Is The Salary Gap Too Wide?

In sectors where competition is intense, where foreigners are showing a lot of interest and which have the potential for growth, executives are being given high salary packages. This has resulted in a gap opening between the salaries of executives and those of the workforce. The sectors in which this salary gap is largest are as banking, finance, telecommunications, pharmaceuticals, logistics and retailing.

According to a survey carried out last year, in 2005 the average salary of a CEO in the US was 262 times more than that of the workforce. When one considers that there are 260 working days in the year, this survey shows that a CEO earns in one day what the average member of the workforce earns in a year. The difference is not so great in Turkey. But neither has it escaped anyone’s notice that the differences in wages scales are becoming increasingly large.

In Turkey the average rate of turnover for high ranking executives is 20 percent per year. The most common method used to satisfy the demand for executives created by this high rate of turnover is the transfer. Particularly in sectors where there is intense competition, companies which do not want to lose the executives they have transferred with such high hopes offer high salary packages. This is the reason for the opening of a gap in the salaries of executives and employees.

Why Is The Gap Opening?
There has been a noticeable significant improvement in salaries since 2004. Human resources experts say that in some sectors salaries for middle-tier and high level positions have risen by over 100 percent on a YTL basis over the last five years. Ray & Berndtson Executive Partner Ayse Öztuna notes that salaries have risen by 15-20 percent compared with last year. “We have recently begun to see a repeat of the astronomical increases in salaries and transfer fees that occurred before the crisis. This rise in salaries has produced an increase in salary differentials.”

One of the most important reasons why the salary gap is opening up is that. in an intensively competitive environment, companies don’t want to lose an executive who will bring successful results. In sectors where competition is intense, such as finance and telecommunications, the salary gap is opening still further. MY Executive Management Consultant Elif Baydar says: “Companies and banks are offering very attractive offers in order to attract high level executives. In response, other companies are improving their salary packages in order not to lose them.”

It Is Different In Every Sector
There is no doubt that the salary differentials are different in every sector. In sectors with high growth, in which foreign investors are interested and where, as a result, there is a limited pool of ability, there is an extremely high difference between the salaries of entry level employees and high level executives. Ray & Berndtson Executive Partner Ayse Öztuna explains the reasons for this as follows: “As a result of growth in sectors in which it takes years to develop able, experienced executives with a vision, particularly at the top, there is a high demand for capable executives and their salaries rise as a result. The sectors in which there has been a striking development in the pace of growth are rapidly consumed goods, pharmaceuticals, logistics, retailing, financial services and telecommunications. As a result, both the demand for and the salaries of executives are rising in these sectors.”

Fortune Danışmanlık Executive Partner Ayşen Arıduru also comments that the salary differential is greater in profitable sectors and companies. She says that in the banking and finance sectors and in multinationals there is a significant difference between the salaries at general manager level and those of the rest of the workforce.

What Should The Ideal Difference Be?
Human resources consultants say that an assistant general manager should receive 80-90 percent of the salary of a general manager. The salary levels of directors should be 70-75 percent of the general manager’s salary, those of managers 50-55 percent and those of entry level employees 10-15 percent. These figures are calculated on basic salary.

Ray & Berndtson Executive Partner Ayse Öztuna says that the difference can increase considerably when performance related bonuses are added. “For example, the bonuses of a general manager and assistant general managers can differ by more than 50 percent.”

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