The beginning of each calendar year marks the time when most employers embark on the sensitive topic of salary adjustments.
Apart from several industries that continue to perform well, a cautious approach is recommend for other employers. Assuming that salaries are already on par with market benchmarks, it is recommended that employers:
- offer a 2.5% salary adjustment to employees at the beginning of the year;
- introduce a higher variable bonus that is pegged to performance of the company;
- introduce more performance-driven incentives; and
- allow for a mid-year adjustment of salaries after the economic situation becomes clearer.
The 2.5% increment recommended will cover the core inflation index of 2.2%, meaning that employees will not suffer any shrinkage in real wages. This should be complemented by higher variable payments to drive productivity, performance, and enhance retention. An optional mid-year adjustment should not be ruled out in the event that the global economy recovers in the next few months.
Feel free to contact us for more details on how you can introduce pay-for-performance schemes, and how salaries can be restructured to allow for higher variable components.