Average increase next year expected to be 3.9%, national firms estimate. Inflation is the main factor influencing changes in budgets, concludes the latest WTW study.
Portuguese workers’ salary budgets are set to shrink next year after peaking in 2023. Employers in Portugal are budgeting for an average increase of 3.9% in 2024, down from an average increase of 4.2% in 2023 , concludes WTW’s latest Salary Budget Planning. Inflationary pressure is the main factor influencing changes in budgets.
“Although we are seeing lower wage increases planned for next year, these are still much higher than those recorded over the last ten years. This shows that companies are striving to remain competitive in a dynamic working climate,” comments Sandra Bento, associate director at WTW Portugal.
“Companies that have a clear compensation strategy, as well as a good understanding of the factors that affect it, will be more successful in attracting and retaining employees, keeping pace with an evolving environment in which yesterday’s certainties no longer apply,” she added in a statement.
At the top of the factors influencing changes in salary budgets is inflationary pressure (71.3%), followed by concerns about a tighter labor market (46.7%). Other factors leading to changes in salary budgets include the forecast of recession or weaker financial results (22.2%), concerns related to cost management (19.2%) and employee expectations (18%).
Businesses take action to tackle difficulties in attracting talent
Attracting and retaining workers continues to cause difficulties for almost half (40%) of employers, and 33% foresee the same difficulties in the coming year.
In response to these ongoing pressures, organizations are taking steps to attract and retain people. A third (30%) have increased starting salaries and just over a third (32%) have initiated a full pay review for all employees. Other measures taken include higher base salaries for all employees (29%), hiring people at relevant pay grades (25%), targeted base salary increases (26%) and greater use of retention bonuses (22%).
Non-monetary actions are also underway to attract and retain talent. More than half (57%) of respondents have introduced more flexibility in the workplace. The same percentage (57%) have broadened their emphasis on DEI (Diversity, Equity and Inclusion) policies, while 35% of respondents have taken steps to improve their employee experience, 27% have changed health and wellness benefits, 22% have modified compensation programs and 21% have increased training opportunities.
“It takes more than compensation to attract and retain great talent, and recent years have pushed companies to be more resourceful. As workforces become more diverse, demanding and dynamic, the key is to understand their specific needs and preferences while providing the desired experience and careers for employees within the company,” stresses Sandra Bento.
The Salary Budget Planning report is compiled by WTW’s Reward Data Intelligence division. The research was conducted in April and May 2023, and approximately 33,000 sets of responses were received from companies in 150 countries around the world. In Portugal, 396 organizations responded.
