Inflation & Reward Actions 2022 survey by WTW finds inflation, attraction and retention challenges are driving companies to rethink compensation policies
(Boursier.com) — Companies have to deal with a context that is, to say the least, unprecedented and very uncertain: an inflation rate in France of 6.5%, the highest since the mid-1980s, a rate of unemployment at its lowest, especially for managers, and growth that should slow at the end of 2022 and during 2023. In short, contradictory factors making anticipation complicated.
According to the Inflation & Reward Actions 2022 survey conducted by WTW, inflation, attraction and retention challenges are encouraging companies to rethink their compensation policies to attract talent and remain competitive in the market. In addition, the results of the Salary Budget Planning report – July 2022 edition show that globally, 96% of companies have increased salaries and the increase budgets this year reach rates not seen for nearly 20 years. ..
Facing difficulties in attracting and retaining digital talents (79%), executives (57%) and salespeople (55%), more than half of organizations in France have increased the number of their recruitments since the beginning of the year. Increasing emphasis on the non-financial elements of compensation (34%), revising the budget upwards for annual salary increases (35%), and providing additional budgets for one-time increases as needed (30%) are the 3 most common actions that French organizations have considered or plan to introduce to counter inflation and respond to their attraction and retention issues.
In France, the average real wage increase reached 3.1% in 2022 compared to 2.3% in 2021. For 2023, French companies forecast an average increase of 3.3%, or 0.2 percentage point more than the actual increase granted in 2022. The average 2023 increase planned for executives is 3.2% (vs 2.8% in 2022), 3.3% for managers and executives (vs 3, 1%) and for employees and technicians (vs 3%) and 3% for workers (vs 2.8%).
Inflation, attraction and retention issues encourage companies to rethink their compensation policies
In a context where annual inflation in Europe stood at 8.1% at the end of May, more than half of the organizations in France have increased the number of their recruitments since the beginning of the year. Indeed, they are currently facing difficulties in attracting and retaining, this is particularly the case for digital talents (79%), managers (57%) and salespeople (55%).
These issues are pushing companies to rethink their compensation policies and implement other measures in a context of increased observation by various stakeholders. The 3 most common actions that organizations have considered or plan to institute are to increase the emphasis on the non-financial elements of compensation (34%), to revise upwards the budget for annual salary increases (35% ), as well as providing additional budgets for one-off adjustments (30%).
The most frequent adjustments concern employees with a high risk of retention (68%), those with rare/critical skills (68%) and the best performers (64%). 59% of respondents plan to focus on the lowest paid people. Companies that make such adjustments are more likely to do so twice a year or as needed.
“In such a particular context, companies and compensation professionals can take very concrete actions to improve the attractiveness and retention of talent while coping with both economic and labor market tensions. We therefore advise them to identify key target segments where action is required, such as digital talent, etc. Besides reviewing the increase budget allocated in 2022, it is also important that they improve knowledge and skills. managers on compensation-related topics and that they put in place a strategy to listen to employees’ preferences in terms of total compensation” recommends Khalil Ait-Moouloud, Director of the Compensation Surveys Activity at WTW.
2023 salary increase budgets higher than ever…
Worries about a tight labor market (57%), concerns about cost management, such as inflation or rising cost of supplies (57%), and employee expectations and concerns (47 %) are the main reasons that led companies to implement higher actual increase budgets for 2022 compared to those for 2021 and compared to forecasts at the end of 2021.
Indeed, the average real increase in salaries in France reached 3.1% in 2022, compared to a real increase of 2.3% in 2021 and a forecast budget of 2.5% at the end of 2021. This observation is comparable in the 15 largest economies in the world. Indeed, companies have pushed their initial forecasts to higher budgets than seen for nearly 20 years with 34% of companies surveyed indicating that their salary increases were higher than they had forecast a few months earlier. ..
The first forecasts for 2023 indicate that French companies are planning a average increase of 3.3%which is 1 percentage point more than the actual increase of 2.3.0% in 2021 and 0.2 percentage point more than the average increase of 3.1% granted in 2022.
In the UK (4%), Germany (3.8%) and Spain (3.6%), forecast salary increases are in line or higher for 2023 compared to actual increases in 2022. forecast an average increase of 4.1% in 2023, relatively in line with the average real increase of 4.0% in 2022, the highest since 2008, and above the 3.1% in 2021.
This reality can vary relatively according to the main sector of activity of each company… Indeed, the most dynamic sectors in terms of forecast salary increases for 2023 are the finance sector (3.7%), fintech and new technologies (3.6%), as well as the media (3.5%).
Other sectors of activity adopt a more conservative approach such as the agri-food sector (2.5%), leisure and hospitality (2.7%) and banking (2.8%) .
“Indicators highlight that companies are continuing to return to a more normal salary review process this year compared to the 2020 freezes. Today, they are deciding how to focus their compensation spend to achieve the greatest impact and support their employees in the current period of economic uncertainty. This includes monetary and non-monetary actions to attract and retain talent, especially for critical or high-performing talent. Prioritization and segmentation of increases is essential for a return on appropriate investment” concludes Khalil Ait-Moouloud, Director of Compensation Survey Activity at WTW.
Methodology: 2022 “Inflation & Reward Actions” survey
The survey was conducted from May 30 to June 13, 2022. 9.3 million employees and 358 companies on a representative panel responded in France…
Methodology: 2022 “Salary Budget Planning” survey
The survey was conducted from April 26 to May 27, 2022. Around 22,400 responses were received from companies in 133 countries around the world. 627 organizations in France on a representative panel responded…