November 2016 - ERI Economic Research Institutedownloads.erieri.com/pdf/Guide_to_2017_Salary_Increase_Planning.pdf · 2016 Welcome to eRI’s guIde to 2017 salaRy INcRease plaNNINg

2 | ERI’S GUIDE TO 2017 SALARY INCREASE PLANNING | ERI ECONOMIC RESEARCH INSTITUTE | NOVEMBER 2016

November2016

Welcome to eRI’s guIde to 2017 salaRy INcRease plaNNINg

This eBook presents up-to-date compensation projections based on the latest forecast for the world economy and salary increase survey analysis.

ERI Economic Research Institute provides helpful data and insights for planning 2017 salary increases in the United States and global economies.

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3-7 part 1: global 2017 salary Increase Forecast 8-10 part 2: united states 2017 salary Increase Forecast

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Consider key trends from the recent World Economic Outlook as reported by the International Monetary Fund1:

Global growth is projected to slow to 3.1 percent in 2016 before recovering to 3.4 percent in 2017. The forecast, revised down by 0.1 percentage point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union (Brexit) and weaker-than-expected growth in the United States. These developments have put further downward pressure on global interest rates, as monetary policy is now expected to remain accommodative for longer. Although the market reaction to the Brexit shock was reassuringly orderly, the ultimate impact remains very unclear, as the fate of institutional and trade agreements between the United Kingdom and the European Union is uncertain. Financial market sentiment toward emerging market economies has improved with expectations of lower interest rates in advanced economies, reduced concern about China’s near-term prospects following policy support to growth, and some firming of commodity prices. But prospects differ sharply across countries and regions, with emerging Asia in general and India in particular showing robust growth and sub-Saharan Africa experiencing a sharp slowdown. In advanced economies, a subdued outlook subject to sizable uncertainty and downside risks may fuel further political discontent, with anti-integration policy platforms gaining more traction. Several emerging market and developing economies still face daunting policy challenges in adjusting to weaker commodity prices. These worrisome prospects make the need for broad-based policy response to raise growth and manage vulnerabilities more urgent than ever.

Source: 1. International Monetary Fund. 2016. World Economic Outlook: Subdued Demand: Symptoms and Remedies. Washington, October.

GLOBAL 2017 SALARY INCREASE FORECAST

the 2017 projections indicate salary increase budgets throughout the majority of the world between 2.5% and 5.0%.

part 1


projected 2017 salary Increases by country and Historical trendsAn analysis of projections for 2017 salary increases across 72 countries is provided in Table 1 to support businesses in next year’s salary increase budgeting. This table also includes the International Monetary Fund’s updated research on 2015, 2016, and 2017 actuals/projections for unemployment, growth in gross domestic product (GDP), and change in the consumer price index (CPI). These 2017 salary increase projections are based on ERI Economic Research Institute’s extensive database, plus global historical trends and projections. Data from governmental resources, publications, and over 20,000 companies were assessed in this review.

table 1 – 2015-2017 global salary Increase trends with Key economic Indicators

Unemployment Rate2 Gross Domestic Product2 Consumer Price Indices2 Salary Increase1

% Labor Force % Change from Prior Year % Change from Prior Year % Change from Prior Year

