By Daniel Hunter

Stagnating economies across Europe can expect only modest salary rises in the new year, whilst the region’s emerging markets will see wages rocket, according to the latest pay forecast data from global management consultancy, Hay Group.

Average pay rises across the region are set to remain subdued in 2013 (3.3 percent compared to 5.5 percent in 2012) as European countries continue to feel the effects of the euro crisis. However, a closer look reveals a ‘two-speed’ trend in Europe.

Across Western Europe, many developed countries will only marginally increase pay next year. And, of those that plan to increase pay, nearly two thirds will fall below the European average.

Greece and Ireland will be particularly hard hit (zero percent wage growth), and increases in Germany, the UK (both 3 percent) and France (2.5 percent) will be subdued.

Yet in Europe’s emerging countries, pay will climb significantly next year, with fast growing economies such as Ukraine (10 percent), Russia (9 percent), and Turkey (8 percent) bucking the trend with inflated pay increases.

Hay Group’s research is based on the salary expectations of more than 20,000 reward specialists in 69 countries worldwide, representing 14 million employees.

Ben Frost, global product manager at Hay Group, comments: “Employees in developed markets face a tough year ahead, with pay rises falling behind — or barely outstripping — inflation.”

“In times of slow growth, organisations in these countries are keen to minimise cost and drive productivity. However, they must still ensure that staff are rewarded appropriately and that remuneration budgets are used wisely — leaders must communicate effectively with staff and be creative with the benefits on offer.”

Global state of pay

Latin American firms are set to be the big spenders of 2013, with average pay rises of nine percent expected across the region.

Venezuela will enjoy the highest pay increases (29 percent) in the region (and globally) and Argentinian organisations will also implement considerable wage hikes (24.5 percent) — driven largely by rising inflation.

At the other end of the spectrum, pay in North America will climb by just 2.9 percent — the lowest of any global region — with Europe not far behind (3.3 percent).

In Asia, pay will rise by some 7.5 percent in 2013 and, interestingly, the ‘two-speed’ growth trend apparent in Europe is mirrored in the region, as wage rises in the emerging generation of high growth Asian economies (e.g. Vietnam: 12.8 percent; Indonesia: 10.6 percent; the Philippines: eight percent; and Malaysia: 6.2 percent) outstrip those of their colleagues in more developed countries (e.g. Japan: 2 percent).

China is the biggest surprise, as the intensifying ‘war for talent’ will see wage hikes of 9.5 percent in 2013, despite slower economic growth (up 1.1 percent on last year).

Organisations in Africa and the Middle East are also planning significant pay rises next year (5.2 percent on average).

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