Pay for low-skilled business functions in western Europe is more than 50% higher than their counterparts in the UK, according to research by Towers Watson.
The Towers Watson General industry compensation report focused on four core business functions that are commonly moved across borders in order for organisations to take advantage of cheaper labour costs. These jobs include clerical, entry-level and experienced professional roles in various finance, accounting and IT development and infrastructure organisations.
The research found that despite high wages in the UK, salaries for commonly outsourced roles in Belgium, France, Germany and Ireland, are 57% higher than their UK equivalents. These are also almost seven-times higher than the salaries of workers in the larger central and eastern European countries.
For instance, a typical account support clerk in the UK can expect to be paid an annual salary of £21,000, while a western European in the same role would earn £32,000 per year in Belgium, and an equivalent salary in Bulgaria would be £5,000. The UK has the sixth highest salary level in Europe for this particular role.
At the higher end of the wage spectrum, an experienced IT professional’s annual salary in the UK averages £42,000, significantly below their German counterparts who can expect to earn £57,000. However the UK is ahead of Bulgaria and Romania at £15,000, and Poland and Hungary where the same role would attract an annual salary of £19,000.
Darryl Davis, senior consultant in Towers Watson’s data services business, said: “We have seen strong growth in business process outsourcing services in central and eastern Europe in recent years because wages have remained competitive compared to western European equivalents and talent pools have been broadly able to keep up with demand.
“This does leave lower-skilled workers in the UK, as well as other high-wage western European countries such as Germany, Belgium, France and Ireland, vulnerable as organisations take advantage of lower wage levels elsewhere to make savings.
“However, organisations considering this approach should be cautious as nominal wage inflation can be an issue in many emerging central and eastern European economies.
“Savings made in the short term may disappear quickly as economic development and high inflation put upward pressure on pay. We have already seen Turkish wages increase significantly in the last few years because workers are able to demand pay increases that keep pace with the cost of living.”
Andrew Steels, UK HR service delivery practice leader at Towers Watson, added: “Undoubtedly, cost savings are a major benefit of outsourcing, but it should not be seen as a silver bullet.
“Employers need to consider what is most important to their organisation and what positive benefits to the business they will be offering by going down this route.
“While cost savings may be achieved, many organisations risk altering their culture and impacting customer expectations, both external and internal, so decisions of this nature should be carefully thought through.”