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017

Argentina 6.5 9.2 8.5 2.5 -1.8 2.7 - - 23.2 28.0 30.0 26.5

Brazil 8.5 11.2 11.5 -3.8 -3.3 0.5 9.0 9.0 5.4 8.0 7.9 7.3

Canada 6.9 7.0 7.1 1.1 1.2 1.9 1.1 1.6 2.1 2.9 3.0 3.0

Chile 6.2 7.0 7.6 2.3 1.7 2.0 4.3 4.0 3.0 5.3 5.0 4.8

Colombia 8.9 9.7 9.6 3.1 2.2 2.7 5.0 7.6 4.1 - 4.6 4.5

Costa Rica 9.2 8.2 8.1 3.7 4.3 4.3 0.8 0.7 2.6 5.8 5.5 5.1

Mexico 4.4 4.1 3.9 2.5 2.1 2.3 2.7 2.8 3.3 4.7 4.7 4.4

Panama 5.1 5.1 5.1 5.8 5.2 5.8 0.1 0.7 1.5 5.3 5.0 4.7

Peru 6.0 6.0 6.0 3.3 3.7 4.1 3.5 3.6 2.5 - 5.0 4.7

United States 5.3 4.9 4.8 2.6 1.6 2.2 0.1 1.2 2.3 3.0 3.0 3.1

Venezuela 7.4 18.1 21.4 -6.2 -10.0 -4.5 121.7 475.8 1,660.1 54.0 65.0 91.0

Australia 6.1 5.7 5.7 2.4 2.9 2.7 1.5 1.3 2.1 3.4 3.5 3.2

China 4.1 4.1 4.1 6.9 6.6 6.2 1.4 2.1 2.3 8.0 8.0 7.5

Hong Kong 3.3 3.2 3.1 2.4 1.4 1.9 3.0 2.5 2.6 4.4 4.5 4.3

India 3.5 3 3.4 3 3.4 3 7.6 7.6 7.6 4.9 5.5 5.2 10.8 10.9 10.4

Indonesia 6.2 5.6 5.7 4.8 4.9 5.3 6.4 3.7 4.2 9.5 9.2 9.1

Japan 3.4 3.2 3.2 0.5 0.5 0.6 0.8 -0.2 0.5 2.4 2.5 2.5

Malaysia 3.2 3.2 3.2 5.0 4.3 4.6 2.1 2.1 3.0 5.9 5.7 5.7

NewZealand 5.4 5.3 5.5 3.0 2.8 2.7 0.3 0.7 1.6 3.0 3.2 3.2

Pakistan 5.9 6.0 6.0 4.0 4.7 5.0 4.5 2.9 5.2 12.0 11.2 10.7

Philippines 6.3 5.9 5.7 5.9 6.4 6.7 1.4 2.0 3.4 6.8 6.7 6.8

Singapore 1.9 2.0 2.0 2.0 1.7 2.2 -0.5 -0.3 1.1 4.4 4.3 4.3

SouthKorea 3.6 3.6 3.3 2.6 2.7 3.0 0.7 1.0 1.9 5.0 5.0 4.8

Taiwan 3.8 3.9 4.0 0.6 1.0 1.7 -0.3 1.1 1.1 3.5 4.0 4.0

Thailand 0.9 0.8 0.7 2.8 3.2 3.3 -0.9 0.3 1.6 5.6 5.9 5.7

Vietnam 2.4 2.4 2.4 6.7 6.1 6.2 0.6 2.0 3.7 10.4 10.4 10.1

Sources:1. Economic Research Institute2. International Monetary Fund. October 2016. World Economic Outlook Database3. World employment and social outlook: Trends 2016 / International Labour Office. – Geneva: ILO, 20164. World employment and social outlook: Trends 2015 / International Labour Office. – Geneva: ILO, 2015; updated January 20, 2015

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Unemployment Rate2 Gross Domestic Product2 Consumer Price Indices2 Salary Increase1

% Labor Force % Change from Prior Year % Change from Prior Year % Change from Prior Year

