Wages Will Rise, but Not Increase

Yekaterina Kuzmina / Vedomosti

Raises in salaries in 2016 will not exceed inflation, researchers have found. In a difficult economic situation, employers tend to motivate employees with bonuses, rather than salary.

83% of Russian employers plan to raise their employees' salaries this year — this  is the takeaway of a Hay Group survey of 290 Russian companies conducted in March.

Indexing, not increasing

According to the survey, the smallest increase is coming to manufacturing specialists and IT developers (6% on average), sales professionals and administrative office workers will receive a slightly larger increase in their salaries (7%). Operational staff, office workers, managers and middle managers' salaries will increase by 7.5%. Employers will be most generous to senior management: they plan to increase their salaries by an average of 7.95%.

Irina Chernozubova, head of research at Korn Ferry Hay Group, says that respondents have little economic justification for increasing payroll: 72% of companies still assess the current market situation negatively.

"Raises are being indexed, companies are trying to bring the earnings of employees in line with inflation," said Chernozubova. She recalled that, this year, according to the Ministry of Economic Development, inflation will reach about 6.8% in Russia while, according to the Hay Group survey, the average increase in salary will not exceed 7.5%.

According to PwC's annual review of wages, employers are in no hurry to increase employees' salaries. While 40% of the companies surveyed intended to index salaries by an average of 7% in 2015, in 2016, 30% of them plan to, but only by 6%. Adjusted for inflation, real wages in Russia have been falling since November 2014, according to data from Rosstat, the state statistics service.

Foreigners are more generous in Russia

Income falling faster

The reduction in real average wages of Russians amounted to 9.3% (adjusted for inflation) in the past year, said Labor Minister Maxim Topilin at a government meeting. Total monetary income in 2015 decreased by 4%.

According Topilin, in the first two months of 2016, the disposable income of the population decreased in comparison with January-February 2015 by 6.7%, and real wages fell by 3.1%.

The observations of the Hay Group study are similar to those of recruitment company Antal Russia. More than a third of companies in Russia are going to raise employees' salaries, according to its survey, which was conducted by the recruiters February 15-27 among 207 Russian and international companies in various sectors of the economy. According to the survey, twice as many international companies as Russian companies were planning to increase salaries: 54% vs. 28%, respectively.

Today employers are showing less flexibility with financial motivation, and if wages are indexed, it will not be by more than 4-9%, says Antal Russia manager Pavel Ostroumov. When selecting new employees, he said, companies are sticking to budget much more strictly than in previous years, and they are not willing to increase it to hire an employee they find interesting.

International companies are more generous with salaries because they often receive investments in dollars or euros, the expert explained, and this makes Russian specialists cheaper for them. According to Ostroumov, many foreign employers in Russia use this chance to attract the best staff.

In addition, over the past two years, international companies have gradually increased the ruble prices for their products in line with rising currency exchange rates, and that has given them additional financial resources to invest in staff. In general, international companies, as always, pay more attention to employee motivation than Russian employers, Ostroumov says.

Motivation other than salaries

Hay Group's Chernozubova notes that companies are changing the structure of the remuneration of employees by increasing its variability. In 2009, bonuses accounted for only 5% of employee compensation on average, while in 2013 its share rose to 12%, and last year to 20%. This is because employers are looking for ways to increase efficiency in personnel costs. They are reviewing KPI and remuneration structure, and increasing bonuses to obtain results. No results means no bonuses and a lower wage fund. However, only a few companies are radically changing the management model of labor productivity, the expert believes.

Flexibility in remuneration policies allows companies to retain staff and protect them from layoffs. Employers are also planning significantly fewer layoffs this year than a year ago, researchers say. At the beginning of 2015, 45% of participants in a similar Antal Russia survey said they were going to have layoffs or have already started making them. This year only 17% of employers said they had plans to reduce personnel. The first to suffer from cuts were IT, HR, accounting, marketing and sales. Most employers did not plan any recruitment, limiting themselves to filling vacant positions (49% of respondents). However, one in four employers said they plan to involve employees in developing new areas of business and regional expansion.