UK employers are planning to increase salaries by an average of 3% in 2013 for the second year running, according to research by Towers Watson.
Its Salary budget planning report, which received 5,000 responses from organisations across 60 countries in Europe, the Middle East and Africa (EMEA), found that 4% of respondents are planning a pay freeze in 2013, while 3% are preparing to postpone their salary reviews.
Northern European countries, such as Belgium, France, Germany, the Netherlands, Scandinavia and the UK, are averaging pay rises of 3%, while southern European counterparts, such as Greece, Portugal and Spain, are expecting lower increases of between 2% and 2.5%.
However, due to lower levels of inflation anticipated for Greece (0.4%) and Portugal (1.8%) and higher inflation in northern Europe, including in the Netherlands (2.7%), Denmark (2.1%) and the UK (3.2%), the difference in real-terms is likely to be less marked.
The research also found that, outside western Europe, salary increases continue to rise significantly in fast-growing and developing economies. In the past year, the Middle East has seen salary increases of 5% in Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE), while Saudi Arabian and Lebanese organisations are anticipating increases of 5.6% and 6.5%, respectively.
The highest pay rises in EMEA this year are expected to occur in rapidly developing economies, such as Egypt (10%), Russia (9%), Turkey (7.5%) and the Ukraine (9.2%). However, these same markets continue to struggle with high, and often growing, inflation with all expecting 2013 inflation to be at least double that of the UK.
Paul Richards, head of Towers Watson’s data services practice in EMEA (pictured), said: “UK organisations are planning to offer similar pay rises to their northern European neighbours, but with inflation rates remaining stubbornly high in comparison to all other major European economies employees will feel a limited effect, if any.
“Employees in other European countries, such as Germany, France and the Netherlands, are going to feel better-off than their British counterparts with lower levels of inflation making pay increases feel more substantial.”
Chris Charman, a director in Towers Watson’s UK rewards practice, added: “It’s good to see that organisations are targeting their resources where they feel they will generate the best return on investment.
“Interestingly, this tendency to reward selected employees above others becomes increasingly pronounced the more an employer’s budget is squeezed.
“Conversely when budgets are more generous, the focus shifts away from differentiation and toward more equal pay rises across the organisation.”