The big chill

The big chill

A quarter of the world’s companies are freezing salary increases this year, says a survey by a research company.

April 8, 2009 2:27 by Aarti Nagraj

One in four companies across the world will be freezing salaries this year, according to a survey carried out by employee research company ECA International. The Salary Trends Survey found that salary increases worldwide are expected to fall from last year’s average of 6.2 percent, to around 4.7 percent this year.

The Middle East, however, is not bucking the trend; 40 percent of Saudi-based companies that participated in the study said they will not increase employees’ salary in 2009, compared with 36 percent in the UAE.

Companies that are planning salary hikes, however, are reducing the increases; in the UAE, the salary hikes have fallen from 7 percent last year to 4.8 percent this year, and in Saudi, it has decreased from around 5 percent in 2008 to an average of 3.9 percent in 2009. In both cases, the increases are 43 percent lower than when predictions were made in September, says the survey.

Notwithstanding the slowdown, the survey showed that the region is faring well compared to other places such as Japan, Western Europe, and Singapore, where the average salary increase rate is only 2 percent. In Canada and the US, they are 1 percent and 2.8 percent respectively.

According to the survey, however, countries and regions such as India and South America are still hiking salaries, with Venezuela seeing a 24 percent rise on average, compared to 22 percent last year.

However, the survey adds that despite the apparent reduction in salaries, people could still be making almost the same amount as last year. “One thing to remember is that in the vast majority of locations surveyed, annual inflation figures today are also significantly lower than they were as oil and food prices have fallen from the highs they hit last year,” says Lee Quane, ECA’s regional director for Asia.

“In Singapore and Hong Kong, for example, current inflation is well below figures published six months ago. This means that real wage increases – the difference between actual salary increases and inflation – may not differ significantly from last year. In some locations they are, in fact, higher than they were despite salary increases being lower.”

In the UAE, inflation rates are predicted to fall sharply this year; a recent report by Standard Chartered bank said that the rate could fall from a calculated 20 percent in 2008 to 2.5 percent in 2009.