A smaller percentage of companies have already decided not to give salary increases to employees until the activity can resume with some normality
It seems even inappropriate to speak this year of salary increases when many people have had to close their businesses or SMEs, or are receiving only 75 percent of their regular income for not being able to perform their “non-essential” tasks.
Even more so when the pandemic struck squarely in the indicator of unemployment in Argentina: between March and May 2020, it lost more than 280,000 jobs, and is calculated to be the worst drop in 18 years. This “army” of unemployed puts pressure on the labor market and lowers the wages offered in the market.
For the year, a drop in the Gross Domestic Product of around 10 points is expected, which would imply a recession as rarely seen in the history of Argentina.
But even so it is true, there are companies in Argentina that even in this scenario will give salary increases and with the beginning of second semester of the year are already in the final stretch to decide the number. Although everything indicates that it will not be an improvement in people’s purchasing power.
Days ago, a survey by consulting firm Grant Thornton already warned that the 77% of large companies in Argentina will give salary increases in this second semester, but only one fifteen% expect those rises to be located above inflation. If this scenario is fulfilled, in the vast majority of cases the adjustment variable will be once again (another year) for people.
Cut wage increases
What will the dynamics of salary increases be like in the second semester
Salaries will not only be below inflation this year, but those who are among the lucky ones to receive an increase in this second semester will almost certainly see lower increases than expected at the beginning of this particular year.
The latest survey in this regard is from the consulting firm Mercer, which ensures that it is still somewhat early to take this issue for granted when almost half of the companies (48%) still did not decide whether to grant the increase I had planned in the second semester. There is a 23% that will keep it unchanged and the rest will modify it.
“There are still much uncertainty in the market regarding whether or not the second half increase will be granted, with almost half of the companies in the sample that have not yet defined it. This will largely depend on how the economy evolves and its impact on business and inflation. Faced with this, we will be able to see companies that do not grant it, others that do but in later months or with lower percentages than originally anticipated, “said Ivana Thornton, Director of Career at Mercer.
Before the consultation of iProfessional About the percentages in which the salary increases for this year would be cut, from Mercer they indicated: “39% of companies reduced the expected salary increase for 2020 as a consequence of the pandemic. The reduction on average is 11%“
“The effect of this reduction in the general market is a 3 percentage point reductionthat is, before the Pandemic the projected average increase in the market was of the order of 41% and currently the annual projection of increases is 38% per year, “they assured.
PwC Argentina also anticipates that salary increases for non-contractual employees will be reduced from original forecasts from 39% a year to 32% Finally. This implies seven points less than expected at the start of 2020.
For the first semester, it had even been projected to raise 22% on average, which ended up being 15%, always talking about what happened in large companies. Mariela Rendón, People & Organization manager at PwC Argentina explained “according to one of our previous surveys and, comparing the behavior of salary adjustments in the Argentine market in past periods, since the month of April, a delay was looming in decision-making related to granting increases in this context. “
Salary increases: suspended until further notice
As inflation riotous, companies freeze salary increases
PwC surveyed 180 companies in June and concluded that they expect an average of annual inflation of 43%Therefore, salary increases will be more than ten points below that increase.
30% of these firms are already thinking of giving lower increases than previously stipulated for the second semester, and another 34% still have under analysis what measures they will take in this regard. Only 30% are already clear that they will comply with the salary guideline defined for the year.
Further, PwC added that 11% of the organizations in their sample stated that they will not be able to give salary increases, and among them, 5% are considering the option of decrease wages.
A similar picture was detected by HuCap. In this case, the talent consultant assured that 83% of the companies it surveyed planned to modify the original salary budget, and 38% had already defined giving increments less than planned. On average the salary increases in these companies would be 17.5% lower to the forecasts at the beginning of the year (which were 38% per year on average).
Another 33% of those companies told HuCap that they decided not providing salary increases until you have a clearer picture regarding what was going to happen with the activity. This occurred, according to the consultant, especially among companies that “have closed their operations or their turnover and profitability are being severely impacted. And even a percentage of companies are evaluating or making salary cuts.”
There is another 21% that continues analyzing the situation and also that they have postponed the hikes they had budgeted to give in the second quarter of the year, suggested the consultant led by Miguel Terlizzi. So another 8% of companies said that will maintain the original salary guideline but they will specify the salary increases once the situation is normalized.
“On the one hand, 32% of companies that according to this survey plan to decrease their endowment for the rest of the year. On the other hand, there are companies that are having to be assisted by the state to be able to pay the salaries to their collaborators, while SMEs and mini-SMEs in some extreme cases even consider the impossibility of being able to continue their businesses. For all this, it is very difficult to even think of a space for salary negotiation; although we cannot fail to mention that inflation continues to be a matter of occupation in the country, “concluded the Hucap president.
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