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3 per cent pay rises forecast next year in the UK according to ECA International

  • Rising inflation in the UK set to limit real* wage increases in 2016 compared with 2015
  • UK real wage increases below global average next year

Companies in the UK are forecasting 3 per cent pay rises for staff in 2016, according to the latest Salary Trends survey by ECA International, the world's leading provider of knowledge, information and technology for the management and assignment of employees around the world.

“The 3 per cent wage increases next year in the UK continues the trend we have seen over the past five years. The United Kingdom's economy continues to grow at a respectable rate with inflation expected to rise next year to 1.5%. However, this rise will likely limit UK based employees’ salary increases to just 1.5 per cent in real terms next year, down on this year’s 2.7 per cent.”

- Mark Harrison, Manager, Remuneration Services, ECA International

ECA's Salary Trends Survey reports current and projected salary increases for local employees. It provides information on ‘real’ pay rises by factoring in inflation rates. This year, it is based on information collected from 336 multinational companies across 70 countries and regions.

Global markets

According to company predictions from around the globe, wages will rise 5.1 per cent on average in 2016, slightly up on this year’s 5 per cent average. In terms of ‘real’ salary increases, i.e. once inflation has been factored in, the global average is forecasted to be 1.7 per cent, which is similar to last year’s average of 1.5 per cent.

Companies in Venezuela are forecasting the survey's highest nominal pay rises in 2016. Employers there are predicting 60 per cent pay rises for staff next year on average. However, once inflation of over 204 per cent has been factored in, employees will actually experience the largest global decrease in spending power in 2016.

The lowest forecasted nominal salary increase is expected in Greece in 2016, companies here anticipate a 1.5 per cent increase compared with Europe’s 2.8 per cent average. There are no particular surprises with Greece’s inclusion here with their well-publicised sovereign debt crisis. In 2016, real wage rises are expected to average 1.4 per cent in Europe, which is actually a decrease from 2015’s 2 per cent average increases. Romania is forecasted to have the largest real salary increase in Europe, ranked 5th in the global rankings with an expected increase of 4.7 per cent. Although the forecast of 0.2% deflation for 2016 is a concern, the country continues to reap dividends from the economic openness provided by previous reforms, and notable progress has been made with curtailing political corruption.

Forecasts for 2016 salary increases in Ukraine fall below the expected rate of inflation; a real-terms wage decrease is therefore predicted, at -4.2 per cent. The Ukrainian revolution and subsequent Russian invasion created economic turmoil and forced the Ukrainian government to greatly devalue the hryvnia. The weaker currency immediately inflated import prices and added to product shortages, resulting in a rapid inflation-rate rise to more than 50% in 2015. Although likely to remain elevated, inflation is nevertheless expected to decline significantly in 2016, reducing upward pressure on wages.

In mainland China, companies are planning to award 8 per cent salary increases next year. Even after inflation, staff in China will be the second best off globally in 2016: they can expect to see increases of 6.2 per cent in real terms. Despite its recent slowdown, China remains among the fastest-growing economies in the world with well-developed supply chains and cheap labour making it the primary destination for foreign investment in the developing world.

On average, salaries in Asia are expected to increase by 6.8 per cent in 2016 with the largest uplifts being given in Pakistan and the lowest in Japan. After a short period of inflation in Japan, the IMF is predicting a renewal of the trend towards deflation throughout 2016. It appears that the government’s efforts to raise wages in recent years, to encourage spending, may not be sustainable and Japan should continue to see small salary increases.

In terms of real salary increases, it is staff in Vietnam that will experience the highest regional and global real wage increase in 2016 of 7 per cent. Real wage rises in Asia will average 3.1 per cent in 2016 – higher than all other regions surveyed.

In the US and Canada, companies are predicting 3 per cent wage increases – the same as this year’s uplifts. Staff in Australia can expect to receive 3.5 per cent uplifts in 2016 while employees in the Middle East are set to see wages rise 5 per cent on average.

*’Real terms' refers to wages that have been adjusted for inflation. Forecast inflation rates are based on information from the International Monetary Fund.

Real and nominal salary increase forecast - European rankings
Countries Europe rank real wage increase 2016 Europe rank nominal salary increases 2016 Global rank  nominal salary increases 2016 Global rank real wage increase 2016
Romania 1 4 36 5
Bulgaria 2 6 47 18
Switzerland 3 21 66 19
Poland 4 6 47 22
Italy 5 13 57 27
Germany 6 10 54 28
Serbia 7 3 26 32
United Kingdom 8 6 47 36
Greece 9 25 70 38
Sweden 10 13 57 39
Czech Republic 11 12 56 41
France 12 18 63 42
Hungary 13 5 43 46
Austria 14 10 54 47
Netherlands 15 13 57 48
Spain 16 21 66 49
Slovakia 17 13 57 50
Belgium 18 20 65 54
Irish Republic 19 18 63 57
Norway 20 6 47 58
Finland 21 21 66 60
Denmark 22 13 57 61
Portugal 23 21 66 62
Russia 24 2 12 65
Ukraine 25 1 5 67 
Nominal and real salary increase forecast rankings - Global top 20
Countries Global rank nominal salary increase 2016 Global rank real salary increase 2016
Venezuela 1 70
Argentina 2 17
Ghana 3 69
Pakistan 4 3
Vietnam 5 1
India 5 6
Bangladesh 5 9
Egypt 5 44
Ukraine 5 67
Nigeria 10 64
Indonesia 11 8
Sri Lanka 12 4
Russia 12 65
China 14 2
Kenya 14 21
Brazil 14 31
Turkey 14 52
Myanmar 18 68
Kazakhstan 19 66
South Africa 20 55
 

-ENDS-

Notes to Editors

◾Venezuela and Argentina have been excluded from global averages as they skew the average; their reported salary increases were 60 per cent and 28 per cent respectively.
◾Ukraine has been omitted from the European average as the 2015 real wage decrease of -41.4% skews the average.

About ECA International

Recognised since 1971 as a world authority in its field, ECA is a leader in the provision of knowledge, information and technology to inform, guide and support managers handling compensation and benefits for international workers moving around the world. ECA offers organisations of all sizes an unrivalled portfolio of data, calculation aids, salary management software, reports, guides, surveys and consultancy to help them structure and manage their international rewards programmes for long-term, short-term and permanent moves.

About ECA's Salary Trends Survey

The information above was taken from ECA's Salary Trends Survey 2015/2016. The survey reports current-year salary increases for local national employees and the anticipated increases for reviews in the forthcoming year. It is based on information collected from 336 multinational companies for 70 countries. Reports are available free to all participants or for purchase either as a set or individually per country for non-participants from ECA's online shop. Information regarding ECA surveys can be found on the website.

Data is based on increases including merit. Including merit is the total salary increase and represents general cost of living/inflationary increases plus performance/merit related increases. The data above was collected from August to September 2015. The survey included data from all seniorities across the following industry groups which included Petrochemicals & mining; Chemical & pharmaceutical; Transport & logistics; Manufacturing & consumer goods; Legal & professional services; Engineering & technology; Retail, leisure & other services; Banking & insurance; Non-Profit.

Follow ECA on twitter: @ECAintl

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