At first glance, Korn Ferry’s 2020 global salary forecast tells a familiar story, but there’s a twist in the tale. While 2020 salary increases across the globe are expected to grow at 4.9% – about the same rate as 2019 – slowing inflation means employees will see an increase in the real-wage salary they take home at the end of the day.

The same goes for India, with 2020’s expected growth to hit 9.2% and with inflation at 4.2%, real wages will be up 5.1% – among the highest globally. But Indians shouldn’t expect this increase to necessarily find its way into their base salary pay. As Indian businesses look to drive performance and productivity, reward strategies are shifting towards emphasising incentives. Long story short, the outlook for Indian employees is good, but businesses want to see the benefits too.

Real wage growth in India in 2020 will be up 5.1% – among the highest globally. #KornFerryGlobalSalaryForecast Click To Tweet

The global picture

Around the globe, salaries are predicted to grow at a rate of 4.9% in 2020. With a predicted global inflation rate of approximately 2.8%, the real-wage salary increase is expected to be 2.1%. So while the 2019 salary growth rate was a touch higher at 5.1%, a higher global inflation figure of 4.1% meant 2019 real-wage salary increases across the globe were only 1.0 percent

This feels like good news for employees. And of course, in many ways it is. But it also may reflect a shifting economic outlook that may mean slower growth in several key countries and an increased risk of higher unemployment.

Highest real-wage growth in Asia

Asian economies can again expect to see the highest salary increases globally. The topline 2020 forecast is for a 5.3% increase, with real-wage salaries expected to increase 3.1% (up from 2.6% last year) as inflation drops to 2.2%.

While the headline figures tell a good story, a patchwork of regional economies sits behind them. China’s real-wage growth for 2020 is expected to weaken to 2.9%, continuing the downward trend from 3.2% last year and 4.2% the year before. Other mature economies are predicted to see increases, with Japan looking at a real-wage increase of 0.6%, up from 2019’s prediction of 0.1% and Singapore predicting a boost of 3.6% to real-wage salaries, up from 3.0% last year. In Hong Kong, political uncertainty and a relatively high inflation rate of 2.6 percent has translated to a more modest real-wage growth forecast of 1.4%.

India looking to pay for performance

While salaries continue to grow in India, that growth isn’t occurring evenly. Businesses are increasingly using pay to differentiate performance, rewarding their top performers, high potentials and critical talent with higher increments. Annual increments are no longer an entitlement. Instead, organisations are marking their budget allocations to returns, with labour and productivity related metrics driving compensation costs.

Annual increments are no longer an entitlement. Instead, organisations are marking their budget allocations to returns, with labour and productivity related metrics driving compensation costs. Click To Tweet

For employees, this means they’re more likely to see substantial increases coming through short- and long-term incentives. With businesses under increasing cost pressures, fixed salaries are growing more slowly. Wage growth is instead happening through total remuneration including performance incentives. This shift allows businesses to pull the lever more aggressively on performance while managing their fixed costs and keeping business realities in check with macro-economic parameters.

This approach is critical as the wider economic conditions continue to signal a slowdown in India’s business growth. It enables organisations to align their remuneration strategy to the expectations of their financial stakeholders. For companies to stay ahead of the curve, they will need to respond effectively to the dynamic and tough environment, manage stakeholder expectations and look at rewards strategically to remain competitive in the long run.

About the study

The data was drawn from Korn Ferry’s pay database which contains data for more than 20 million job holders in 25,000 organisations across more than 130 countries.

It shows predicted salary increases, as forecasted by global HR leaders, for 2020 and compares them to predictions made at this time last year regarding 2019. It also compares them to 2020 inflation forecasts from the Economist Intelligence Unit.

Our interactive site with more detailed figures, and a downloadable infographic with headline figures for each country is here.

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