Service Leadership, a ConnectWise solution, released the findings of its Service Leadership Index 2023 IT Solution Provider Compensation Report.

This is the 10th edition of the report, but the first since 2016. It was brought back based on high demand for current, industry-specific compensation data, especially due to wage inflation and staffing challenges in 2020-2022.

The report reveals a wealth of information about the W-2 (T4 in Canada, P60 in the United Kingdom, Income Statement in Australia and Gross Earnings in New Zealand) compensation of staff- and management-level technical, sales and administrative positions common to TSPs (total solution providers). The report also includes analysis of headcount ratios between the various positions in both lower- and higher-performing TSPs as well as compensation trends over time including percent increase in 2022 and budgeted percent increase in 2023.

"Nowhere else will TSPs be able to find this kind of TSP specific data and analysis on the market pay in more than 50 common TSP positions," said Peter Kujawa, vice president, Service Leadership, and TSP evangelist. "Owners and principals now have access to data they need to determine if they are paying their employees what they should be in order to recruit and retain employees."

Combined with the Service Leadership Index quarterly financial performance benchmark for TSPs worldwide, Service Leadership is uniquely able to correlate compensation data to TSP profitability performance. TSPs now have a resource to see how their compensation compares to their peers in the industry. Having an understanding of peer compensation and what the top performers are paying is critical in running their TSP.

The report revealed that more profitable TSPs tend to pay less for staff and non-owner manager positions than less profitable TSPs:

• Staff positions: The best-in-class (BIC) paid approximately 9% less than the median and 13% less than the bottom ¼ (the least profitable TSPs).
• Managers: BIC paid approximately 9% less than the median and 17% less than the bottom ¼.

"There is widespread belief that because a TSP is more profitable and financially successful, they pay their employees more, but the data proves the exact opposite is true," Kujawa said. "The least profitable firms pay more for both s'es in 2022 and are planning to do the same in 2023. The data is compelling as to why some companies are doing well and others struggle."

The report also showed there was a close correlation between TSP profitability and the percentage of variable compensation paid for both staff and management. The BIC paid a materially higher amount of variable compensation for staff and managers:

• Staff positions: BIC tied 9.6% of total annual earnings (TAE) to variable compensation while the bottom ¼ paid 5.8%.
• Managers: BIC tied 16.9% of manager TAE to variable compensation while the bottom ¼ tied only 8.2%.

Since 2005, the Service Leadership Index (S-LI) has been the largest, most detailed and most accurate TSP benchmark in the IT industry, worldwide. This year marks the 18th year of benchmarking to objectively identify best practices and "set the bar" for TSP owners and executives, including in 102 countries.

To receive a complimentary Executive Summary and learn how to purchase a full copy of the report, click here.