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Global Salaries Will Climb, but Only Modestly in North America: Study

The slight increase in North America is not surprising, according to Hay Group analysts, because the U.S. economy is only expected to grow 2.1 percent in 2013.

December 19, 2012

Salaries in North America will rise a modest 2.9 percent in 2013, the lowest of any global region, according to a new salary study from Hay Group, a global management consultancy. Europe is not far behind at 3.3 percent.

In emerging and high-growth markets, Latin America is expected to be the most generous, with a 9 percent average increase in pay. While average salaries in many parts of the world remain much lower than in the U.S., compensation is noticeably rising in some spots, including India (10.5 percent), China (9.5 percent), Russia (9 percent), and Brazil (5.5 percent), according to the report released Dec. 10.

In Latin America, Venezuela is expected to see the highest pay increases (29 percent), followed by Argentina (24.5 percent).

However, the pay increases need to be taken in context, says Iain Fitzpatrick, a global pay category manager for Hay Group, with worldwide headquarters in Philadelphia. Argentina and Venezuela, for example, "are two countries where you're seeing the highest levels of inflation," Fitzpatrick said, noting that inflation rates in those countries could be as high as 20 to 25 percent.

The slight increase in North America is not surprising, according to Hay Group analysts, because the U.S. economy is only expected to grow 2.1 percent in 2013. Fitzpatrick said that North America's salary increases have hovered around the same level for the last several years. However, salary growth in North America is still expected to outpace inflation, which is predicted to increase 2.6 percent.

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

Given that salary hikes will be modest in North America, employers need to focus more than ever on factors beyond salaries to attract and retain employees, Fitzpatrick said.

"As it's often said, people leave bosses, not jobs," Fitzpatrick said. "Companies really need to be focusing on making sure there's a positive environment in which employees can endure and develop. ... The best companies to work for will be doing a better job of communicating and will be doing a better job of developing their people. Therefore, they will have a much stronger employee value proposition."

One simple thing that many companies don't do well is communicating about their rewards, Fitzpatrick said. Instead, many companies leave employees in the dark about what's expected of them and how they can earn top salaries, bonuses and perks from their employers.

Recent Hay Group research has found that 82 percent of what it defines as "the world's most admired companies" take specific steps to communicate rewards to their employees. However, only 50 percent of all companies do so, Fitzpatrick said.

"Clearly, the evidence is there that it's a positive thing to do," he said. "For a minimal cost, companies could do a lot more with communicating their rewards."

Meg McSherry Breslin is a writer based in the Chicago area. Comment below or email editors@workforce.com.