• Global pay slowdown set to hit next year
  • UK employees caught between flat pay and rising inflation
  • Ireland shows positive signs of recovery

Salary rises across the world are set to decline in 2014, according to the latest salary forecast data from global management consultancy, Hay Group.

Globally pay will increase by 5.2% on average – largely driven by robust growth forecasts in emerging markets – representing a 0.3% decline compared to last year’s forecasts.

Employees in Europe are expected to see an average pay rise of 3.1% next year – one of the lowest figures anywhere in the world and 0.2% down on last year’s forecast.

Even in this subdued environment, UK employees will experience pay increases (2.5%) significantly below the global and European average – a drop of 0.5% since 2013. And with inflation set to reach 2.7% next year, workers face a squeeze on real pay.

However, there is slightly better news for Ireland. Following 3 years of 0% rises, salary increases are set to grow to 0.8% in 2014 – in line with recent reports that the country is emerging from recession.

David Smith, consultant at Hay Group, comments: “Although it’s pleasing to see the recent economic growth figures, it’s clear that businesses are remaining cautious when it comes to setting pay. Although the gap is closing within some industry sectors, salaries have now not kept pace with the cost of living for several years.”

Hay Group’s research is based on the salary expectations of more than 22,000 organisations in more than 100 countries worldwide, representing 15 million employees.

To see all global pay forecasts, please see our infographic.

2014’s winners and losers

In the Middle East pay rises have stabilised but forecasts are down on 2013. The average rise forecast is 5% – down 0.5% on last year.

North America is forecast to see rises of 2.7% in 2014, compared to 2.9% last year.

Meanwhile, Venezuelan employees look set to receive the biggest wage increases at 27%. Yet, with inflation predicted to reach 36.4% in 2014, employees will actually feel a significant cut in real income.

Salaries in Asia are expected to increase by an average 7% – 0.2% less than the rise in 2013, reflecting slowing but still strong economic forecasts. The highest increases will be seen in Vietnam (11.5%), India (10.9%), Indonesia (10%) and China (8.6%).

David Smith comments: “Pay decisions will continue to be driven by a range of factors.  Despite the economic growth many are seeing, organisations continue to walk a fine line between carefully managing the pay bill and ensuring that reward arrangements motivate and engage employees.

“As the cost of living continues to bite for many employees, there is a need for organisations to be creative about how they reward their people. Many organisations are thinking more about the wider benefits package, the design of their pay system, and the other, more intangible drivers of engagement too.

“Developing clear career pathways, nurturing key talent and creating a buzz around the company’s vision can also play a key role in engaging and retaining employees over the long-term.”