A new survey on compensation found that international businesses in the Bermuda market are increasingly tying compensation to performance and also offering signing bonuses, long-term bonuses and non-monetary forms of compensation to attract and retain management and professionals.

The trend towards variable pay plans comes at a time when recruitment and retention is ultra competitive.

The authors of the survey, PricewaterhouseCoopers Human Resources Services, reported the turnover rate for management and professionals in Bermuda international business has surged with 23 percent of respondents reporting a turnover rate of 20-30 percent in the past year.

In the two prior years, such high turnover rates were reported by fewer than 14 percent of respondents.

Recruitment and retention may become an even bigger issue in the coming months with a dozen new insurers/reinsurers planning to set up shop on the Island. Some have already been accused of poaching staff from current operations.

Anand Parsan, manager of Human Resource Services at PWC said: ?In the current environment where a lot of companies aren?t performing to their potential there is less opportunity for people to move but as the economy picks up or as we see new businesses come to the island that will always be an issue in terms of that opportunity for people to move around. That is why we are seeing other kinds of variable pay.?

PwC director Alistair McNeish added: ?These new reinsurance companies are going to create more opportunity. It is going to put more pressure on retention strategies in the existing companies. They really need to make sure that they have some good tactics in place.?

The variable pay of the past usually amounted to a bonus and perhaps stock options while the new trend in compensation is retention bonuses.

Three years ago just ten percent of companies used them. Now over one-third of respondent companies employ retention schemes. ?In the past you used to just have your base and bonus. After December, you got your bonus and a lot of people would jump ship and go to another organisation,? Mr. Parsan said. Retention bonuses that don?t kick in for the medium or long term ensure employees stick around.

?It puts pressure on other companies if they want to poach someone. This person has this windfall, they are not going to likely leave your organisation unless that other company wants to pick up this sum of money,? Mr. Parsan said.

Retention and sign on bonuses are also being pushed further into the ranks of an organisation to the management and professional level where they used to exist just at the executive level, the survey found.

Bermuda is of course not alone in the increase in variable pay plans as these trends are also prevalent in the US and UK.

Results from the 2005 survey indicate that base salaries will mirror the trend in the US market and remain relatively flat aligned with cost of living adjustments and projections for 2006 suggest a slow down in company wide salary merit increases and a more targeted approach to salary strategy as companies try to cap fixed compensation costs.

?Variable pay is way to align pay to performance and have people follow the business strategy of the business,? Mr. Parsan said. ?A few years ago we saw increases in base salaries in double digits, ten-12 percent year-over-year increases, and companies couldn?t sustain that kind of increase every year.

?Now they have shifted to variable pay where if a person performs they will receive a good bonus. If the person doesn?t perform, the company does not have to automatically pay out a high bonus whereas if it is in your base salary, you are contracted to pay out your base salary which is a fixed cost.?

The pay for performance culture however places more pressure on performance management systems in organisations, Mr. McNeish said.

?Where individuals, teams, etc. are going to be compensated based on their performance and the contribution they have made, an organisation needs to make sure that they have an alignment between where they are trying to get to as an organisation and that compensation.?

Creative forms of non-monetary elements are also playing a big role in recruitment and retention with organisations placing more focus on the work/life balance, training and development and promotional opportunities.

?That has had a positive effect for Bermudians as training development and succession planning is becoming more important, companies are focusing more on the long-term view and getting Bermudians into management positions,? Mr. McNeish said.

He adds that two to three years ago, the majority if not total focus when negotiating compensation would be on the monetary elements.

Now however non-monetary elements are increasingly important with individuals more cognisant of culture, the training opportunities and the work life elements. In the latter case, the standard three-week vacation has been upgraded with most companies now offering professionals four weeks as a standard.

?You can see that definitely there has been a trade off in terms of more work life balance,? Mr. McNeish said.

He advises Bermudians who are considering changing jobs to look further than just the base pay being offered.

?Look at the whole package, look at the non-monetary elements that you are currently getting and what the new organisation is proposing in that area,? he said.

The annual Bermuda International Business Compensation Survey was launched in 1999 and focuses on management and professional positions within international and local companies.

Fifty companies ranging the spectrum of local and exempt companies from insurers to financial and telecommunications companies were represented in this year?s survey.