In the majority of countries, including the US and UK, pay increases are predicted to hover a few percentage points above the annual inflation rate. However, a handful of countries can be found at the extremes. For example, in Venezuela pay increases are expected to be around 7 percentage points lower than inflation, while in Bulgaria pay is predicted to rise almost 11 percentage points above inflation.
"Despite some optimism about economic recovery, companies remain cautious in setting their salary budgets and are reluctant to commit to high increases in the current uncertain times," says Gareth Williams, an international consultant in Mercer´s Chicago office.
Mercer´s Global Compensation Planning Survey Report examines economic, employment, and pay trends in more than 60 countries worldwide. Data on projected pay comes from surveys of large employers, while inflation data is mostly collected from the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).
The report reveals distinct differences in pay and inflation trends across various regions of the world.
Western Europe
In this region, the average salary increase next year is forecast to be highest in Ireland, at 6.4%. Employees in Norway and Belgium can also expect large increases of 4.7% and 4.4%, while those in the UK are likely to receive increases of around 3.8%. Switzerland is predicted to have the lowest pay growth, at 2.7%.
Overall, inflation is expected to be moderate in EU countries next year (1.5% to 3.8%).
Eastern Europe
In contrast to Western Europe, pay increases in Eastern Europe are expected to vary considerably in 2003, with wide margins between pay and inflation rates. Salary growth is predicted to be as high as 15.2% in Bulgaria and 12.1% in Slovakia, while forecast increases for Slovenia are just 2.0%.
Inflation will outpace pay increases in Slovenia, Russia, and the Ukraine by around 3.2, 2.6, and 1.0 percentage points, respectively.
"Salary increases are expected to be at or below inflation in many parts of Eastern Europe," Mr. Williams notes. "This is partly because there are no collective bargaining arrangements, compared to Western Europe where union power is much stronger."
North America
US employers predict pay increases of 3.9% next year, compared to Canadian employers, who expect a 3.3% increase. Inflation in these countries is anticipated to be 2.3% and 2.5%, respectively.
Central/South America
Central and South American countries generally will experience large salary increases next year, though these frequently will be matched by high inflation rates. Average pay raises are predicted to be as high as 15.4% in Venezuela, 13.5% in Honduras, and 12% in Costa Rica. Inflation is expected to be 22.5%, 12.0%, and 11.8% in these countries, respectively. Peru is likely to experience the lowest salary increases, at 4.0%.
Asia/Pacific
Projections for 2003 in Asia/Pacific reflect the varying economic conditions of the countries in this region. Indonesia expects pay increases of 15.4% and inflation of 10.0%, while Japan forecasts pay increases of 2.7% and inflation of 0.2%, the lowest inflation of any country in Mercer´s study.
"The outlook for 2003 is broadly positive," Mr. Williams says. "But this prediction assumes some element of global economic recovery which, in turn, will depend on stable international relations."
Notes to Editors:
Data for Mercer´s 2003 Global Compensation Planning Report covers five levels of employees: operations staff, clerical staff, technical staff, managers, and senior executives. The salary increase figures quoted above relate to the average of all employee categories.
Mercer Human Resource Consulting, one of the world´s leading consulting organizations, helps organizations create measurable business results through their people. With more than 13,000 employees serving clients from 143 cities in 40 countries worldwide, the company is part of Mercer Inc., a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific, and London stock exchanges.