Mercer research: UK employers anticipate below inflation pay rises in 2012

UK employers anticipate pay rises at 3% which is below inflation, according the Mercer’s TRS Quarterly Pulse Survey.

The survey also found that organisations in Western Europe predict that their employees will be given pay rises that average 2.7%; the lowest increase across the Europe, Middle East and Africa (EMEA) region.

Inflation in the UK is running at 5%, so despite the salary increases, with high travel, petrol and food costs, employees will continue to feel under financial pressure.

Mark Quinn, principal at Mercer, said: “Salary increases in the UK are not keeping pace with the rising cost of living, and employees are finding it difficult.

“But the economic situation is still volatile so organisations are being cautious with their fixed costs, such as salaries.

“Committing to higher salary increases reduces a company’s flexibility and manoeuvrability if the economy does drop again.

“While restraint is painful for everyone in the short term, it is also prudent, and if it ensures the survival of the company it is in the longer term interests of employer and employee.”

According to Mercer, 2012 salary increases in fast-moving consumer goods (FMCG), durable, hi-tech, non-durable and services are forecast to be in line with the general market while, on average, forecasted salary increases are typically higher in the finance/banking and energy sectors.

The average budgeted increase in Western Europe is 2.7%.

Employees in Norway are set to get the highest pay rises of 3.1%. Austria, Sweden, UK, Belgium, Luxembourg, Italy and Germany are all anticipating pay rises of 3%.

Employers in Finland, Netherlands and France are anticipating passing on rises of between 2.8-3%.

Employers in Greece, Spain and Malta are anticipating 2.5% pay increases for the majority of position categories followed by Switzerland (2.1-2.2%).

Portugal (2.1-2.2%) and Ireland (2-2.3%) have the lowest anticipated pay increases.

Quinn said: “In countries such as Spain, the UK and Portugal, inflation is outpacing wage increases and this is eroding livings standards.

“In others like Germany, Italy and France, wage increases are above the rate of inflation, although in the case of France and Germany by less than 0.5%. The 2009 to 2011 trend, however, is that inflation is exceeding wage increases across Western Europe.”

Employees in Eastern and Central Europe are predicted to receive much higher pay rises, averaging 5.7% across the region.

At the lower end of the scale, Latvian employees are predicted a 3-3.1% pay increase with employees in Cyprus and the Czech Republic predicted to get 2.9-3.4%. Lithuanian employers are budgeting for 3.1-3.5% while Hungarian and Polish employers are anticipating 4%.

In Bosnia-Herzegovina and Croatia, too, pay rises of between 3.5-4% are expected with slightly higher rises expected in Bulgaria (5%).†

Employers in Turkey, Russia and the Ukraine are predicting 7.8-8%, 9.6-10%, and 10% respectively although this is more reflective of the small sample groups rather than a regional trend.

The lowest increase is set to be Montenegro with 1.3-2.5%.

Middle East and Africa has the largest variation in forecast pay increases due to the diverse nature of the region and the limited number of multinationals.

Organsiations in Algeria are forecasting an increase of 6.9-7.3%, surpassed by forecasts from South Africa (7.4-7.8%), Kenya (8-8.8%), Nigeria (10%) and Uganda 10-11%.

Employees across the Middle East are forecasting pay increases averaging 7.6%. There are dramatic increases in countries like Pakistan (15%) and the Yemen (10-13%).

The reality is that employees in the Middle East are set to receive relatively modest increases. Organisations in Israel (3.0-3.5%) are forecasting the lowest increases in the region followed by Bahrain (4.5-5%), Saudi Arabia (6%), Qatar (5.5-6%) and Kuwait 6%.

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