Pay raises across professions are projected to decline in developed and emerging economies.
Although pay raises in emerging nations have higher percentage increases than those for slow-growing nations, the raise projections are lower than the previous year and sometimes don’t keep pace with inflation.
That’s according to Hay Group’s annual global salary forecast, which draws from more than 22,000 companies and 15 million workers worldwide. The survey looked at a wide range of professions.
Management accountants in 23 countries, in a separate survey of Chartered Institute of Management Accountants members and students, saw their wages rise by an average of 3% in 2013.
In the Hay Group forecast, Venezuela is the percentage leader in worker pay raises for the second consecutive year, but the projected 27% growth in wages is offset by projected inflation of more than 35%.
Only a handful of countries have higher projected raises in 2014. Brazil’s estimate is 6.1%, up from 5.5% a year ago, and India’s rose from 10.5% to 10.9%. Italy’s projection jumped from 2.7% in 2013 to 3.3% in 2014. Workers in Peru and Ireland also are projected to experience small increases.
Developed markets remain in a slow-growth mode. In the United States, pay is projected to increase 2.8%, compared with 3% a year ago, and in the UK the projection has dropped from 3% last year to 2.5% this year. Japan (2%), France (2.5%) and Germany (3%) are among the countries with no change in projected pay raises.
Projected raises in Russia dropped from 9% to 7.8%, and those in China fell from 9.5% to 8.6%.
“This year’s global forecast highlights a significant slowdown of pay rises into the new year, as GDP growth in many parts of the world remains subdued,” Ben Frost, a consultant at Hay Group, said in a news release. “Even where optimistic rises are expected in fast-growing markets, high inflation means the economic recovery won’t be felt in the pay packets of employees in many countries.”
Hay Group offers four ways for organisations to manage talent in the face of declining pay raises:
Spend smarter, not more: Hay Group recommends using a balance of base pay, benefits and variable compensation. Companies should use financial incentives that are strongly linked to team and individual performance.
Be totally committed to total reward: Make sure workers understand their jobs in the context of the organisation’s goals. Development plans and opportunities for growth should be offered, and employees should feel they have a voice in the company.
Look after the best: Top talent should be identified and given challenging projects with greater potential rewards, Hay Group writes. “This concept of ‘growing your own’ talent is especially important in fast-growing economies, where buying in talent from outside is likely to involve paying a premium,” said Nick Boulter, managing director for global reward services at Hay Group. Hiring a “superstar” from outside doesn’t guarantee that person is the right fit; it’s better to pick “from an internal pipeline of known talent,” Boulter added.
Be fair and transparent: Employees will appreciate openness about pay decisions, even if the news is a smaller raise or none at all.
Related CGMA Magazine content:
“Pay Raises Rampant in Emerging Markets”: Projected raises for workers in emerging economies far outpace those for workers in developed areas such as Western Europe and North America. Pay in some emerging markets was expected to increase 10% in 2013, according to Hay Group.
“Retention-Focused US Companies Giving ‘Stars’ Bigger Raises”: Raises for top performers at many US companies substantially exceed the pay increases given to average and low-performing employees, according to a survey. Nonetheless, there is demand for even bigger incentives for top performers.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.