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Employees in the UK will experience a year of above inflation pay rises in 2013, according to pan-European pay data issued by Mercer. UK companies are anticipating employee base pay rises of 3%, the same as 2012 increases. However, the Bank of England’s estimations for inflation in the UK in 2013 are lower that this figure, so the predicted increases will result in a degree of pressure being taken off household finances across the UK.
The data comes from Mercer’s Salary Movement Snapshot which tracks pay plans of 570 multinational organisations operating across 76 countries in EMEA. The data provides information from multinationals on median base pay increases across all employee groups including ‘blue’ and ‘white collar’ workers up to management and Senior Executive level.
Across Europe, the Middle East and Africa (EMEA) the picture is varied with rates of pay inflation for workers in other parts of Europe outpacing that of employees in Western European nations. Across Western Europe, on average, companies are predicting employee pay rises of 2.6% in 2013, marginally lower that the average of 2.7% awarded in 2012. The data also showed that companies in Eastern Europe were anticipating average pay rises for employees of 4.6%, companies in Africa anticipating average increases of 8% and companies in the Middle East expecting to give employees increases of 5.2% in 2013.
“The picture is certainly brighter for the average UK household but the pressure is being relieved more by lower inflation rather than higher pay increases from companies. Businesses are still keeping a tight rein on salary increases,” said Mark Quinn, Partner and pay specialist at Mercer. “The economic situation is still precarious and organisations remain cautious with their fixed costs, such as salaries which make up a very significant part of the cost base of their organisations. What we are seeing is that many companies are implementing low-cost, high value programmes such as employee recognition schemes in an attempt to further reward their staff.”
UK employees are slightly better placed than many of their Western European peers, with companies in the country budgeting for a median 3% pay increase for staff across all employee groups. Employees in Austria, Germany, Greece, Norway and Sweden are also expected to receive comparable amounts. However, this is higher than is being forecast for many other Western European countries, but far lower than is anticipated for staff in some regions of Africa, the Middle East and Central and Eastern Europe. Wage inflation is high in some areas like Turkey and Russia, partly due to economic buoyancy but also due to the high rates of inflation in these countries.
The average budgeted salary increase for 2013 in Western Europe is 2.6%, a small drop from 2.7% in 2012. Employees in Norway, Austria, Sweden and Germany are all expecting pay rises of 3%, with those in Italy and Finland due slightly less (2.9%). Employees in Denmark and France are anticipating pay rises of 2.6%, with those in Portugal and Spain due 2.4%. Employees in Greece are expected to receive 2.3%, those in Ireland 2.1%, while those in Switzerland and Belgium only 2%. Employees in Luxembourg (1.8%) look set to receive the lowest pay increases in 2013. This excludes those organisations who are predicting a pay freeze in 2013.
Central and Eastern Europe
By comparison to Western Europe, the rates of pay increases are much higher in Central and Eastern Europe. Russian companies are predicting pay rises of 9% across all employee groups although this may be more reflective of the relatively small number of multinationals sampled in the region. Cyprus, Latvia and Lithuania are at the other end of the regional spectrum, predicting pay rises of 3%, still generous by Western European standards. Turkey and Romania are predicting 8% and 5.1% pay rises respectively, followed by Bulgaria (4.8%), Poland, Hungary and Bosnia and Herzegovina, with employees in all of these last three countries anticipated to receive increases of 4%. Companies are planning base pay increases for their employees in Croatia, Estonia and the Czech Republic of 3.5%, 3.5% and 3.1% respectively. Multi-nationals may have smaller operations in many of these countries and currency considerations may mean that even though the increases appear high, they may not actually translate into a large cost for multinationals.
Middle East and Africa
This area has the largest variation in forecast pay increases due to the diverse nature of the region and the limited number of multinationals. Companies in Morocco (4.9%), Tunisia (5.3%) and Algeria (6.8%) are predicting high pay increases to employees compared to those in Western Europe, while employees in Egypt and South Africa are anticipated to receive 10% and 7%, respectively. In the Middle East, companies in the UAE and Saudi Arabia are expected to approve pay increases of 5% and 6% respectively.
"Companies are placing less emphasis on inflation rates when budgeting for pay increases, and factoring such variables as relative pay competitiveness, affordability, labour market conditions and confidence in their business outlook” said Ilya Bonic, Senior Partner in Mercer’s Geneva Office.
The figures provided are the median figures which Compensation and Human Resource Managers – those responsible for planning salary increases - are forecasting in each country. These forecasts, of course, have to be approved by company management and depend on numerous economic factors, as well as an individual’s good performance. Given the economic uncertainty, there is a high possibility that the actual salary increases will be less.
Notes for editors
Base salary increase refers to the percent increase in base salary including any general/across-the-board/mandatory salary increases, with the exception of Belgium and Luxembourg where it includes merit increase only and excludes indexation. For all geographies it does not include promotional increases or any special adjustments to be made for internal equity or external competitiveness reasons. The salary increase figures are based on local currency (in markets where multiple currencies are prevalent).
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