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Article | Beyond Data

The impact of hyperinflation on rewards

By Léonie Wey | August 18, 2023

Organizations in Hungary, Turkey and Egypt are looking beyond compensation to strategies that drive talent attraction and retention.
Compensation Strategy & Design
Beyond Data

The countries in Central and Eastern Europe, the Middle East and Africa (CEEMEA) represent diverse examples of how inflation (or hyperinflation, as the case may be) and expected market growth has impacted organizations as well as the way they approach employee compensation. While organizations are still implementing salary increases, high inflation continues to eclipse wage growth at varying degrees (Figure 1).

Middle Eastern countries are the exception to high inflation beating salary increases. Increases in the region have caught up with inflation, while countries such as Hungary, Turkey and Egypt are experiencing exceptionally high inflation. This has prompted changes to organizations’ compensation and benefits strategies to drive talent attraction and retention through a challenging economy.


With the lowest salary levels across the European Union (EU), for the past two decades Hungary has attracted multinational companies to establish manufacturing and service facilities. Increasingly, though, these organizations are struggling with a shortage of skilled workers, as individuals opt to work in neighboring EU countries that offer higher salaries or commute to higher-paying jobs overseas.

This talent shortage is expected to intensify as Hungary’s working population ages. Additionally, the country is grappling with an 18.4% inflation rate that has lowered purchasing power despite government initiatives to enact double-digit increases to the minimum wage in the past few years. As such, Hungarian employers have decided to increase salaries to address the weak economy (Figure 2).

Salary budgets caught up with inflation from 2019 to 2021. However, in 2022 inflation rose to 14.6%, prompting organizations to increase their initial salary budgets from 4.8% to 6.6%. In 2023, inflation is forecasted to reach 18.4%, leading most companies to make higher salary adjustments to respond to the weak economy and tight labor market.

In fact, higher increases have been made based on the talent pool, particularly for manual workers, operations employees and support staff (i.e., HR, IT, Finance). In addition to incremental salary increases, 84% of employers in Hungary also are improving the employee experience and putting more focus on diversity, equity and inclusion (DEI) to encourage attraction and retention (Figure 3).


Turkey has a relatively younger population and 24% of this workforce have attained a higher-education degree. While this may offer a potentially skilled workforce, companies in Turkey are struggling with talent shortages. Political and economic uncertainty have created a new wave of migration, particularly among well-educated citizens. The economy, meanwhile, is projected to grow by 2.7% this year, supported by robust local household and government spending.

However, even with government regulations to expand purchasing power (e.g., 34% increase in minimum wages), inflation in Turkey is expected to reach 45% this year. As such, most companies (73%) have decided to increase annual wages twice per year (Figure 4).

Organizations that plan to increase salaries twice had their annual review and adjustment period between January and April, and the median value for 2023’s actual annual salary increase is 50% (Figure 5).

Adjustments were made in July, with a median value of 23%. For the year, 2023’s compound salary increase at market median is 76%.


Egypt’s working population is more than 30 million, but local organizations still grapple with a dearth of qualified talent. Either the country’s well-educated citizens migrate overseas for better paying jobs, or companies are in tight competition with multinational organizations who hire Egyptians from abroad and employ them locally, offering flexible working conditions and hard-currency compensation.

This talent shortage is compounded by the local economy, which remains uncertain after Egypt’s three currency devaluations in the past year. Moreover, inflation continues to be high and is projected to reach 33.6% this year after peaking at 40.3% in May 2023, based on a year-over-year analysis.

Despite a tough economy, about 70% of companies will maintain one annual salary review this year, according to WTW’s latest local pulse survey. This annual review is expected to increase salaries between 12% and 15%.

However, 80% of participants in our local pulse survey said they also are planning to implement an adjustment review later this year to address inflation and local currency devaluation. Combining the annual review and the later adjustment, salaries are expected to increase by 20%. In addition, Egyptian companies also are taking other rewards actions (Figure 6).

Most employers (84%) are putting a stronger focus on DEI, and 66% are aiming to provide more flexibility and introduce changes to health and wellness benefits (e.g., transportation allowances, medical needs). These initiatives suggest that companies in Egypt are trying to help employees reduce their expenses, and that can foster retention and even attract new talent.

Total rewards actions make a difference

Employers in Hungary, Turkey and Egypt provide strong examples of how organizations can address hyperinflation combined with talent shortages. While increasing salaries may appear to be the easiest route to whittle down the impact of inflation on the workforce, companies are taking a broader look at their rewards strategies and actions to make their workplaces somewhere that talent wants to be. This reflects an understanding of employee needs and a desire to support the workforce through a challenging economy. And the best way to make these critical business decisions is by leveraging credible data that will help compensation and HR professionals deliver defensible recommendations at every level in the organization.


Senior Director, Willis Towers Watson
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