Latin American Companies Starting to Identify Top Employees and Differentiate Pay as Competition for Talent Increases

Hewitt Associates Study Reveals Salary Increases Are on Pace With Inflation, But Many Companies Favor Variable Pay to Reward and Retain

February 12 2007 - As the competition for talent increases, particularly in Argentina and Brazil, more companies are starting to identify high-potential employees and differentiate compensation programs to help return those key individuals. With base pay increases remaining on pace with inflation in 2007 for many Latin American countries, more companies are relying on variable pay - performance-related awards that must be re-earned each year - to attract, motivate and retain employees, according to Hewitt Associates, a global human resources services company.

Overall, Hewitt's data shows that salary increases are conservative for 2007. The study of more than 360 organizations also found that more companies are starting to evaluate non-cash/non-monetary attraction and retention strategies such as becoming an attractive place to work, providing training and development opportunities, and flexible work arrangements. In addition, the study reveals that legally mandated and/or union increases in some countries (e.g., Venezuela, Argentina and Brazil) are impacting salary increase budgets and an organization's ability to distribute funds freely.

"Managing the workforce is a top priority for companies, and in today's competitive global environment, an engaged workforce is fundamental to business success. In order for an organization to attract, motivate and retain employees it must have effective compensation programs in place," said Craig Bruce, talent and organization consulting leader for Hewitt in Latin America. "To help align and motivate employees, more companies are relying on variable pay, which allows them to manage fixed costs, create focus on key business objectives, and motivate and reward employees with bonuses when performance goals are attained. The bottom line is that variable pay is a smarter way to manage a business in a good or bad economy."

Highlights by country of Hewitt's annual survey are included below:

Argentina

Salary increases are projected at 13 percent for 2007, a slight increase from 11 percent in 2006, while inflation is projected at 10 percent.

With uncertain political and economic environment, as well as a strong competition for talent, companies in Argentina will be challenged to manage their salary increase budgets in 2007. A strong leadership and workplace brand will be critical to navigate this environment.

The competition for talent is especially strong in the oil and gas, and pharmaceutical industries.

Brazil

For the second straight year, salary increases in Brazil will exceed inflation, providing a real gain for workers. In 2007, salary increases are projected to be 5.9 percent but may be revised due to economic growth and stability of inflation rates.

Almost all (90 percent) of employers in Brazil offer variable compensation.

Chile

Salary increase projections for 2007 remain stable at 5.1 percent compared with 5.0 percent in 2006.

Consumer products and pharmaceutical industries are among the highest, with 6 percent increases projected.

Currently, 83 percent of Chilean companies offer some kind of variable pay plan, targeted to blue collar, professional and administrative employees.

Mexico

In 2006, executives received 5.1 percent salary increases, while supervisors received 5.7 percent, administrative 5.5 percent and workers 4.7 percent.

Projected salary increases for 2007 show a slight decrease, ranging from 2.8 percent to 4.9 percent.

Companies are focusing more on top performers and/or high potentials.

Puerto Rico

Salary increases have remained below inflation for the last four years.

For 2007, salary increases are expected to remain similar to last year, within the 4.0 percent to 4.2 percent range, while inflation rates are expected to be 12 percent.

Industries with the highest salary increases include consumer goods (4.5 percent) and pharmaceutical (4.4 percent).

Unemployment continues to steadily increase and is forecasted to reach 12 percent in 2007.

Venezuela

For 2007, salary increases are projected to be 16 percent.

Variable compensation practices are becoming more prevalent, particularly for executives.

Employers are increasingly using special recognition for high-potential employees.

About Hewitt Associates

With more than 65 years of experience, Hewitt Associates (NYSE: HEW) is the world's foremost provider of human resources outsourcing and consulting services. The company consults with more than 2,300 organizations and administers human resources, health care, payroll and retirement programs on behalf of more than 340 companies to millions of employees and retirees worldwide. Located in 35 countries, Hewitt employs approximately 24,000 associates. For more information, please visit www.hewitt.com.

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