A recent study predicts salaries will rise sharply in emerging markets but remain flat in developed countries. This means finding other ways to keep workers motivated.
With salaries in 2013 expected to rise sharply in emerging markets yet remain flat in developed countries, talent managers are faced with two distinct roles to play in helping the company engage and retain talent. They must take into account local pay realities if they are going to be effective. What works in Europe may not address the challenges of China.
According to a December 2012 study by global management consultancy Hay Group on global salary increase expectations, there will be a clear disparity between developed and emerging economies in 2013. The study, which drew on data from reward professionals in more than 20,000 organizations worldwide, showed that almost no countries in Western Europe or North America were expecting increases of more than 3 percent. In Ireland and Greece, no increases are expected. By contrast, in emerging markets, expectations for salary increases are consistently above 5 percent, reaching 9.5 percent and 10.5 percent in China and India, respectively.
These clear differences in pay strategy suggest that talent management priorities should be adjusted depending on location — a particularly important insight for organizations with a large international footprint.
Emerging Markets: Help Employees Move Up the Ladder
Emerging markets have seen consistently high pay increases for most of the last decade. Turnover has also been high. Significant economic growth has translated into substantial increases in employment opportunities, allowing employees to easily secure alternative employment. In developing nations, average tenure is often only 18 months, compared to about four or five years in many European countries. This competitive economic climate has led to fears of an expensive “arms race” for talent in markets like China, as salaries for many management levels approach those in the U.S.
Given their adverse effect on turnover, these levels of pay increases are unsustainable in the medium- to long term. To compensate, talent managers will play an integral role in helping companies attract and retain talent without merely relying on cash. Helping people move up the ladder quickly is critical. If employees don’t get the career moves they want, competitors will soon be offering a better and, most likely, better-paid position.