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017

Algeria 11.2 9.9 10.4 3.9 3.6 2.9 4.8 5.9 4.8 - 6.5 6.3

Austria 5.7 6.2 6.4 0.9 1.4 1.2 0.8 0.9 1.5 2.6 2.9 2.9

Belgium 8.5 8.4 8.3 1.4 1.4 1.4 0.6 2.1 1.6 2.3 2.5 2.9

Bulgaria 9.2 8.2 7.1 3.0 3.0 2.8 -1.1 -1.6 0.6 - 4.0 4.0

Cyprus 14.9 13 11.6 1.5 2.8 2.2 -1.5 -1.0 0.5 - 1.7 1.8

CzechRepublic 5.0 4.1 4.1 4.5 2.5 2.7 0.3 0.6 1.9 2.0 2.5 2.6

Denmark 6.2 6.0 5.8 1.0 1.0 1.4 0.5 0.4 1.1 2.5 2.6 2.8

Egypt 12.9 12.7 12.3 4.2 3.8 4.0 11.0 10.2 18.2 10.0 10.0 11.0

Estonia 6.1 5.6 5.5 1.1 1.5 2.5 0.1 0.5 1.4 2.8 3.0 2.5

Finland 9.3 9.1 8.9 0.2 0.9 1.1 -0.2 0.4 1.2 1.5 2.3 2.2

France 10.4 9.8 9.6 1.3 1.3 1.3 0.1 0.3 1.0 2.5 2.7 2.7

Germany 4.6 4.3 4.5 1.5 1.7 1.4 0.1 0.4 1.5 2.9 3.0 3.0

Greece 25 23.3 21.5 -0.2 0.1 2.8 -1.1 -0.1 0.6 1.8 1.8 2.1

Hungary 6.8 6.0 5.8 2.9 2.0 2.5 -0.1 0.4 1.9 3.0 3.5 3.2

Ireland 9.5 8.3 7.7 26.3 4.9 3.2 0.0 0.3 1.2 1.8 2.1 2.4

Israel 5.2 5.2 5.2 2.5 2.8 3.0 -0.6 -0.6 0.8 2.5 3.0 3.0

Italy 11.9 11.5 11.2 0.8 0.8 0.9 0.1 -0.1 0.5 2.8 2.6 2.7

Jordan 13.1 11.1 4 11.0 4 2.4 2.8 3.3 -0.9 -0.5 2.3 6.0 5.7 5.7

Kazakhstan 5.0 5.0 5.0 1.2 -0.8 0.6 6.5 13.1 9.3 - 8.5 8.1

Kenya 9.2 4 9.1 4 9.1 4 5.6 6.0 6.1 6.6 6.2 5.5 - 7.9 7.5

Kuwait 2.1 2.1 2.1 1.1 2.5 2.6 3.2 3.4 3.8 - 4.4 4.8

Latvia 9.9 9.4 9.2 2.7 2.5 3.4 0.2 0.2 1.7 - 3.3 3.3

Lebanon 6.7 4 6.8 4 6.9 4 1.0 1.0 2.0 -3.7 -0.7 2.0 - - 5.5

Lithuania 9.1 7.8 7.6 1.6 2.6 3.0 -0.7 0.5 1.2 - 3.5 3.6

Luxembourg 6.9 6.4 6.3 4.8 3.5 3.1 0.1 0.2 1.0 3.0 2.9 3.0

Morocco 9.7 10.2 10.1 4.5 1.8 4.8 1.5 1.3 1.3 - 4.5 4.1

Netherlands 6.9 6.7 6.5 2.0 1.7 1.6 0.2 0.1 0.9 3.0 2.8 2.9

Norway 4.4 4.7 4.5 1.6 0.8 1.2 2.2 3.2 2.3 3.2 3.0 2.9

Poland 7.5 6.3 6.2 3.7 3.1 3.4 -0.9 -0.6 1.1 3.0 3.0 2.7

Portugal 12.4 11.2 10.7 1.5 1.0 1.1 0.5 0.7 1.1 1.8 2.0 2.2

Qatar 0.3 4 0.4 4 0.4 4 3.7 2.6 3.4 1.8 3.0 3.1 5.0 4.4 4.6

Romania 6.8 6.4 6.2 3.8 5.0 3.8 -0.6 -1.5 1.7 4.6 4.5 4.7

Russia 5.6 5.8 5.9 -3.7 -0.8 1.1 15.5 7.2 5.0 8.1 8.0 8.0

Saudi Arabia 5.6 5.7 3 5.7 3 3.5 1.2 2.0 2.2 4.0 2.0 5.0 4.7 4.9

Slovakia 11.5 9.9 8.8 3.6 3.4 3.3 -0.3 -0.2 1.1 - 2.7 2.8

South Africa 25.4 26.3 27.0 1.3 0.1 0.8 4.6 6.4 6.0 6.3 6.8 6.7

Spain 22.1 19.4 18.0 3.2 3.1 2.2 -0.5 -0.3 1.0 2.4 2.3 2.4

Sweden 7.4 6.9 6.7 4.2 3.6 2.6 0.7 1.1 1.4 2.6 2.8 2.9

Switzerland 3.2 3.5 3.4 0.8 1.0 1.3 -1.1 -0.4 0.0 2.1 2.0 2.2

Tanzania 3.1 4 3.2 4 3.2 4 7.0 7.2 7.2 5.6 5.2 5.0 - 7.0 7.0

Tunisia 15.0 14.0 13.0 0.8 1.5 2.8 4.9 3.7 3.9 - 6.5 6.5

Turkey 10.3 10.2 10.2 4.0 3.3 3.0 7.7 8.4 8.2 9.0 8.0 8.0

Uganda 3.6 4 3.5 4 3.4 4 4.8 4.9 5.5 5.5 5.5 5.1 - 6.8 6.5

Ukraine 9.1 9.0 8.7 -9.9 1.5 2.5 48.7 15.1 11.0 18.0 11.7 12.3

United Arab Emirates 3.5 4 3.4 4 3.3 4 4.0 2.3 2.5 4.1 3.6 3.1 4.9 4.5 5.0

