A competitive labour market and high inflation spur higher salary increases.
The tide may just have turned for remuneration with human resource professionals expecting 2023 to register the highest pay increases in over a decade.
This is according to WTW’s latest Salary Budget Planning Report, which found that local employers are considering average pay increases of 6.1 percent this year. The high number is largely driven by the desire to attract and retain employees in a high inflation and increasingly competitive labour market.
Melanie Trollip, director of work and rewards at WTW South Africa, said, “The forecast pay increases for this year are, however, slightly below inflation, which is common in more challenging economic times.”
“Employers are facing tough choices as they try to control costs during a testing business climate, but also strive to keep their pay levels attractive. Those organisations that succeed will have a clear reward strategy and an understanding of what employees are looking for,” she added.
The WTW report noted that almost 40 percent of businesses expect their 2023 salary budget to be higher than initially expected, while 31 percent are predicting a better business outlook.
“A quarter plan to increase their total headcount over the next 12 months. Half of employers plan to recruit into engineering roles in the next 12 months, while 44 percent are hiring in IT roles, and 44 percent also want more workers in sales,” reads the report.
Participants in the December Salary Budget Planning Survey pushed their 2022 actual increases notably higher than both actual 2021 increases and initial 2022 projections. In fact, 67 percent of organisations reported increasing their total compensation spend in 2022 as compared to 2021.
In mid-2022, companies in the 15 largest economies projected increases of 4.6 percent in 2023, but changed that to 5.5 percent as the year drew to a close. The highest increases forecast are in Belgium (10.5 percent), India (10 percent) and Brazil (7.5 percent).
The report makes particular mention that organisations in countries dealing with hyper-inflation (of 30 percent or more), are factoring in more frequent pay increases, cost-of-living adjustments and even linking salaries or incentive payments to foreign currencies.