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2008 Worldwide Pay Survey

28 November 2007

Media Release

2008 Worldwide Pay Survey

 Average global salaries forecast to rise by 6 per cent – almost 2 per cent* above inflation

 New Zealand is predicted to experience a salary increase at 3.9 per cent while inflation is likely to be at 2.6 per cent

 Highest pay increases expected in India (14 percent – almost 10 per cent above local inflation), lowest pay increases in North America and Western Europe

 Projected inflation and average pay increases essential in labour sourcing decisions

Global salaries are expected to rise by an average of 6 per cent in 2008 – 1.9 per cent above inflation, while New Zealand can expect a modest increase at 3.9 per cent with inflation likely to be at 2.6 per cent – according to a study by Mercer.

The study of 62 countries worldwide shows a strong correlation between 2008 forecasted inflation and forecasted average pay increases but also reveals wide global variation in both projections.

In the Asia Pacific region pay increases will pick up next year, with actual increases expected to reach 6.65 per cent and increases above inflation reaching 3.3 per cent. India can expect one of the highest pay increases in the world at 14.1 per cent, nearly 10 per cent above local inflation. In comparison North America and most Western European countries will experience the lowest salary increases worldwide.


David Little, who leads Mercer’s information business in New Zealand, said New Zealand will also see relatively modest pay increases over the coming 12 months despite low unemployment and genuine pressures in the labour market.

“There are hotspots in the market where pay increases will be more aggressive such as in the construction and engineering sector. Given the broader market conditions, individuals seeking higher salary increases may need to do so through internal promotion or changing employers” he said.

Steve Gross, worldwide partner and global head of broad-based performance and rewards consulting at Mercer, said: “Some of our clients are experiencing labour cost savings of 75 per cent by sourcing labour from emerging markets. On the flip side, they generally need to invest more in employing supervisory staff and in training.

He added: “We are starting to see that short-term costing savings from sourcing labour in emerging markets can evaporate over time. It is therefore essential for multinational companies to consider both current pay levels and future salary increases when deciding where to source their labour. “

Mr Gross continued: “Some companies that might otherwise be looking at emerging economies to establish their customer services are now reconsidering their options. Immediate cost savings are no longer the only consideration, as short-term affordability might be offset by long-term volatility in labour costs and inconsistent service quality in many emerging markets.

“A US company might decide to locate its call centre in rural America where there is a good work ethic, strong language skills and less competition for labour – and where projected pay increases are lower and long-term cost variations less volatile.”

In Western Europe, Ireland is predicted to experience the highest actual salary increase (4.7 per cent) as well as the highest increase above inflation (2.6 per cent). UK pay is projected to increase by 3.1 per cent, 1.1 per cent above inflation. Projected salary increases remain fairly consistent across Western Europe, with actual increases averaging 3.4 per cent and increases above inflation averaging 1.3 per cent.

In Eastern Europe a different picture is offered as actual pay increase levels are forecast to stay amongst the highest in the world, at an average of 6.9 per cent. Because inflation rates are also expected to remain high in this region (4.6 per cent on average), increases above inflation will average only 2.3 per cent.

Bulgaria is expected to see one of the highest pay increases in the region (9.3 per cent) and with expected inflation rates at 4.4 per cent, pay above inflation is projected at a high 4.9 per cent. At the other end of the scale is the Czech Republic where the average pay increase (4 per cent) is expected to be mostly offset by inflation (3.1 per cent).

Cameron Hannah, worldwide partner at Mercer, said: "We are seeing increased activity amongst European and global companies in relocating labour intensive units, such as shared service centres, to the Eastern European region. This region is becoming more popular due to strong multi-lingual skills, proximity to Western European markets and the rapid escalation of salary levels in popular off-shoring centres such as India."

North America

Modest pay increases and inflation rates are forecast for next year in both the US and Canada, with average salary increases above inflation expected at 1.9 per cent in the US and at 1.8 per cent in Canada.

AsiaPacific

Pay increases in the Asia Pacific region will pick up next year, with actual increases expected to reach 6.6 per cent and increases above inflation reaching 3.3 per cent. India is expecting the highest pay increase in the region at 14.1 per cent, reflecting its buoyant economic growth; its pay above inflation is also projected to be the highest, at 9.8 per cent. Vietnam is also expecting a double-digit actual pay increase at 11.9 per cent, 5.6 per cent above inflation.

In Australia and New Zealand, pay rises are more modest, projected at 4.0 per cent and 3.9 per cent while inflation is likely to be 2.5 per cent and 2.6 per cent.

Copies of Mercer’s 2008 Global Compensation Planning Report are available for USD 780 / € 630 from www.imercer.com/gcpr or from Client Services, Geneva, 41 22 869 3000.

-ends-

Notes for Editors

Data for the 2008 Global Compensation Planning Report covers five levels of employees: Executives, Management, All Professionals (Technical/Professional), Para-Professionals White Collar (Clerical/Technical) and Para-Professionals Blue Collar (Operational). The projected salary increases quoted in this release relate to the average of all employee categories.

*All references to percentage increases above inflation are percentage points above inflation. Where inflation rates are given for individual countries, they are local projected rates for 2008.

Selected countries – 2008 forecast figures (%), ranked by projected pay increase above inflation


Country

Projected average (‘actual’) pay increases Projected inflation rates Projected pay above inflation

Europe
Western Europe
Ireland 4.7 2.1 2.6
Switzerland 2.5 1.0 1.5
Spain 3.8 2.4 1.4
France 3.0 1.8 1.2
Italy 3.1 1.9 1.2
Germany 2.7 1.6 1.1
United Kingdom 3.1 2.0 1.1
Netherlands 3.0 2.1 0.9

Eastern Europe
Bulgaria 9.3 4.4 4.9
Turkey 8.5 4.0 4.5
Romania 8.3 5.0 3.3
Slovakia 4.1 2.4 1.7
Czech 4.0 3.1 0.9

North America
United States 3.7 1.8 1.9
Canada 3.8 2.0 1.8

Asia Pacific
India 14.1 4.3 9.8
Vietnam 11.9 6.3 5.6
China 7.5 3.2 4.3
South Korea 6.4 2.5 3.9
Japan 2.5 0.8 1.7
Australia 4.0 2.5 1.5
New Zealand 3.9 2.6 1.3
Source: Mercer’s 2008 Global Compensation Planning Report


ends

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