In most countries worldwide, 2022 salary increases are forecast to be higher than in 2021, according to a report from Willis Towers Watson.

Long-term savings from hybrid work models and a booming job market have led to forecasts for higher 2022 salary increases.

Companies are going through extensive planning in 2021, and will be experimenting with hybrid work models which better fit employees’ lifestyles and which may also result in long-term business savings, the report stated.

“The buoyant job market and the challenge of engaging employees without the office environment mean that companies will need to pay top dollar to hold on to their top talent,” the report stated.

“Every country, industry and company has experienced the pandemic differently and will have been impacted in different ways,” the report added. “Furthermore, the various stimulus packages, and the unwinding of these, may yet have unexpected consequences for economies in the ongoing pandemic. There are therefore a lot of variables to consider when making generalizations and forecasts.”

Meanwhile, Willis Towers Watson noted that most companies have been able to give higher than forecasted salary increases in 2021, largely due to their lower operating costs and an economy that has been better insulated than expected.

Furthermore, many sectors are recovering in line with the wider economy, and 51% of companies globally are reporting better than expected performance in 2021.

Higher salaries in 2021 are partially attributable to fewer companies freezing pay increases compared to last year. In 2020, an unprecedented number of companies cancelled salary reviews (15-20%), whereas in 2021 the figure has returned to historic levels (2-5%).

Of the companies surveyed in the report, 47% indicated that their rate of recruitment currently far outpaces their 2020 efforts. Organisations which stalled hiring last year are now starting to actively and aggressively recruit.

Rich Luss, a senior economist at Willis Towers Watson said, “If demand for labour remains high and supply growth is sluggish, we would expect organisations to feel the pressure to increase compensation to attract the employees they need.”