According to a report by ECO, the figure of 3.2% is higher than the average growth of 3% of the budgets presented in 2022 and is also above the 2.4% inflation forecast for next year. The reason behind the increase is being attributed to competitiveness in a market where finding the best talent is a challenge, according to the latest WTW “Salary Budget Planning” report.

“The challenging economic climate and the advancement of new ways of working are forcing organisations to keep an eye on salary budgets. Those that do not, will not be competitive, will lose their employees and will have to fight harder to replace them. In such a dynamic environment, it is imperative that companies have a clear rewards strategy and understand what the job market and its people expect”, said Sandra Bento, associate director – rewards data intelligence at WTW Portugal, in a statement.

More than a third (36%) of the organisations surveyed found that their salary budget is currently higher than expected. And the same percentage (36%) also said they will increase the frequency with which they review salaries. Among these, 98% will review salaries twice a year.

There are three fundamental reasons for the increase in budgets: concerns about a tighter labour market (57%), fears about inflation (56%) and meeting employees' expectations and concerns (43%).

Difficulty recruiting

The proportion of Portuguese companies that reported difficulties in attracting talent increased from 28% in 2020 to 90% this year, while those that have problems retaining current employees rose from 20% to 84% in the same period.

IT and engineering skills are especially in demand. Among the companies surveyed, 82% said they had problems filling IT roles and 79% found it difficult to keep current employees in this area. For engineering roles, 55% expressed difficulties in recruiting and 46% had problems retaining their employees.

To improve their attractiveness, 65% of employers have increased flexibility in the workplace; 60% placed more emphasis on diversity and inclusion; and 40% now offer financial incentives such as entry bonuses.

Likewise, organizations are committed to retaining their talent, namely by increasing their focus on diversity and inclusion (56%); the increase in distance working options (45%); and the change in salary structures, through the base salary and bonuses (38%).

“The demanding job market, especially around certain key competencies, means that organizations need to be much more creative in meeting the challenges of attraction and retention. It's not just about pay. Employers need to understand the dynamics of the diversity of their workforce and provide a superior employee experience for everyone,” explains Sandra Bento.

The “Salary Budget Planning” report, compiled by WTW's Reward Data Intelligence department, was based on a survey conducted between April and May 2022. Approximately 22,570 responses were received from companies in 168 countries around the world. In Portugal, 305 organizations responded.