Aon Hewitt has published the UK results of its 2010/2011 European Salary Increase Survey. The report reveals that while UK average salary increases are expected to rise from 2.5% in 2010 to 2.7% in 2011, these will still be below current inflationary levels.
Despite improved corporate financial performance and a sizeable rise on 2009 levels, salary increases are still below the 2007, pre-recession levels of 4.6%.
The survey of 215 organisations reveals that, despite projected average salary increases for 2011 of 2.7%, up 0.6% from 2009, the figures still demonstrate continuing uncertain economic conditions, as companies remain a long way from awarding the level of increases that were seen pre-recession.
With inflation, currently 3.1%, expected to remain well above the Bank of England target of 2% next year, owing to the scheduled rise in VAT and a weak sterling, this will mean that there are likely to be no 'real' increases in salaries for many employees for a third year running.
Andrew Macleod, senior reward consultant at Aon Hewitt, said: "Compared with 2009, when 47% of the participating companies reported salary freezes, in 2010 only 12% did so and even fewer are expecting one next year. Although this appears to be a positive sign for employees, pay rises are still at a subdued level, owing to the uncertain economic climate and they are struggling to keep up with inflation. As this is set to remain at higher levels for the foreseeable future and above general salary increases, employees will be looking for ways to maximise their earnings."
In line with 2009, top executives received the lowest average salary increases in 2010, (2.3%), while the middle management and professional levels received the highest average increases (2.5%). But the projected average increases for 2011 are highest for senior managers (2.9%), which is in line with pre-recession trends.
Macleod added: "Companies are keen to keep their top performers and senior employees happy, especially given the tighter salary budgets and challenging market conditions. As companies continue to find the post-recessionary period difficult, they are differentiating through performance-related increases. With a large number of companies having not awarded a salary increase to certain groups of employees for one if not more years, tough messages may still need to be delivered in 2011."
The real-estate sector awarded the lowest average increases at 1.9%, while the energy sector gave the highest average increases at 3.9%.
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