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back to index backEUROtalk November,  2005


Salary Hike 2006: Greener pastures in Eastern Europe and Asia Pacific

Looking for "greener" pastures? Try Eastern Europe or Asia Pacific – countries in these regions are increasing pay at the most rapid rate worldwide.

Mercer's 2006 Global Compensation Planning Report forecasts a significant rise in salaries in parts of Eastern Europe and Asia Pacific. The report covers 70 countries around the world, with information on economic and salary increase trends as well as observations on GDP, inflation, and employment indicators.

In Eastern Europe, salary increases will be relatively higher than in previous years, at 4.7% this year and 5% in 2006. However, salary hikes will remain stable in Western Europe, at an average of 3.5% this year and 3.4% in 2006. Ireland, Greece, and Luxembourg register the highest economic expansions.

Asian economies have enjoyed across-the-board growth over 2004 and the outlook for end-year 2005 is healthy. The region's economic growth rates for 2005 are forecast to range between 1.6% and 9.0%.

The Middle Eastern economies are also progressing, demonstrating sustained growth throughout 2004. Countries in this region lure nationals as well as expatriates by announcing high salary hikes. In April 2005, the President of the United Arab Emirates (UAE) ordered a 25% salary hike for UAE nationals and 15% for expatriates.

In the US, organizations continue to remain cautious in their approach to pay increase budgets for 2005. Pay increases are expected to be 3.6% for 2005 and are projected to remain constant at 3.6% for 2006.

Projected 2006 annual base pay increases and inflation rates

– ranked by projected pay above inflation (%)

Top ten ranked countries

 

  Region

 Country

2006 Projected Pay increase
rates

2006 Projected Inflation
rates

Projected Pay above
inflation

Asia Pacific

India

11.3

4.0

7.3

Middle East

Egypt

12.0

4.9

7.1

Eastern Europe

Lithuania

8.5

3.0

5.5

Eastern Europe

Estonia

7.5

2.5

5.0

Eastern Europe

Bulgaria

8.4

3.5

4.9

Asia Pacific

China

7.8

3.0

4.8

Latin America

Guatemala

10.0

5.7

4.3

Asia Pacific

Indonesia

11.3

7.0

4.3

Asia Pacific

South Korea

7.2

3.0

4.2

Eastern Europe

Serbia & Montenegro

12.0

7.8

4.2

 

Americas

Guatemala tops the American countries with a pay increase after inflation of 4.3%, while Nicaragua comes last in the rating with 0% increase after inflation. Attracting and retaining key talents are the buzz words in the US. Job families already gaining attention include IT, Accounting & Finance, Sales & Marketing, and Engineering. The number of organizations reporting salary freezes fell from 5% in 2004 to 2% in 2005.

Asia Pacific

Supply of skilled talent remains a hot issue for the Asian region. Mercer's latest Asia Pacific Compensation Forecast Report found that talent pool is in limited supply, particularly in China. Candidates with differentiated skills and experience can command market premiums beyond what most of the companies pay, resulting in upward price spirals. This situation is a common occurrence in the Asian markets where multinational corporations are aggressively expanding and working towards a growing market share. India tops the Asian countries in pay increase with 11.3%.

Europe

The European Union, now counting 25 members, has brought new challenges, since countries in the eastern wing must be able to compete and uphold economic prospects.

In Eastern Europe, salary increases for management employees will be relatively higher, at 4.7% this year and 5% in 2006. However, increases remain stable in Western Europe, at an average of 3.5% this year and 3.4% in 2006.

Middle East and Africa

Of the four Middle Eastern and African countries covered by the report (Egypt, Israel, South Africa and UAE), Egypt tops the list with a 7.1% real salary increase, which is also the second highest worldwide. Israel comes out the lowest with salaries rising only 2.5%, which represents only 0.7% after inflation.

Key areas of the report

Mercer's 2006 Global Compensation Planning Report includes analysis and interpretation on economic and salary increase data. Salary figures and forecasts are based on Mercer's Total Remuneration Surveys (TRS) and country compensation databases.

Some of the key areas included in this report are:

* Regional overview
* Country analysis
* Economic data
* Pay increase trends
* Inflation outlook
* Compensation trends


For more information on the 2006 Global Compensation Planning Report, please contact us.

Source: Mercer HR Consulting - GAI


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