According to the 15th edition of AIMS Compensation and Benefits Survey, 2006, the past year (the twelve-month period encompassing 6 months of 2005 and 6 months of 2006), has marked record levels of growth in pay levels, as compared to prior periods. See Chart 1.
Chart 1: Compensation increase percentage dynamics. Source: AIMS Human Capital Bulgaria’s Compensations and Benefits Survey 2006.
The average actual increase in the compensation levels for the last Survey period (July 2005 – June 2006) reaches 13,72%. Companies at the market opt for different compensation growth rates varying from 5% to over 70%. However, common trends can be observed. Generally speaking, there is a strategic common concern with employee motivation. Namely, almost all the participants in the 2006 edition of the Survey (96%) have revised their employees’ remuneration (including salaries and other benefits) in the past year.
Sector-specific trends can also be traced. The highest growth level is witnessed in the IT and Telecoms Sector, i.e. 17,19%. Such growth is basically grounded on the dynamic development of the sector, i.e. increased competition, entrance of new foreign investors on the market, the boost in outsourcing activities of multinational companies in Bulgaria, etc., factors that inevitably intensify the war for talent. Software development companies are an important segment of this sector and their growth rates are even more significant. The average percentage reaches 28,57 %, as compared to the prior-period average increase of 25,68 % (July 2004 – July 2005). In other words, salaries have grown with 61,6 % within a period of only two years.
The Services Sector has undergone a rapid development as well, compensation growth rates exceeding 15 % for the analyzed period (2005 – 2006). Distribution companies have continued to gradually increase their salaries. AIMS Compensations and Benefits Survey witnesses a 13,10% increase this year, after the increase of 11.5% in the prior year.
An interesting trend is observed for the 100% Bulgarian-owned companies, who tend to make considerable compensation increases, namely an average increase of nearly 20 % (for reference, the growth rate in 100% multinationals reach 13,11 %). International companies still hold the leadership over Bulgarian ones in remuneration levels. However, the cited trend will result in reducing the differences in levels of pay based on type of ownership.
Having analyzed the dynamics of remuneration and the margin between projected and actual compensation growth over the last 4 years, the 2006 edition of the Survey anticipates that the average percentage of salary increases will again rise next year, reaching levels of approximately 16 %. The sectors that are presently undergoing rapid development are likely to mark the most significant growth rates - within reasonable limit, though.. It should be noted that if the software development sub-sector tendencies for the last two years keep stable, compensations will double the 2004 ones and the business will face considerable difficulties in financing such increases.
In a mid-term perspective, one can expect all sectors’ salaries to increase – certainly, at a different pace. Remuneration for middle and low positions in organizational hierarchies is a priority and will most probably rise considerably. Still, its growth rate is likely to slow down in anticipation of the slackening of the increase trends in the second half of 2008.
However, in a long-term perspective the business will have to face the serious challenge of synchronizing its compensation growth rates to the EU ones of 3-8 % per year. It may be expected that the process of synchronizing may significantly confront the employees’ expectations, the latter stemming from the well-adopted practices of the last 3 years for 10 – 20 % regular annual growth. In order to meet this challenge, gradual bridling of the compensation dynamics and launching of performance-based remuneration plans need to be adopted.