UnitedKingdom 5.4 5.0 5.2 2.2 1.8 1.1 0.1 0.7 2.5 3.0 2.8 3.0

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Key observations

americasSalary increases in the United States will experience a modest increase from 3.0% to 3.1% from 2016 to 2017, while Canada will remain stable at 3.0% from 2016 to 2017. Although costly, the U.S. federal overtime law effective December 1, 2016, does not appear to have an increased effect on salary increase budgets in 2017. Minimal change is also expected in unemployment over the same time period with Canada increasing from 7.0% to 7.1%, and the United States decreasing from 4.9% to 4.8%.

Brazil’s recessionary environment continues but shows signs of improvement in 2017 according to the IMF. Unemployment is projected to increase from 11.2% in 2016 to 11.5% in 2017. The change in the CPI is projected to decrease from 9.0% in 2016 to 5.4% in 2017. Salary increases are expected to slow from 7.9% in 2016 to 7.3% in 2017.

Argentina continues with double-digit inflation, with the change in CPI approaching 23.2%in 2017, influencing a 26.5% salary increase projection. Salary increase budgets of 26.5% willsupport salary increase administration at one or two times per year. The hyperinflationaryeconomy in Venezuela includes out-of-control inflation at 475.8% in 2016 and is projected

to escalate to 1660.1% in 2017. Salary increases are now expected to be at 91% in 2017, butwill continue to require close observation throughout the year. Consider implementing salaryincreases multiple times throughout the year and avoid managing compensation outside of thehome country currency.

High inflationary countries, such as Venezuela and Argentina require close observation and action, as needed, to ensure up-to-date compensation programs. The loss of real income for Venezuela employees, in particular, will be an important business issue and will require ongoing monitoring and updates throughout 2017 to avoid catastrophic consequences. This dire inflationary environment will clearly result in the most significant reduction in real income throughout the world.

Salary increases in the United States will rise slightly from 3.0% in 2016

to 3.1% in 2017

“

“


europe, middle east, and africaIn the Euro zone, modest changes to unemployment and a challenging financial environment will require a cautious outlook on salary increases in 2017. In the aftermath of the Brexit vote, the IMF expects slower growth in the United Kingdom. The IMF also expects the Euro recovery to proceed at a slower pace in 2016-2017 as compared to 2015.

Western Europe is projected to implement 2.8% median salary increases (2.7% average) in 2017. Greece is low at 2.1%, while Germany, Luxembourg, and United Kingdom are high at 3.0%.

