Pay levels in many Eastern European countries are forecast to be among the highest in the world according to a new survey of global pay increases.

21 September 2006

AMSTERDAM - Pay levels in many Eastern European countries are forecast to be among the highest in the world according to a new survey of global pay increases.

Mercers 2007 Global Compensation Planning Report shows that within Europe employees in many Eastern European countries can generally expect to benefit from higher salary increases than their Western counterparts, after inflation. 

The highest pay increases forecast are in Latvia where employees are expected to receive pay increases of 6.8 percent above inflation, which is an increase of 11.1 percent on average, with inflation at 4.3 percent.  Workers in Lithuania can expect increases of 7.3 percent, with inflation at a comparatively low rate of 2.8 percent. However, while employees in Hungary can expect pay rises of 4.8 percent, inflation is likely to be higher at 5.5 percent.

In Western Europe, average salary increases are expected to be highest in Greece for the fourth consecutive year, at 5 percent, with inflation predicted at 3 percent.

Employees in Ireland are forecast to receive large pay rises of 4.5 percent, while inflation is estimated to be 2.5 percent.  In the UK, pay is projected to increase by 3.6 percent, with inflation at 1.9 percent.  Germany is expected to have the lowest pay growth in the region at 2.3 percent, with inflation at 2.5 percent, leaving workers worse off in real terms.

"Demand for low-cost, well-educated employees is increasing in Eastern Europe," said Mercer's Steve Gross. "In particular, the need for skilled workers with marketing, engineering and IT expertise continues to drive up salaries," he said.

The Americas

Despite continued economic growth in the US and Canada, wage inflation remains stable, with salaries in both countries likely to increase by 3.7 percent next year.  However, with inflation at 2.4 percent and 2 percent in the US and Canada, respectively, Canadian employees will fare better overall.

"Since the dot-com bubble burst around four years ago, base pay in the US has remained fairly stable," said Gross.  "Employers continue to be reluctant to increase their fixed pay costs, preferring instead to use variable pay to reward their employees.

Pay rises in some Central and South American countries are forecast to be among the highest in the world but most of these increases will be offset by high inflation rates.  In Argentina, workers can expect pay rises of 11.8 percent, while inflation will be 15 percent.  The survey found salaries in Venezuela will be almost frozen as pay rises of 17.4 percent are predicted with inflation 17.3 percent.

Asia-Pacific

In the Asia-Pacific region, there are likely to be significant variations in salary increases across all countries, with employees in the emerging economies receiving higher increases than their counterparts in more mature economies. Workers in Indonesia are expected to receive an increase of around 11.4 percent and workers in China 7.2 percent. Both countries are popular choices for multinational companies to setting up operations in the region.   Inflation in these countries is likely to be 6.6 percent and 2.2 percent, so in real terms employees in both countries will experience similar increases.

In Australia, average pay is predicted to rise by 4 percent while inflation is likely to be 3.5 percent.

Globally, salaries are expected to outpace inflation by 1.9 percentage points on average.

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