WHAT PAY RISE SHOULD YOU EXPECT NEXT YEAR?
For many organisations, it's time to start thinking about 2015 budgets and, for HR, this means recommending next year's salary increases, which will hopefully result
in a bumper pay rise!
But do you really know what factors human resources (HR) considers for the budget? Is the process shrouded in secrecy as the HR department works their dark magic behind closed doors, with zero transparency in the process? If this sounds all too familiar, then read on.
The fact is that those of us working in the fast moving Middle Eastern job market can become a little unrealistic about what to expect. With governments in the region sometimes putting forward pay adjustments of up to 80% for nationals in the public sector, the standard pay rise offered to expats can seem a little miserly. However, if you offer a 4% rise to a worker in other parts of the world, for example, the European Union, chances are they will snatch your hand off having been frozen out of pay rises in previous years. It is also worth remembering that pay rises are not an entitlement and your company will only provide them if the business can afford to do so. With this in mind, what budgets are to be expected and what factors are considered?
Aligning to market
Firstly, your salary increase is meant to be aligned to the market. The theory is that good HR functions regularly test this by reaching out to professional firms for benchmark studies, which reflect “the market” (in essence, what other companies will do).
This data is based on pulse surveys which will collect salary increase budgets of all participating organisations provided by HR. For example, in Qatar, the consulting industry estimates an average pay increase of 5.2%.
Secondly, external economic factors such as the rate of inflation will influence salary increases. In Egypt for example, inflation is around 10% which is reflected in the salary increases, as these are meant to cope with the increased cost of living. Another influential factor is the overall economy measured by GDP growth. A positive number suggests that the overall economy is doing well. So will everybody in Qatar receive a 5.2% pay rise? Possibly, but more likely the answer is ‘no', as there are other factors that influence the final distribution of salary increases.
The CEO and board members will have the final word on salary increases. The task for HR is to come up with a reasonable recommendation but it's not untypical that these recommendations will be revised due to changes in the organisation. The 2014 budgets projected this time last year were around 5.6% overall, however, the actual increases were only 5%. This year, the projections of 5.2% seem to be a bit more conservative, but more in line with the actual 2014 increases.
However, even if the CEO and the board sign off on the HR recommendations, it is still possible that you'll receive a lower pay rise. This could be because the pay rise pool was diverted away to more deserving cases who trumped your needs! Typically, those who are new in a role will get paid less than those who have experience; however, as contribution levels increase, salaries should become comparable over time which is achieved via bigger pay rises – or your company rewards the best performers exceptionally well, which would be taken out of your bonus pool.
Overall, it is important to be prepared for your salary increase discussions by keeping in touch with the latest economic figures and numbers published in the newspaper from credible sources. Stated facts are a much better source of information than anecdotal references of what your friends at other companies may or may not have gotten