Hewitt Finds Rebound in Salary Increases Globally

Hewitt’s global compensation survey of more than 6,000 large companies in 46 countries revealed that projected average pay raises around the world will increase or stabilize this year compared to 2009; however, salary increase are still considerably lower than pre-recession salary increases.

According to a Hewitt news release, base pay increases for U.S. workers are projected move up to 2.7% in 2010, up from 1.8% in 2009 – the lowest on record since Hewitt began tracking this data in 1976. Canada is also expected to see a modest improvement in base pay increases of 2.8%, up from 2.2% in 2009.

Asia

Some countries in Asia will see stronger rebounds, motivated in large part by the war for top talent, Hewitt said. Salary increases in China are projected to jump to 6.8% in 2010 from 4.7% in 2009.

Indonesia and India are expected to have the highest increases of 8.8% and 9.7%, respectively. On the other hand, Japan is expected to see marginal increases of 2.1% in 2010.

Europe

For most Western European countries, average salary increase budgets for 2010 are projected to be in line with 2009 growth estimates. The predicted salary increases in Western Europe are expected to vary, with this year’s lowest increases predicted for Switzerland at 1.9% and the highest for Italy at 3.3%.  

In Eastern Europe, the picture is more varied by country. Employees in the Czech Republic can expect salary increases to be 3% in 2010, while employees in Turkey will see salary increases rise to 6.8%, largely driven by high inflation.  

Latin America

According to the news release, varying economic and political conditions across Latin America make it difficult to generalize salary increase trends across the region. For example, significant inflation and mandatory salary increases driven by government and/or unions are contributing to jumps in salary increases in Argentina and Brazil. According to Hewitt’s survey, 2010 salary increases in Brazil are expected to be 5.7%, down just slightly from 2009 (5.9%), while salary increases in Argentina are expected to rise from 13.6% in 2009 to 15.2% in 2010.

Hewitt’s said it found that some countries in Latin America are ahead of the game when it comes to compensation practices. Companies in Mexico, for example, have stabilized salary increases and are now focused on differentiating high-performing and high-potential employees and rewarding them accordingly.

Companies Globally Focus on Variable Pay Programs

While base salary increases continue to lag, more than 80% of companies around the world are offering variable pay programs - or performance-based awards that must be re-earned each year, Hewitt’s global compensation survey of more than 6,000 large companies in 46 countries revealed. Companies that offer a variable pay program anticipate marginally higher spending this year.  

At a time that Hewitt recorded some of the lowest salary increase budgets in its history, variable pay budgets for U.S. companies were at an all-time high. Spending on variable pay as a percent of payroll for salaried exempt employees in the U.S. was 12% in 2009. Hewitt said it projects 2010 budgets to be in line with that at 11.8%.  

In Canada, spending on variable pay as a percent of payroll is expected to drop slightly in 2010 to 9.6%, from 10.1% in 2010.

In Asia, Hewitt’s survey estimates that more than 87% of companies are offering variable pay programs this year. Of those, employers are budgeting 13% as a percentage of payroll for variable pay in 2010, similar to 2009.

Most organizations in Europe (91%) offer variable pay plans - the highest of any other region. Among those, variable pay budgets as a percent of payroll are expected to increase significantly to 12.5% this year compared to 10.5% in 2009.

Hewitt said organizations in Latin America place a high value on variable pay programs. Ninety-one percent of companies in the region offer variable pay plans, with spending as a percentage of payroll expected to be 17.5% in 2010.