By Daniel Hunter
Lower-skill and process-based jobs in the UK remain vulnerable in the face of continued popularity of Central and Eastern (C&E) European countries as major outsourcing and shared services destinations according to research by Towers Watson.
Towers Watson’s General Industry Compensation Report shows that despite the fast economic development of many countries such as Poland, Romania, Bulgaria and Hungary, wages for low-skill business functions still remain between two and four times lower than their UK equivalents.
Despite high wages in the UK, compared to C&E Europe, the report also shows that that wages for commonly outsourced roles are even higher in other Western European countries. Germany, Belgium, France and Ireland in particular offer lower-skilled workers up to 57% higher salaries than their UK equivalents, or up to six and a half times higher than workers in the larger C&E European economies.
The research, to end 2012, focuses on four core business functions that are commonly moved across borders in order for organisations to take advantage of cheaper labour costs. These jobs include clerical, entry-level and experienced professional roles in various finance, accounting and IT development and infrastructure functions.
According to the research a typical account support clerk in the UK can expect to be paid and annual salary of £21,000, this compares to a Western European high of £32,000 pa in Belgium and an equivalent salary in Bulgaria of £5,000. Poland and Romania are similarly competitive with salaries for this role of around £7,000 with Hungary slightly higher at £9,000. The UK is only the sixth highest in Europe for this particular role with the UAE, Germany, Belgium, Ireland and France all offering even higher salaries.
At the higher end of the wage spectrum, an experienced IT professional’s annual salary in the UK averages £42,000, significantly below their German counterpart on £57,000 and ahead of Bulgaria and Romania on £15,000 and Poland and Hungary on £19,000. A similar pattern is seen for other roles, including entry-level accounting professionals, experienced accounting professionals and entry-level IT development professionals.
Darryl Davis, senior consultant in Towers Watson’s Data Services business said: “We have seen strong growth in business process outsourcing (BPO) services in C&E Europe in recent years as wages have remained competitive compared to Western European equivalents and talent pools have been broadly able to keep up with demand. This does leave lower-skilled workers in the UK — as well as other high-wage Western European countries such as Germany, Belgium, France and Ireland — vulnerable as organisations take advantage of lower wage levels elsewhere to make savings.
“However, companies considering this approach should be cautious as nominal wage inflation can be an issue in many emerging C&E European economies. Savings made in the short term may disappear quickly as economic development and high inflation put upward pressure on pay. We have already seen Turkish wages increase significantly in the last few years as workers are able to demand pay increases that keep pace with the cost of living.”
Andrew Steels, Towers Watson’s UK HR Service Delivery Practice Leader said: “Undoubtedly cost savings are a major benefit of outsourcing but it should not be seen as a silver bullet. Firms need to consider what is most important to their company and what positive benefits to the business they will be offering by going down this route. While cost savings may be achieved, many companies risk altering their culture and impacting customer expectations, both external and internal, so decisions of this nature should be carefully thought through.”
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