Only 3% of European companies plan to increase salaries in line with inflation, study finds | Popgen Tech

Record levels of inflation have pushed up the cost of living in Europe this year, but only a handful of companies will increase salaries in line with inflation, a new study has found.

According to data from British HR company Figures, only 3.4 percent of companies in Europe plan to match salary increases with inflation.

While the figures show that 35 per cent of those companies plan to increase salary budgets in response to rising inflation, the vast majority have not committed to keeping up with the rate of inflation – meaning that for most employees, their pay will not go that far don’t go as it did before.

Of the companies not increasing salaries in response to inflation, one-fifth said they would stick with their current pay structures, while 44 percent said they were holding off for now to see what the economic outlook held further down the line. the line.

Almost half of the companies surveyed plan to cap any budget increases at 5 percent.

The companies most likely to raise salaries in response to inflation were larger, more established companies, while smaller companies and startups were most likely to hold back.

“Our research shows that business leaders are divided on how to deal with inflation on a global scale, and with so many options on the table – from bonuses to salary increases, benefits and more – it’s no wonder,” says Virgile Raingeard, CEO and co. -founder of Figures.

“Organizations cannot tackle inflation, but they can tackle how they respond to it with a robust plan built on communication, metrics, processes and education.

“In such a critical period, the actions organizations take now will determine their future. Those who fail to act are likely to lose the confidence of their workforce – not to mention their workforce itself.”

For the study, Figures spoke to leaders of companies in countries such as France, Germany and the UK

HR company Oyster decided to conduct twice-yearly salary evaluations.

“We’ve seen employees ask more about whether salaries will be adjusted due to inflation, citing the impact on their daily lives, and the concern that without a salary change their purchasing power will be reduced,” says Kim Rohrer, head of People Experience at Oyster.

“The biggest challenges we have to think about are scalability and sustainability – how can we continue to compensate competitively and fairly without simply reacting to market changes?”

Julio Hailu, head of people and culture at AREX Markets, told the Figures researchers that his company is focused on minimizing employee turnover due to salary issues – but it’s a balancing act.

“My biggest concern is being able to maintain my staff’s spending power while I’m on a tight budget – either you can afford it or you can’t. We can’t lose sight of the fact that businesses are also bearing the brunt of the current situation, ” he said.

Keep up with inflation

Inflation has run rampant in Europe this year. In the eurozone it reached 10.7 percent in November, while in the UK it fell to 10.7 percent from a 41-year high of 11 percent the previous month.

But as inflation increases, along with the cost of living, rising wages can cause a wage-price spiral, meaning that when employees receive a wage increase, they demand more goods and services, which pushes prices even higher.

In the International Monetary Fund’s economic outlook for October, the risks of a spiral are contained – so far due to the central bank’s tighter monetary policy and falling real wages.

Almost half of the companies surveyed intend to increase budgets by 3-5 percent – well below inflation.

One third of the companies aim to increase budgets below 3 percent, and 15 percent increase it between 5-10 percent.