Employees rarely had so many arguments on their side to demand a higher salary. Despite inflation and a shortage of skilled workers, there is only one problem: many companies have their backs to the wall financially. The big salary forecast for 2023 shows what’s in it.
There has never been anything like it: There is a crisis and companies are looking for salespeople like crazy: German companies advertised 25 percent more positions for sales managers in the third quarter than in the same period last year.
The job platform Indeed reports similarly insane numbers from various industries: The number of job advertisements remains at an enormously high level. And demographic change will even intensify the competition between companies for new talent in the coming years.
“The balance of power has shifted in favor of workers,” says Indeed’s Annina Hering. And that means: When it comes to salary negotiations, employers get on the defensive. The times for HR departments could hardly be more difficult: Specialists are hard to come by and one’s own talents are more willing to emigrate than ever before. And in view of the inflation, unions and works councils are demanding higher salaries. On the other hand, in view of the high energy costs, companies have to save wherever they can.
It is becoming increasingly clear what this means for employees’ salaries: The experts at the compensation consultancies Kienbaum, Korn Ferry and WTW have presented their forecasts. In 2022, the increase is likely to be 3.5 percent. To put this into perspective: Since 2007, the annual rate of increase has been fairly constant at around three percent. So the mix of high inflation and a shortage of skilled workers is having an impact, but this year it is still very weak.
If trade unionists brand the relatively small increase as unfair because the inflation rate will probably be over 3.5 percent this year, that may be justified for 2022. But in the 14 years before that, employers increased wages more than inflation had an impact. Nevertheless, the pressure on employers to raise salaries is growing. Many companies are still waiting and pointing to the unclear world situation. In addition, many entrepreneurs are only waiting for the results of the collective bargaining this autumn and winter. In some cases, they are also obliged to do so for legal reasons.
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However, anyone who asks their superiors for a higher salary and is put off should ask for a one-time payment. Consulting firms specializing in remuneration advise companies to do so, also because tax subsidies are now available up to EUR 3,000. “My recommendation is to use the one-off payment instrument. But you have to be able to afford it,” says Florian Frank, compensation expert at WTW. “A company should take a close look at which group of employees is hit by inflation and how badly. Executives with company cars and fuel cards are not suffering as much from rising petrol prices as commuters.”
There is now also the first reliable data for 2023: According to Kienbaum’s salary development forecast, salaries will increase by an average of 4.9 percent in the coming year. Competitor WTW arrives at a very similar value in its estimate. That is significantly less than the inflation expectations, which fluctuate between five and nine percent – the federal government and the Bundesbank assume around seven percent. There are hardly any differences between the sectors – they are all affected in roughly the same way by inflation.
However, there are interesting anomalies in the hierarchical levels: What is unusual is that the expected salary increase for skilled workers should be above average at 5.6 percent, and lower at 4.4 percent for senior management. “You can see here that the shortage of skilled workers is particularly high. This is also a global phenomenon,” says Michael Kind, compensation expert at the consulting firm Kienbaum.
Well, money alone doesn’t make you happy, but at least the workforce is less unhappy if the salary is right. In the Kienbaum survey, Germany’s employees would like their salaries to increase by seven percent, around two percentage points more than the salary budget provides for according to the forecast. But that doesn’t have to lead to waves of churn: Firstly, because a lot of companies have the same problem. And secondly, because there are a number of options that are in great demand among many employees right now. The salary is still the main argument for or against an employer – regardless of whether you change or stay. But other points are becoming more important.
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Companies are increasingly concerned about fringe benefits, which are more important than ever. However, they are very individual: In the financial sector, it is important to many that their employer regulates the company pension scheme appropriately. Others pay close attention to wellbeing offers or flexibility in working hours and work location, which can be a decisive criterion, especially for young employees. Some also want to work from abroad. Still others look at the image of the employer – keyword sustainability. “The desire to do meaningful work has become more noticeable, especially among younger people,” says Frank. “But it’s not as important in everyday life as operational issues and well-being.” Another important block concerns the benefits. From company cars and e-bikes to job tickets and fuel vouchers. Continuing education is becoming increasingly important, and sharing electricity bills is a trend.
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The article “You can get this much money out of the next salary negotiation” comes from WirtschaftsKurier.
