2006 Worldwide Pay Survey

• Average global salaries are forecast to rise by 2.4 percentage points above inflation
• Pay in the EU is expected to outpace inflation by 2 percentage points, on average

LONDON, Oct. 3 /Xinhua-PRNewswire/ -- Globally, salary increases are expected to be higher next year than they were in 2005, according to a survey by Mercer Human Resource Consulting, the world's largest employee benefits consultancy and services provider. The average pay rise worldwide is expected to be 2.4 percentage points above inflation compared to 1.9 percentage points this year. In the European Union (EU), pay is likely to rise by 2 percentage points over inflation.

Average pay in 7 in 10 (69%) of the countries covered, including the UK and US, is predicted to increase by between 1 and 3.5 percentage points above inflation. The study also found a minority of countries will experience rises which are over double the global average. The greatest increases are expected in India, Egypt and Lithuania where employees are forecast to receive pay rises of 7.3%, 7.1% and 5.5% above inflation respectively.

Greg Cornish, Global Head of Human Capital Advisory Services at Mercer, said: "We've seen strong global economic growth in the past couple of years and all the signs indicate this is set to continue in 2006. With this growth and more stable inflation we anticipate next year's pay rises to be higher, in real terms, than this year's."

Mercer's Global Compensation Planning Report examines employment, economic and pay trends in some 70 countries worldwide. Data on projected pay is taken from a survey of multinational companies and inflation data is primarily taken from the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development.

The report shows clear variations in pay and inflation trends across the world.

Europe

The survey examined 31 European countries, including 24 in the European Union. The results revealed salary increases in Western EU countries are likely to remain stable, while those in the East will be higher due to greater economic growth in these countries.

In Western EU countries, average pay rises are forecast to be highest in Greece for the third consecutive year, where employees can expect their salaries to increase by around 4.9%. Inflation in Greece is predicted to be 3%. Workers in Ireland, Spain and Italy can also expect substantial pay rises of 4.2%, 4% and 3.8% respectively, while inflation is forecast to be 2.4%, 3.2% and 1.8%. In the UK, employees can expect increases of 3.5%, with inflation at 2%. The lowest pay growth is predicted to be in Germany, at 2.1%, where inflation is expected to be 1%.

Pay increases in Eastern EU countries are likely to be among the highest in the world, with Lithuania at 11th place in the global rankings with a projected increase of 8.5%, with inflation at 3%. Next year, employees in Latvia and Estonia are forecast to receive large pay rises of 8.3% and 7.5% respectively, while inflation is likely to be 5.3% and 2.5%. At the other extreme, workers in Poland will be worse off with salaries expected to rise by just 3.1%, while inflation will be 2.6%.

"Although many Eastern European countries have experienced high wage inflation since joining the EU, their labour costs are still extremely competitive," commented Mr Cornish. "Multinational organisations continue to look to Eastern Europe for opportunities to set up operations at a much lower cost than in Western Europe."

North America

The sustained growth of the US economy in recent years has impacted countries worldwide. However, in the US, this growth has not necessarily translated into wage inflation.

"Despite the tremendous growth in the US economy, many companies remain cautious in their approach to pay increases. Organisations continue to use variable pay such as bonuses to help retain talented employees, as they struggle to afford higher base pay levels," said Robin Ferracone, President, Human Capital Business at Mercer.

Salaries in both the US and Canada are forecast to increase by 3.6%. However, employees in Canada will fare better than those in the US as inflation is expected to be 1.9% and 2.6% in these countries respectively. In Mexico, salaries are likely to increase by 5%, while inflation will be 3.9%.

Central/South America

Pay rises in Central and South American countries are generally expected to be high, though the majority of these increases are likely to be offset by high inflation. For example, the survey found wages for workers in Nicaragua will effectively be frozen as both pay rises and inflation are forecast to be 6.8%.

Employees in Argentina are forecast to receive 10.5% pay rises, while those in Guatemala and Honduras are likely to experience increases of 10%. Inflation in these countries is predicted to be 8.6%, 5.7% and 5.9% respectively. In Brazil, salaries are likely to increase by 7.5%, while inflation is forecast to be 4.6%.

The lowest salary increases are expected in Panama, at 3.8%, where inflation is expected to be 1.8%.

Asia/Pacific

Salary increases in Asia/Pacific countries are expected to vary greatly. For example, employees in India and China, where economic growth is being driven by investment from the US, are expected to receive pay rises of around 11.3% and 7.8% respectively. Inflation in these countries is predicted to be relatively low, at 4% and 3%.

In contrast, pay in Singapore is likely to increase by 3.8% and inflation by 1.5%, while in Hong Kong employees can expect rises of 3.2% with inflation at 1.1%.

"Organisations recruiting employees with specialist skills in India and China must offer competitive salaries, as the pool of skilled workers is relatively limited," Mr Cornish commented.

In Australia and New Zealand salary rises are predicted to remain in line with recent years, at 4.2% and 3.8% respectively. Inflation of 2.8% is projected in both these countries, meaning annual pay rises in real terms are relatively low.

"While the economic outlook for 2006 is positive, fluctuations in oil prices, exchange rates and consumer confidence could affect companies' pay increase budgets for next year," said Mr Cornish.

Copies of Mercer's 2006 Global Compensation Planning Report cost $US720 / EUR600 and are available from Client Services, Geneva at +41 22 869 3000 or at http://www.mercerhr.com/globalcompensation.