UK salaries predicted to rise by 3%

Salaries for UK employees were predicted to increase by 3%, according to research by Towers Watson Data Services.

The Salary budget planning report for Europe, the Middle East and Africa, which collated pay data from 4,200 organisations across 60 countries, found that salary increases are set to be consistent across Europe’s largest economies – Germany, France, Italy, Spain and the UK – at or around 3%.

Due to lower rates of inflation in Germany, France and Spain, these increases will feel more significant than in the UK and Italy, where inflation is currently running at a higher rate.

Outside Western Europe, salary increases are likely to be more significant in 2012. Russian organisations expect to grant salary increases of 10% on average, against an inflation rate for 2012 of 5.9%.

Among Middle Eastern respondents, Saudi Arabian organisations are increasing salaries slightly above this rate, while South African employees will see pay increase by an average of 7.5%.

The research also found that high performers can expect to do best when it comes to salary increases. Around four-fifths of UK, German and French organisations report that high-performing employees will receive a larger proportion of salary increase budgets than their colleagues.

A fifth of Spanish high-tech firms will give their entire budgeted salary increase to high performers while a similar proportion of Irish financial services firms will do the same. A tenth of French high-tech firms also plan the same favourable treatment for high performers in 2012.

Paul Richards, head of European data services at Towers Watson, said: “The results of the report clearly show that UK employers are still cautious when it comes to pay increases, with rises only fractionally above inflation, after a period of negative growth in real salaries.

“Employees in other European countries such as Germany, Spain and France are going to feel better off than their British counterparts with lower levels of inflation making a 3% increase feel more substantial.

“We are also continuing to see many of the developing nations increase pay by double or even triple the rate of European economies. This trend is likely to continue where inflation is high and/or where the developing economies grow and living standards rise.”