Background on Key Figures and Relevance
In Argentina, the recent decline in monthly inflation to 1.5% in May marks its lowest level in five years, prompting companies to reassess their wage adjustment strategies. Historically, the rapid rise in prices made it challenging to base salary increases on employee performance. However, with a more controlled inflation rate, companies are now prioritizing performance as a crucial factor in determining individual salary increases.
WTW Survey Highlights Performance-Based Adjustments
According to a WTW survey, 60% of non-unionized employees will see their salary adjustments influenced by their job performance this year. On average, performance-based increases are expected to range from 4% to 10% above inflation-based adjustments.
In 56% of cases, salary increases occur in the same month as general pay raises. Marcela Angeli, WTW’s Work & Rewards Director, explains that “during high-inflation periods like the last two to three years, over half of the companies stopped offering merit-based adjustments. Even among those that continued, a 5% performance bonus was barely noticeable due to high inflation. As prices continue to fall, performance-based adjustments will gain more significance.”
Frequency and Magnitude of Salary Adjustments
Nearly 70% of companies plan to distribute three to four salary adjustments throughout the year. Only 2% will provide monthly increases, while 4% intend to offer just one annual adjustment.
In the past month, companies granted a 16% salary adjustment, which could rise to 19% by late June. The survey was conducted electronically among 436 companies across various sectors, including technology, health (human and animal), finance, agriculture, services, consumer goods, automotive, fintech, communications, entertainment, energy, oil, and insurance.
An overwhelming 80% of the surveyed companies intend to provide cumulative annual adjustments between 29% and 36%, with a median of 33%. These figures align closely with initial annual plans, albeit reduced by 1 to 2 percentage points.
Angeli adds, “69% of companies aim to offer annual salary adjustments equal to the annual inflation rate. By pursuing this goal, companies can lower their current estimated annual adjustments of 30% to 35%, contingent on the Index of Prices’ behavior.”
Key Questions and Answers
- Q: How has inflation affected wage adjustments in Argentina? A: Historically, rapid inflation made it difficult for companies to base salary increases on employee performance. However, with lower inflation, companies are now prioritizing performance-based adjustments.
- Q: What percentage of salary increases will be based on performance? A: According to WTW, 60% of non-unionized employees’ salary adjustments will consider job performance, with expected increases ranging from 4% to 10% above inflation-based adjustments.
- Q: How frequently will salary adjustments occur? A: Nearly 70% of companies plan to distribute three to four salary adjustments throughout the year, with only 2% offering monthly increases.
- Q: What are the projected cumulative annual salary adjustments? A: 80% of surveyed companies aim for cumulative annual adjustments between 29% and 36%, closely aligning with initial plans adjusted for inflation behavior.
