Monitoring salary trends around the world is important for managing both local and expatriate pay. Research Analyst, Charlotte Harris, reports on the results of this year’s survey.
ECA’s latest Salary Trends survey found that salaries around the world have increased by 4.8% on average for local staff in 2015. At the time of the 2014 survey, the predicted global average salary increases for 2015 were 5%. The marginal difference between the forecast and actual global averages for 2015 indicates that global events have not had a significant impact on salary increases in 2015. In fact, 38% of the country results were within 0.1% of the predicted increases in 2014. While the overall picture is stable, regional differences are apparent, and for some countries, deviation from the global average is considerable.
Local staff in Europe have seen 2.9% average salary increases in 2015. Factoring in inflation, the average real wage increase is 2%. A number of countries are experiencing deflation - Bulgaria, Greece, Poland, Romania, Slovakia, Spain and Switzerland – but positive salary increases persist in some, resulting in high real wage increases. Local employees in Romania, Bulgaria and Poland have therefore enjoyed the highest real wage increases in Europe in our survey.
At the other end of the spectrum, the tension between Russia and Ukraine continues to have an impact on the economies there. In response to client demand, ECA performed an interim review in March for Russia, when inflation had spiked and was set to continue. In October, annual inflation for 2015 was forecast at 15.8%, leaving local staff worse off by -7.8%. In Ukraine, despite nominal salary increases of 8.5%, exceptionally high inflation rates of 50% in October led to a -41.4% loss of real income for local staff in 2015.
Unexpectedly low inflation in Vietnam has led to staff experiencing the highest real wage increases in the region. When the 2014/15 survey was published, the IMF predicted 5.2% annual inflation for the coming year. In October 2015, annual inflation was significantly less than this forecast rate, with the 2015 figure at 2.2%, meaning that with the 10% average nominal increases received, local staff benefitted from a higher than expected real wage increase of 7.8% in 2015. Inflation is predicted to remain low in 2016, and anticipated increases indicate that staff will receive another large real wage increase unless companies react faster to the changing situation. Inflation has continued to fall from the 18.7% highs reached in 2011, but annual nominal salary increases have remained (and are predicted to remain) at or above 10%.
Excerpt from ECA’s Salary Trends Survey 2015/16 - Vietnam
China has been dominating headlines with a fall in growth in 2015, unsettling markets around the world. Whereas in 2014 local staff in China were experiencing the highest real wage increases in the region, this is not the case in 2015 with local staff in Vietnam and Pakistan receiving higher real wage increases. Thailand, having experienced deflation in 2015, has moved up in the regional ranking for real wage increases as well. However, inflation there is expected to return in 2016 and real wage increases are expected to be smaller than this year’s 6.4%.
In general, the average real wage increase in Asia in 2016 is expected to be marginally lower than in 2015, with a decrease from 3.7% in 2015 to 3.1% in 2016. However, Asia is still forecast to have the highest real wage increases next year according to our survey findings, higher than all other regions surveyed.
Africa and Middle East
Salary increases in the Middle East have slowed since 2014, with the average increase for the region at 4.4% in 2015. Lower-than-inflation pay increases of 3% in Kuwait in 2015 have resulted in a reduction of real income for employees there. With the price of oil staying low, this is not unexpected. The outlook is more positive for 2016, with anticipated increases set to rise to 5%.
Three new locations were published in Africa this year: Algeria, Ghana and Tanzania. Companies operating in Algeria and Tanzania are following the general trend for salary increases in Africa, with employees benefitting from real wage increases in 2015, and a similar outlook is expected next year. The picture in Ghana is not so positive. Despite nominal salary increases of 11.3%, high inflation has led to a -4.1% loss of real income in 2015, and -4.8% is forecast in 2016. The average nominal salary increase for Africa in 2015 is 7.6%, anticipated to rise to 7.8% in 2016.
Unsurprisingly, nominal salary increases for Latin America were the highest globally in 2015, with an average increase of 14.8%. Venezuela dominates the region, and the overall survey, with the highest local nominal salary increases at 49% in 2015, but these huge increases are dwarfed by the rampant inflation in the country. Local staff faced massive reductions in real pay terms of -110.1% in 2015, and with no sign of inflation slowing down, it is anticipated that this real wage decrease will be even greater at -144.1% in 2016.
There are more positive signs for the rest of the region, with average real wage increases across the region of 2.4% in 2015, not dissimilar to their North American neighbours, Canada and United States, where local staff enjoyed an average real wage increase of 2.5% in 2015.
Our 2015/16 Salary Trends survey found that the overall outlook is generally positive for next year. Of course, situations in countries can change, and as we saw in Russia last year, unexpectedly high levels of inflation can leave companies facing a decision: re-evaluate the situation and provide higher salary increases, or conduct salary reviews more frequently; but as we have seen, the situation can just as quickly cool off and stabilise and it often pays not to react too quickly.
It is anticipated that regional differences between real wage increases will narrow in 2016, with salaries in all regions expected to be close to the predicted global real wage increase of 1.7%.
Oil prices and the energy sector
As well as analysing trends in salary increases on a country level, the Salary Trends survey also provides industry trends where available.
The fall in the price of oil of -42.6% since October 2014, while giving rise to generally lower levels of inflation, has had a negative effect on those within the industry. The dip is being felt by local staff in energy, mining and petrochemical sectors, who are typically receiving lower salary increases in 2015 than those in other industries.
China, while performing strongly overall, sees great disparity between those working in these sectors and the rest of the country. The real wage increase for these workers is forecast to be 3.5% less than the rest of the country in 2016.
This downward pressure can also be noted among the countries surveyed who are members of the Organization of the Petroleum Exporting Countries (OPEC). With the exception of Venezuela, they are offering on average slightly lower increases than the global average, with real increases of 1.4% compared to the global average increases of 1.5% in 2015.
Points to note
- All figures are including merit (i.e. bonus expectations)
- This year, the survey is based on information collected from 336 multinational companies across 70 countries and regions.
- Venezuela and Argentina have been excluded from global averages as they skew the average; their reported salary increases were 60% and 28% respectively.
- Ukraine has been omitted from the European and global averages as the 2015 real wage decrease of -41.4% skews the average.
ECA’s Salary Trends reports are available for 70 countries including newly added Ghana, Serbia, Tanzania and Algeria. Reports include graphical and tabular data plus economic analysis and, where possible, data for specific industry groups. Free to survey participants, they can also be purchased from our online shop either individually or as a full set.