Pay and Benefits in a High Inflation & Recessionary Environment

Multinationals in Europe Expect to Increase Pay and Cash Awards in 2023 But Should They Consider Non-Cash Awards for Greater Flexibility?

Our analysis of pay and benefit trends reveals that companies are largely opting for permanent pay increases (consolidated) instead of one-off cash awards. This reward strategy will lead to increased wage costs and risk locking some of Europe’s largest firms into future structural “hidden” costs through higher pension contributions and increased risk benefit costs—such as critical illness or life insurance.

Insights for What's Ahead

• Firms expect to increase pay and cash awards in 2023. These increases, which we predict could average nearly 6 percent in France, 8.5 percent in Germany, and 14 percent in Poland, could adversely impact the compensation strategies’ affordability of some of Europe’s largest employers, giving them less leeway in future wage negotiations.
• Firms should consider other ways to help workers through the cost of living crisis and help contain future remuneration costs. By carefully tailoring these non-salary benefits and allowances, for example help with transportation costs, firms can target employees who are most impacted by cost of living increases.
• There is a rapid repositioning of employee financial well-being as an important component of benefit strategies. Global and international companies are prioritizing employee financial well-being in an uncertain and inflationary environment. Despite strong pressure to cut costs, international and global rewards executives view current economic conditions as an accelerant to their well-being strategies.