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UK salaries grow ahead of inflation, finds Willis Towers Watson

UK wages are set to rise by an average of 2.9% in 2016, following an average increase of 3% in 2015, according to Willis Towers Watson’s latest Salary Budget Planning report.


Against a backdrop of two years of comparatively low inflation (expected to average 0.4% this year), the report shows UK workers at all professional levels continuing to feel less pressure on disposable income, as salary increases outstrip inflation, giving an average real salary increase of 2.5%.


Iain Nichols, senior consultant in Willis Towers Watson’s Data Services Practice for EMEA, said, “It is no longer the case that inflation solely drive salary budgets. Pay growth is increasingly affected by factors such as competition for talent, economic growth expectations, affordability and performance.”


The report provides salary increase budget information for a large selection of economies across the globe, as well as projected inflationary and country GDP movements for the same period of time. The UK’s predicted salary rises were consistent with Germany, but higher than pay rises in other European countries including the Netherlands (2.5%), France (2.3%), Spain (2.0%), Portugal (2.0%) and Switzerland (2.0%).


When inflation figures are taken into account, Germany and Sweden are offering the highest average real pay rises in Western Europe, both at 2.6%, just above the UK’s rate of 2.5% and well above the Western Europe average real-pay rise of 1.9%.


Across Europe, the Middle East and Africa (EMEA), the report highlights countries where real pay differs significantly to the regional average. Lebanon has the highest pay increase at 7.1%, whilst Zambia has the lowest at -13.6%.  For Central and Eastern Europe, Poland is highest with a 3.1% real-pay increase projected for 2016 and at the other end of the spectrum is Kazakhstan at -5.1%.


On a global level, the report shows employees in Asian countries are predicted to benefit from some of the highest pay rises with a regional average real-pay increase of 3.8%, followed by EMEA at 1.9% and Latin America at 1.8%. North America has some of the lowest projected increases at an average of 1.6%.


Nichols commented, “The high salary increases in Asia are partly fuelled by significant pay increases in China, but with further consolidation of the Chinese economy we should see the regional average drop to match other major world economies. Equally the uncertainty caused by the US election may be supressing wage growth in North America which we would therefore expect to pick up next year, once certainty returns to the market.”


The General Industry Compensation Survey Report, which includes actual and target amounts paid for all employee salaries, allowances and bonuses, suggests that a similar rate of salary growth is likely to be maintained into 2017. The research reveals, however, that pay growth could be greater for certain skilled jobs with a smaller talent pool such as digital professionals.


Tom Hellier, GB leader of Willis Towers Watson’s Reward practice, added, “In an increasingly global and fast-moving talent market, effective use of the company’s salary budget should be high on reward professionals’ agendas. Identifying key talent, for not only technical skilled roles but also for the skills necessary for succession planning, is essential to the long-term heath (sic) of any company. By segmenting and differentiating to meet organisational and employee needs it is possible to ensure companies are offering a total rewards packages that employees value and that will better its chances of retaining and engaging top talent.”


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