India tops global pay increases

Overall global raises will surpass inflation: Mercer

Global salaries are expected to rise by an average of six per cent in 2008, 1.9 per cent above inflation, according to a study by Mercer.

Of the 62 countries surveyed, India will see some of the highest pay increases at 14.1 per cent, nearly 10 per cent above local inflation, reflecting its buoyant economic growth.

North America and most Western European countries will experience the lowest salary increases worldwide.

"Some multinational companies 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," Said Steve Gross, worldwide partner and global head of broad-based performance and rewards consulting at Mercer.

"We are starting to see that short-term cost 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."

In Western Europe, Ireland is predicted to experience the highest increase at 4.7 per cent, 2.6 per cent above inflation. Overall, 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 actual pay increases are forecast to stay among the highest in the world, at an average of 6.9 per cent. But 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.

"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," said Cameron Hannah, worldwide partner at Mercer.

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

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.

2008 forecast figures ranked by projected pay increase above inflation

CountryProjected average pay increases (%)Projected pay above inflation (%)
India 14.1 9.8
Vietnam 11.9 5.6
Bulgaria 9.3 4.9
Turkey 8.5 4.5
China 7.5 4.3
South Korea 6.4 3.9
Romania 8.3 3.3
Slovakia 4.7 2.7
Ireland 4.7 2.6
United States 3.7 1.9
Canada 3.8 1.8
Japan 2.5 1.7
Switzerland 2.5 1.5
Australia 4.0 1.5
Spain 3.8 1.4
New Zealand 3.9 1.3
France 3.0 1.2
Italy 3.1 1.2
Germany 2.7 1.1
United Kingdom 3.1 1.1
Netherlands 3.0 0.9
Czech 4.0 0.9

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