By Irina Kvirikadze - Senior Manager Data Integrity
Competitive compensation packages play a pivotal role in attracting, retaining, and motivating top talent - essential for delivering value to clients and driving sustainable growth in the consulting industry.
Here, we take a look at expected global and regional salary increases, as well as factors influencing salary adjustment for the year ahead.
Expected Global Salary Growth Projections
Vencon Research’s own findings [i], backed up by other studies [ii], suggest that despite some economic concerns, companies all over the world are inclined to maintain a fairly aggressive approach towards compensation.
Among the primary factors for increasing salary budgets are inflation and cost of living adjustments. Inflationary pressures and rising costs of living have compelled consulting firms to review and adjust their compensation structures accordingly. Expected salary increases in 2024 are, partially a response to inflationary trends to maintain the purchasing power of their employees.
Salary increases and inflation rates exhibit significant variation across countries, yet this overarching trend is observable in many, though not all, countries. According to Vencon Research findings (see Figure 1), average global salary rises in 2024 is 5.2% and inflation rate 3.3%. It's important to highlight that in 2023, salary increases outpaced inflation [iii], and this trend is likely to persist into 2024.
Salary increases can vary depending on the geographic location of the consulting firm within a country and its employees. For example, consultants working in major metropolitan areas with higher costs of living may receive larger salary increases compared to those in smaller cities or rural areas. Consequently, each country [iv] and region should be assessed independently, given the significant disparities in economic conditions. The subsequent section will provide further exploration into expected salary increases at both regional and national levels.
Expected Regional and National Salary Growth Projections
Regional salary increases in 2024 vary from 5% to 5.4% and inflation rates from 2.8% to 3.8% (see Figure 2). In Europe, salary increases vary between 2% to 10.4% and inflation rates from 1.9% to 6.6% (see Figure 3). In Belgium, as the inflation rate stabilizes, salary increases for 2024 are projected to decrease to 4.9% compared to the previous year's increase of over 11%, which was influenced by wage indexation tied to inflation [v]. In Germany expected salary increase is 4.4%, in France 4.1%, in Spain 3.9% and in the United Kingdom 4.8%.
In countries with high inflation rates such as Türkiye, where the predicted inflation rate for 2024 exceeds 50%, the expected salary increase stands at 45.4%[vi]. Nevertheless, companies are implementing additional measures such as frequent salary adjustments and issuing payments in foreign currencies.
In the Americas, encompassing both North and South America, projected salary increases stand at 5.3%. Excluding Argentina, a country experiencing hyperinflation, the highest average salary increases in this region are anticipated in Brazil (6.3%) and Colombia (10.1%) (see Figure 4).
In Canada and the United States of America (USA) expected average salary growth rates are 4% and 4.3% respectively.
It is essential to acknowledge that the anticipated economic growth of individual countries is an also an influential factor. The United States of America holds a central position in this regard, owing to the size and resilience of its market. Furthermore, certain US companies boast sales figures that surpass the gross national product of entire countries. Increasingly, attention is shifting towards APAC (Asia Pacific) while diminishing emphasis on Europe. This transition is further accelerated by sluggish economic growth in Europe and notably in Germany [vii].
According to the Vencon Research study, it is anticipated that a majority of locations in the APAC region will either maintain or surpass their real salary growth rates from 2023 in the year 2024 (see Figure 5). China is anticipated to maintain one of the lowest inflation rates at 1.7% in 2024, trailing only behind Taiwan and Thailand in this region. Despite this, it is expected to experience a notable average salary increase of 5.6%. Conversely, India which is poised to lead the way in projected salary increases within the APAC region, with an impressive figure of 9.7%.
As seen in numerous other countries, the anticipated average salary increases in the Middle East and South Africa are poised to remain robust throughout 2024. Projections indicate that pay raises are expected to reach 6% in Saudi Arabia and South Africa, while in the United Arab Emirates, the figure is slightly lower at 4.2% (refer to Figure 6).
It is essential to note that beyond inflation and cost of living, there are additional pivotal factors that drive salary increases within this sector.
