Monetary incentive systems for military personnel in the armed forces – a survey of twelve countries

It is universal in the armed forces that the military workforce and its human capital play a key role in the production of defense and military capabilities. A handful of unusual traits in the armed forces’ personnel and human resources policies – e.g. the recruitment solely of young employees, the provision of military-specific education, the fostering of combat-oriented skills among its workforce, and the risk, hardship, and demands of military tasks – compel military organizations to use a battery of incentives designed to compensate and influence personnel behavior in the desired directions. Some monetary incentives increase the pool of potential recruits; some incentives induce retention and effort, while other incentives reward personnel for taking on high levels of risk or serving in low amenity locations. In this report, we shed light on the monetary incentive systems in the armed forces and self-defense forces in NATO countries and NATO partner countries. The primary objective of this report is to understand how the ministries of defense, along with the armed forces, in a variety of advanced countries structure their compensation and personnel policies so as to meet the challenges of recruitment, retention, effort, and performance, as well as the separation of personnel. The fundamental research question posed in this report is how the monetary incentive systems used in the armed forces in advanced countries are structured. More specifically, we study i) the uses and magnitudes of various compensation categories for military personnel, ii) the requirements for eligibility for the various monetary incentives, iii) the purposes of each monetary incentive, iv) whether the monetary incentives lead to satisfactory attainment of the purposes, and v) whether any of the monetary incentives have been reformed recently. The report is based on a survey submitted as a Request for Information by the Norwegian Ministry of Defence to the respective ministries of defenses in each country in 2020. The ministry received answers from seven NATO countries, Denmark, Germany, Italy, the Netherlands, Poland, Spain, and the UK, in addition to four NATO partner countries, Australia, Finland, Japan, and Sweden. The report also assesses the compensation system in Norway. Thus, the report concerns the monetary incentive systems in twelve countries. This makes the report, to the best of our knowledge, the first analysis of a broad range of NATO members and NATO partner countries’ monetary incentive systems. Our findings show that these countries differ in how the monetary incentive systems are structured. In all the countries, base salary constitutes a central compensation category. Some countries place a strong emphasis on fixed supplements. In others, irregular supplements play a key role. One-time bonuses and deployment-related payments play small, but significant roles, in several monetary incentive systems. The coverage of commuting and housing expenses are important in countries with military bases in remote and sparsely populated areas. Tax exemptions, welfare services and payments, and the provision of civilian education do not play important roles in the incentive systems. In general, the ministries of defense report that they are satisfied with how the incentives work towards the attainment of the purposes of the incentives.