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European companies: How to attract American candidates to your US subsidiary with the right compensation packages
Member news | February 28, 2022
In a very competitive market for talent, candidates are looking at overall packages to make their decision.
As a positive sign that European companies are better prepared to recruit executive talent in the US, I have recently seen a closer alignment with the US market when it comes to salaries. However, the salary is only one component of the “package” offered to candidates in the US. You will find below a list of elements that are important to include in a package to attract and retain American candidates:
• 401 K
- In the US, when professionals do retire, the income they receive from the Federal Government through the “Social Security” program is limited. Therefore, it is important to start building retirement savings through private pension plans that are commonly offered by the companies' people work for.
- Retirement plans vary in settings, but the most common “401k” plans are built so that employees contribute a portion of their salary before taxes and the company will match that contribution up to a certain level. According to the US Bureau of Labor Statistics and Ubiquity, employer’s matching has been between 3% and 5%.
- With some companies boosting their matching over that average, I have noticed that candidates are paying more attention and asking questions early in the recruitment process. The difference may seem small to newcomers, but in the long run, with annual returns, the gap can be significant. This is a particularly interesting tool for a company because it can be used to facilitate retention through a vesting calendar: the company match can become gradually available over time spent in the company.
- In summary, European companies need to pay attention, budget for that important benefit in their plans and stay aligned with market trends.
• Vacation time
Vacation time is not mandatory by law, but it has really become an important way to attract and retain professionals as more and more Americans are looking for a better work/life balance. We commonly see candidates having 20 to 25 days of “PTO” (personal time off) and wanting to keep or increase this benefit when changing job.
European companies in the US can use this to make their overall offer more appealing.
• Healthcare benefits
Since there is no universal healthcare coverage, employer sponsored health insurance is the main way professionals get their coverage. This is the one benefit we tell our European clients they must have because the candidates they will target consider this a given.
That said, healthcare plans come in all sorts of sizes and shape; companies can let employees chose among two or three different types of plans depending on their preference and budgets.
Usually, the employer will cover 60-80% of the cost while the employee will pay for the rest. As candidates move forward in the process, they regularly ask what type of coverage is offered, if the plan will cover them and their family etc.
• Remote and work from home policy
In the last year or so, this has become a main topic of interest and discussion when speaking with candidates: I have spoken to candidates leaving jobs when they were asked to be in the office every day, while others, although fewer, don’t like to be fully remote.
The key is FLEXIBILITY and the existence of a company policy regarding remote work. We are also seeing that this question is closely linked to the culture of an organization regarding trust. One of the consequences of the pandemic that has led to the “Great resignation” is the search for a better work culture where people feel empowered and valued.
• Additional benefits directly linked to work from home
When candidates will regularly work for home, it has become common to pay for certain expenses on behalf of the employees: Providing a printer (or paying for it) is a basic example. Some companies chose to give a monthly allowance to cover the cost of various items such as Internet access, printing, etc.
• Long term incentives
- At the executive level, long term incentives are often the norm in American companies: Stock Options (granted or available at a discounted price) can add 20 to 40% to the regular annual compensation. Their vesting calendar is used as a retention tool since people may lose a significant amount of money if they leave before the vesting date.
- In several executive searches we have conducted, our European clients are giving the opportunity to newly hired executives to invest in the company with their own money to get a certain number of shares. This is the case when the company is owned by Private Equity and the goal for the executives will be to make a significant return on their investment the next time the company changes ownership.
• A word on variable compensation
The variable compensation of executives’ packages is usually very significant: 30-40% annual bonuses are very common for C and VP level roles. They need to be very clearly explained and the way to receive one’s bonus is an important part of the package negotiation. We advise our clients to create an appendix or addendum where objectives and bonus calculation are explained to avoid any miscommunication and potential frustration or even strong disagreement later on.
• Sign-on bonus
This is a common practice that European companies need to be prepared for, as it can really make a difference. This one-time payment made to a selected candidate at the time of hiring comes with no strings attached and is often used to offset a “lost bonus” when an executive leaves his/her current job. It also plays a role in compensating the perceived risk someone takes in joining a relatively new venture.
The US market is a complex market where many components of hiring packages are driven by market trends and demand. European companies that are trying to attract and retain talent need to use every component available to succeed in securing the candidates they need to grow their business.
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