Factors Influencing Salary Trends: Beyond Inflation and Cost of Living
Tight Labour Market and Competition
In 2024, the demand for consulting services continues to increase as businesses face complex challenges such as sustainability initiatives, post-pandemic recovery strategies and digital transformation. In this context, consulting firms are under high pressure to attract and retain top talent to meet client expectations. This heightened demand has translated into competitive salary packages and lucrative benefits for consultants.
Today, it's not only the leading consulting firms competing for talent, but also the MAANG [viii] companies, as well as ever multiplying start-ups. This resonates with the "Z" generation, which has its distinct priorities. They are willing to put in the effort, but seek fair and transparent compensation, alongside a work-life balance conducive to family life, within a communicative, team-oriented environment. This trend predominantly impacts consulting firms operating in mature markets, while emerging markets are not experiencing the same degree of impact at present.
Industry Specialization and Niche Demands
Diversity of client specialization and the rapid emergence of new topics with increasingly shorter life cycles have significantly altered the requirements for potential consultants. Specialized expertise and niche knowledge are now more sought after than ever before. Certain specialized areas within consulting, such as technology, healthcare, or sustainability, may experience higher demand and thus higher salaries. Consultants with expertise in these areas may see larger salary increases compared to those in more general consulting roles or general lines of businesses.
Emerging Industry Trends and Consolidation
Emerging trends and innovations in the consulting industry, such as the adoption of new technologies or methodologies, may influence salary increases. Consultants with skills and expertise in these areas may be in high demand and receive higher compensation as a result.
Apart from that, the consulting landscape has witnessed significant consolidation through mergers and acquisitions, with larger firms acquiring boutique consultancies to expand service offerings and market presence. Salary increases may reflect the impact of industry consolidation, as firms seek to integrate talent seamlessly and align compensation structures across merged entities.
Conclusion
In conclusion, the dynamics of expected salary increases in 2024 within the consulting industry reflect a multifaceted interplay of global economic factors, regional trends, and industry-specific dynamics. Despite economic uncertainties and inflationary pressures, consulting firms are maintaining fairly aggressive compensation strategies to attract and retain top talent crucial for delivering value to clients and sustaining growth.
Across different regions, variations in salary increases and inflation rates underscore the importance of localized analysis and decision-making. Factors such as tight labour markets, industry specialization, and emerging trends significantly influence salary trends, with specialized expertise commanding higher compensation. Furthermore, the ongoing consolidation within the consulting landscape through mergers and acquisitions has implications for salary structures as firms integrate talent and align compensation strategies across entities.
It is interesting to observe how all the market conditions and factors will influence actual salary budget expenditure across all markets in 2024. However, as the consulting industry continues to evolve, a nuanced understanding of salary dynamics remains essential for sustainable growth and success. To effectively navigate these complexities and ensure competitive compensation packages, it is imperative to base decisions on the most accurate, pertinent, and up-to-date market data available. Failure to do so will perpetuate the challenges currently faced by employers, ultimately eroding efforts in attraction, retention, and motivation, thereby resulting organizations failing to meet their anticipated outcomes.
For more information on this topic or on how you may successfully respond to the issues raised in this article, please contact Vencon Research – as always, we are happy to assist you.
[i] Vencon Research analysis encompassing more than 50 countries.
[ii] Various inflation forecasting and research firms, incl. Kienbaum, Korn Ferry and Willis Towers Watson
[iii] Bremen, John. "Will Pay Increases Exceed Inflation in 2024?" Forbes, 14 Dec. 2023
[iv] Each country and its profile will be thoroughly reviewed in upcoming briefings from Vencon Research.
[v] Vencon Research. "Belgium's Consulting Industry Braces for Government-Enforced Salary Adjustments" Vencon Research
[vi] Considering hyperinflation and data volatility
[vii] DW News. "Germany's Economy Set for Rough Ride in 2024" DW
[viii] Meta (Facebook); Amazon; Apple; Netflix; and Google (Alphabet)