Less Risk, Lower Targets
Pharma has long been a lucrative industry for salespeople. But the 2008 Hay Group survey reported a leveling off of reps'
total compensation—and for the first time this survey noted that salaries had even begun to slip. The median total cash compensation
for a sales rep in 2008 is $96,700, compared to $97,000 in the prior year—certainly down, but still higher than the $74,400
payout in other industries, according to Abbott, Langer Association Surveys.
Interestingly, reps' base pay is still growing. The median base salary for a sales rep is $74,500, up from $72,100 the prior
year. This shows that companies increased the proportion of total compensation contributed by base pay, as opposed to bonuses.
(See "Base Pay as a Percentage of Total Compensation") Just last year, base pay made up 74 percent of the average total compensation
package. This year, companies reclaimed some of that risk, and base salary now hovers around 77 percent of the total package.
This shift is seen primarily with specialty and small to mid-sized companies—the segments that are doing the most recruiting.
Reps total compensation packages level off, and for the first time salaries have even begun to slip. The culprit is not the
base pay—which continues to rise—rather, companies are awarding fewer bonuses.
How companies arrive at their pay structure is also telling. Just five years ago, half of all companies targeted the 75th
to 90th percentile of the market median when setting their total cash compensation for reps. Now, firms clearly feel less
pressure to stay ahead of one another, and that percentage has dropped to just 26 percent. The majority (59 percent) target
the market median for reps' total cash compensation.
Most participating companies continue to use salary structure adjustments (modifications to salary ranges to bring them in
line with the market) as a method to attract and retain sales talent. But the percentage that do so has declined for the past
few years. In 2006, it was 90 percent; in 2007, 84 percent; and in 2008, 74 percent. The average salary structure increase
for all employee groups was 3.3 percent in 2008, down slightly from 3.7 percent in 2007.
Merit increases for pharma continue to exceed the average for other industries. Pharma provides a 4 percent increase for performance,
compared to 3.5 percent in other sectors. This rate remains unchanged from 2006 and 2007.
The industry mostly judges its sales force quantitatively—through scrips and market share. But qualitative measures also matter,
with companies lowering daily sales call quotas for all but primary care reps to give the field force a chance at building
more valued relationships.
Nearly all respondents (94 percent) look at performance to determine merit increases. They use bonus results in the calculation
9 percent of the time (down from 15 percent in 2005), and conformance to core values 51 percent of the time (up from 31 percent
the previous year). Other factors include team skills and compa-ratio calculations. The reliance on compa-ratios, which divide
an employee's base salary by the salary midpoint, decreased from 45 percent in the prior year to 29 percent.