Russia’s 2017 salary increases are projected at 8.0% and the Ukraine at 12.3%.

Out of the eight countries reported for the Middle East, the 2017 median salary increase is 5.0% (5.6% average).

Salary increases from 2016 to 2017 show modest change across the Middle East and sub-Saharan Africa for the countries reported, but IMF reports these economies continue to face challenging conditions.

Asia PacificThe 15 Asia Pacific countries reported are projected to implement salary increases of 6.2% (average) and 5.7% (median) in 2017. Japan is low at 2.5%, and Pakistan is high at 10.7%. China’s transition to consumption-based and service-based growth will influence other emerging economies according to IMF, and we project salary increases in China to slow from 8.0% in 2016 to 7.5% in 2017. Also, IMF states China’s working-age population is projected to decrease over the next five years.

IMF states India’s economy continued to recover strongly, and we project 10.4% for 2017 salaryincreases with rising real incomes. On the positive side, growth is expected to remain strong inemerging and developing Asia according to the IMF.

global summary The subdued outlook by the IMF will support continuation of modest to moderate salary increase budgets in 2017 to allow multinational businesses to attract and retain key employees within these budgets. In this uncertain environment, we recommend that salary increase budgets be distributed to meet compliance requirements, while fully recognizing high performance and retention of at-risk employees. Transparent communication of compensation programs requires thoughtful planning and increased emphasis. Other human capital programs, such as training and development, performance feedback, succession planning, short- and long-term incentive compensation, and employee benefits should supplement the compensation planning process and will support in recognizing, rewarding, and motivating key performers.


UNITED STATES 2017 SALARY INCREASE FORECASTemployers are reporting slightly higher expected increases for 2017.

Overall, participants in ERI’s Salary Increase Survey are reporting slightly higher increases at 3.1% for 2017 than when they reported 3% for 2016.

2015 2016 2017Salary Budget % Increase 3.0% 3.0% 3.1%

Salary Structure % Increase 2.3% 2.2% 2.2%

For a closer look at these trends please refer to Figure 1 below, which has three lines. Two lines (red and blue) represent projected increases from ERI’s Salary Increase Survey, and the black line represents actual changes in base salary reported in ERI’s Salary Assessor. The red line represents the expected salary structure increase, the blue line represents the expected budget salary increase, and the black line represents how actual compensation changed in a given year. By comparing these three lines, we can

see the extent to which expectations met up with reality. Generally, the actual movement (black line) is expected to follow the structure increase (red line). Salary surveys generally capture the movement of salary structures within organizations instead of measuring the salary increase of individual employees.

Why the difference? Actual movement of salaries as reported through the ERI Salary Assessor represents actual compensation factoring in reported compensation, salary increases, employee turnover, new hires, and promotions. The Salary Increase Structure takes these factors into account, but the Salary Increase Budget does not. As a result, the actual movement is expected to be more similar to the expected Salary Structure Increase than the expected Salary Budget Increase.

part 2

Figure 1- Overall Trends. 2017 Budget Increase (3.1%), 2017

Structure Increase (2.2%), 2016 Actual Increase (2.6%). Source: ERI Salary Increase Survey and

ERI Salary Assessor.

Projected Movement vs. Actual Salary Movement


An examination of where the reality of salary movement (black line) has departed from the expected salary structure increase (red line) gives us information regarding how salaries might move in the future. Specifically, the past three years have seen actual salaries grow at a rate that is higher than expectations. These trends are supported by reports of salary growth from sources like the Employment Cost Index (ECI), as well as reports of large entry-level salary increases at major corporations.

Based on these findings, the critical question is whether actual salaries will continue increasing at higher than expected rates. There are three directions that actual salary growth could go. It could increase, it could maintain the current growth rate, or it could decrease. While it is possible for actual salary increases to stay above the expected trend for an extended period, it is not likely to continue indefinitely based on history.

