One-Quarter of Global Businesses Plan 2009 Pay Freezes

By Mike Caggeso
Associate Editor
Money Morning

Despite signs of the global economy warming, businesses around the world are curbing salary increases - with more than a quarter of them planning to freeze salaries in response to the global financial crisis, according to a global survey.

Salary increases are expected to clock in at 4.7% this year, down from the 6.2% they rose last year. About 40% of U.S. businesses plan pay freezes, and about half of Japan's businesses will do the same, according to ECA International, an HR research firm that conducted the 53-country survey.

Japan joins Asian neighbors Taiwan, Hong Kong and Singapore as some of the biggest downward salary adjusters. Businesses in the Asia Pacific region will average a 4.8% pay increase, more than a 30% decline from the raises they doled out last year.

"Asia Pacific has been severely affected by the economic downturn and this is reflected in how companies have planned their salary reviews in 2009," said Lee Quane, ECA's Regional Director for Asia. "This is most evident in Japan. Just over six months ago, companies operating in Japan were forecasting that salaries would increase by a relatively healthy 2.8%, now half the companies we spoke to said they will be freezing pay."

ECA's survey - conducted annually - monitors how changing economic conditions have affected companies' business plans. Businesses use the results to help gauge company salary levels in local markets, or against international competitors.

Despite grim results in the United States and Japan - the world's largest two economies - some economies are projecting large salary increases.

Wage increases in India are expected to be the highest at 10.8%, followed by Vietnam (10.6%) - the only location in the region where rises are still higher than last year - and Indonesia (9%).

"There is still a huge demand for talent in India which is keeping salary increases high despite the current economic situation. While in Vietnam and Indonesia persistently high levels of inflation are keeping increases up," Quane said.

North and South American Salaries

While 40% of U.S. companies plan freezes, the others are planning average salary increases of 2.8%, down from the prior prediction of 4%. Canadian companies are slashing raises by 75%, from 4% last year to 1% this year.

In South America, however, wage increases are only 13% lower than forecasts made last year. While workers in most economies witness lower wage growth than in 2008, salaries are anticipated to increase at a higher rate than last year in some South American economies, namely Brazil, Chile, and Venezuela, the ECA's survey said.

Venezuela and Argentina are planning the highest nominal wage increases, 24% and 12% upward adjustments, respectively - partially a result of high inflation resulting from domestic economic policies.

Rounding out the survey, the 10 countries with the highest salary increases are: Venezuela, Argentina, India, Vietnam, Egypt, Indonesia, Russia, Romania, South Africa and Latvia.

The 10 countries with the lowest salary increases are: Japan, Lithuania, Irish Republic, Canada, Switzerland, Sweden, Taiwan, France, Singapore, Hong Kong.

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