Inter-firm Mobility and the Growth of Compensation Components

Abstract

Although most middle managers in Germany continue to follow traditional career paths within their firms, there are alternative job opportunities other than staying with one employer for their whole career. Using data from a unique dataset of managers in the German chemical sector, we find that managerial employees benefit from higher-than-average increases in fixed salary payments when changing firms, but that these mobile employees suffer with regard to variable payments, such as cash bonus and other payments (e. g. stocks options or special payments). Thus, job movers have to trade off variable payments for higher fixed salaries when changing firms. This paper also shows that job movers differ considerably in terms of both increased fixed salaries and decreased bonus payments. Initial fixed salary premiums are much more pronounced if managers switch to a larger firm or to the same functional area or line of business. Notably, job movers suffer from reduced bonus payments, especially in overall economic and/or industry-specific peak times. Our study adds to the discussion on negative monetary consequences of inter-firm mobility.