Given this three year run of heightened actual salary increases, it might be more probable that actual salary change will decrease from the current level towards the expected salary increase trend.

10 year trend by categoryWhile it is valuable to know how all occupations are moving in this economy, it is also useful to know how different types of occupations move relative to each other and across time. Not all occupations grow at the same rate and not all occupations grow at the same rate across time. Figure 2 reveals the total growth experienced across a 10 year period. If we break all occupations down into 10 categories, it becomes clear that some occupations are growing at a faster rate than others. Specifically, Information Technology appears to have seen the highest level of base salary growth, whereas Sales occupations have seen the slowest growth.

Figure 2 - Total salary growth by occupational category 2006-2016. Source: ERI Salary Assessor

supervisory

sales

Health care

Field, shop, and services

middle management

technicians and skilled craft

clerical

professional

top management

Information technology 32.2%

31.8%

31.6%

31.4%

30.5%

30.1%

29.6%

28.5%

26%

25%


2016 mean salary by categoryTable 1 reveals the actual growth rates for different occupational categories in the past three years and also provides information on whether the occupational category is seeing increased or decreased growth over the past three years. It is important to note that, just because an occupational category has decelerating growth, it does not mean that the trend will continue. All occupations may be expected to see salary growth over time, so an occupational category that has been down for a while may be more likely to see growth in the near future.

Occupational Category Mean Salary 2016 Growth 2015 Growth 2014 Growth 3 Yr Growth 3 Yr TrendTop Management $161,435 3.0% 2.1% 3.6% 2.7% ↘Middle Management $99,504 3.5% 2.5% 3.6% 3.0% ↘Supervisory $75,912 3.1% 2.2% 3.3% 2.8% ↘Health Care $110,690 3.1% 3.0% 3.1% 2.9% →Information Technology $86,609 5.0% 1.4% 4.2% 3.3% ↗Professional $82,124 2.6% 2.9% 4.1% 3.1% ↘Sales $58,862 1.2% 3.8% 2.3% 2.3% ↘Technicians and Skilled Craft $58,508 2.7% 2.4% 3.4% 2.7% ↘Field, Shop, and Services $42,448 2.8% 2.5% 3.0% 2.6% →Clerical $39,581 2.4% 2.2% 2.4% 2.2% →

Table 1 - Mean salaries by occupational category (October 2016)

occupational categoriesIn the process of examining the growth of compensation data on a national basis, the data were broken into 10 specific occupational categories to study changes in compensation at a more granular level. The populations of these categories are illustrated in Figure 3 below.

Figure 3 illustrates each category’s percentage as it relates to the total number of occupations in this study.

Top Management 6%Middle Management 9%Supervisory 8%Health Care 11%Information Technology 2%

Professional 13%Sales 11%Technician & Skilled Craft 8%Field, Shop, & Services 23%Clerical 9%


thank you for reading eRI’s guide to 2017 salary Increase planning!We would like to offer you a free salary report, customized to a position, location, and industry of your choice, along with a tour of eRI’s software.

This eBook is designed to capture salary changes across a broad range of jobs found in the United States and economic trends that affect salary changes around the world. Although analysis of broad economic trends is helpful for planning 2017 compensation budgets, many organizations also review salary survey data for specific industries and locations to get a more accurate sense of the

market movement of salaries. ERI provides reliable market data to support organizations in determining reasonable compensation rates. Data for over 6,000 positions and 8,000 locations are available in the cloud Assessor Series software, a collection of professional compensation tools used widely across the public and private sectors. Thousands of professionals and a majority of Fortune 500 organizations rely on ERI software to plan salary budgets accurately and efficiently by reviewing data sourced from their peers.

additional considerations for planning 2017 salary Budgets

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Documents

November 2016 - ERI Economic Research Institutedownloads.erieri.com/pdf/Guide_to_2017_Salary_Increase_Planning.pdf · 2016 Welcome to eRI’s guIde to 2017 salaRy INcRease plaNNINg