Global pay slowdown hits in 2014

Salary rises across the world are in decline, according to the latest pay forecast data from global management consultancy, Hay Group.

Salaries are set to increase by 5.2% on average but rises for 2014 are expected to average 0.3% less than last year’s forecasts (5.5%).

Venezuelan workers look set to receive the biggest pay increase of 27%. Yet, with inflation predicted to reach 36.4% in 2014, employees will actually feel a significant cut in real income.

Salary rises in Europe are forecast at 3.1% on average, boosted by high rises in emerging nations. This compares to 3.3% in 2013.

North America is set to see rises of 2.7% in 2014 compared to 2.9% last year.

In the Middle East pay rises have stabilized but forecasts are down on 2013. The average rise forecast is 5% – down 0.5% on last year.

Hay Group’s research is based on the salary expectations of more than 22,000 organizations in 71 countries worldwide, representing 15 million employees.

Ben Frost, consultant at Hay Group, comments: “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.

“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.”

Two-speed trend persists
Hay Group’s research reveals that fast-growth markets will see the biggest salary rises in the New Year. However, high inflation means real income will fall in many countries.

Venezuela and Argentina look set to offer the highest predicted pay rises – 27% and 24.3% – but these will lag significantly behind projected 2014 inflation rates – 36.4% and 25.7% respectively[1]. As a result, employees will feel a significant cut in real income.

Pay rises across the rest of Latin America remain high compared with other regions but are generally down on last year. The only exceptions to this rule are Peru – where wage rises are up 0.4% to 6.4% – and Brazil up 0.6% to 6.1%.

Salaries in Asia are expected to increase by an average 7% – 0.2% less than the rise in 2013, reflecting slowing but still strong economic forecasts. The highest increases will be seen in Vietnam (11.5%), India (10.9%), Indonesia (10%) and China (8.6%).

Europe’s emerging nations can also expect noticeable increases in pay rises compared to their slow-growth neighbours. Ukraine (7.9%), Russia (7.8%) and Turkey (7.7%) will experience the greatest up-tick in wages but are again down on last year’s forecasts.

UK employees will experience pay increases of 2.5% – a drop of 0.5% since 2013 and falling behind inflation, which is expected to be 2.7% in 2014. France too will see pay rise by 2.5% next year – 0.1% less than last year. Salary increases in Germany will remain at 3% for a second year.

Pay rises in North America are predicted at 2.7%. This reflects a mood of cautious optimism as the economy gets healthier and unemployment continues to drop.

Ben Frost comments: “In times of slow-growth, organizations must keep a keen eye on the bottom line to remain competitive – minimizing costs and driving productivity.

“However, as raised inflation bites for many employees, there is an opportunity for organizations to be creative about how they reward their people – going beyond cash. It’s about spending smarter, not more, and reviewing return on reward spend frequently to ensure the firm is getting bang for buck.

“Securing the commitment of employees by developing clear career management plans, nurturing key talent and creating a buzz around the company’s vision can also play a role in engaging and retaining employees over the long-term.”