In contrast, average pay in most countries, including the UK and US, is predicted to increase by 1 to 3.5 percentage points above inflation in 2004. Forty of the 63 countries covered in the survey fall into this category. A minority of countries will have higher increases, including Bulgaria, Lithuania, and Indonesia, where employees are likely to receive pay raises of around 5 to 6.5 percentage points above inflation.
"Most organizations are reluctant to commit to high pay increases," says Gareth Williams, an international consultant in Mercer´s Chicago office. "Though there is some optimism that the economy will pick up, employers want to keep the lid on fixed costs - including base pay." Mercer´s 2004 Global Compensation Planning Report examines economic, employment, and pay trends in 63 countries worldwide. Data on projected pay come from a survey of multinational companies, while inflation data is mostly collected from the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD).
Mercer´s report reveals distinct differences in pay and inflation trends across various regions of the world:
Western Europe
Average pay increases in 2004 are expected to be highest in Greece, at 5%. However, inflation here is likely to be relatively high, too, at 3.5%. Employees in Italy, Ireland, and Portugal are also predicted to receive large pay raises of 4.5%, 4.4%, and 4.4%, respectively, while inflation is forecast to be 1.9%, 3.2%, and 2.2%. In the UK, pay is predicted to increase by 3.6% and inflation is likely to be 2.5%. Switzerland is expected to have the lowest pay growth, at 1.9%, with inflation forecast to be 0.7%.
Eastern Europe
Predicted pay raises in some Eastern European countries are among the highest in the world. Next year, employees in Romania and Russia can expect to receive pay increases of 15.6% and 14.4%, respectively. However, inflation is also expected to be high in these countries, at 13.1% and 10.7%. Those working in Bulgaria and Lithuania will be better off, as pay increases are predicted to be 9% and 6.1%, respectively, with inflation at 3.9% and 1%.
By contrast, pay increases are likely to equal inflation in Slovakia, at 7%, while inflation is forecast to outpace pay raises by one percentage point in Estonia.
North America
US and Canadian employees are likely to experience similar salary movements, with pay increases forecast to be 3.6% and 3.3%, respectively. Inflation is anticipated to be 2.3% and 2.1%, respectively.
"Though the North American economy is expected to strengthen in 2004, most employers will maintain the survival tactics of the past two years," says Mr. Williams. "This will be the third consecutive year that average annual pay increases stay below 4%."
Central/South America
Generally, pay increases are expected to be relatively high in Central and South American countries next year. However, in most cases these will be matched by high inflation rates.
Employees in Venezuela are likely to receive the highest pay raises by far, at 28.9%, followed by Brazil, Costa Rica, and Argentina, at 11.6%, 11.2%, and 10.8%, respectively. Inflation is forecast to be 36.6%, 8.4%, 9.4%, and 7.7%, respectively. In Mexico, pay is expected to increase by 4.7% and inflation by 3.3%.
The lowest salary increases are expected in Peru, at 4%, where inflation of 2.5% is expected.
Asia/Pacific
The 2004 outlook for Asia/Pacific varies significantly by country, demonstrating the different economic climates in this region. Employees in Indonesia are predicted to receive salary increases of 13% against an inflation rate of 6.5%. In Singapore, pay is likely to increase by 2.9% and inflation by 1.3%, while Hong Kong forecasts rises of just 1.7% and negative inflation of -0.5%. In Japan, pay increases are likely to be 2.2%, with inflation at -0.6%.
Employees in Australia can expect to receive pay increases of 4.2%, against inflation of 2.5%, while those in New Zealand are predicted to see their pay increase by 3%, with inflation forecast at 2%.
"The last few years have been tough on businesses globally," Mr. Williams concludes. "The outlook for 2004 is much better, but it takes time for corporate recovery to be reflected in pay increases."
Copies of Mercer´s 2004 Global Compensation Planning Report are available from Mercer Global Information Services at 800 333 3070 or at www.imercer.com.