulgaria. According to our calculations, in Bulgaria salaries in the capital are on average 20-30% higher than in the rest of the country, while in Austria this difference is only 10%.

Borislava Nedelcheva: Compensation in general is higher in Western European countries and the US, but growth in compensation is slower than it is on the emerging markets.

Do you think that if the growth in compensation on the emerging markets continues at the same speed, the compensation levels will equalize soon?

Borislava Nedelcheva:  We cannot say for sure. What we see is that in emerging markets, business develops quickly, there is greater demand for recruitment, and companies are growing as new investments flow into these markets. The trend is positive, but it is difficult to forecast what will happen with the compensation levels over the next few years. 

According to the results from your survey, top managers in Bulgaria receive some of the lowest compensation compared with other countries. For example, executive compensation is about 30% higher in Romania. What do you think causes this difference?

Irena Bushandrova: We have done our own analysis of this, and as an international firm, we work on assignments outside Bulgaria, too. I have experience with executive recruitment projects in Romania and Ukraine. When interviewing these people, we definitely notice higher current and desired compensation compared to Bulgarian candidates. And this is to be expected, because we have also compared the countries’ economies as a whole. The GDP of Romania is about USD 190 billion, while the Bulgarian economy generates USD 55 billion. The market size speaks for itself. There are more companies present on the Romanian market, the market is more competitive. There are many factors.

Bonuses are a key part of the compensation package. How do the criteria changes over time and do executives manage to achieve their targets?

Irena Bushandrova: Bonuses are important for stimulating better results. Of course they should be set and paid against targets, and they are not applicable to all functions across a company. There are usually bonuses for sales and marketing professionals, and to a lesser extent for operations and production people. We are not in a position to define how the criteria have changed over the years, but the managers that we work with and talk to can confirm that they receive bonuses. The bonus can be worth up to 50% of the annual gross salary, and nowadays companies do not only consider an individual’s performance, but also a combination of factors including team results and soft skills. As well as financial results, organizations take people management, motivation and development into consideration. In Bulgaria, bonuses can vary from 20-23% all the way up to 50%.