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Global compensation trends: Spotlight on Brazil

Compensation Strategy & Design
Beyond Data|COVID 19 Coronavirus

By Christian Mattos | December 21, 2020

We look at four primary trends influencing compensation in the Brazilian labor market in 2021.

Although the Brazilian economy in general has retreated as a result of COVID-19 bringing an increase in the overall level of unemployment and reductions in salary adjustments, professionals with specific critical skills remain scarce and highly sought after.

Below are four compensation trends we observe of the world’s eighth-largest economy based on an analysis of over 770,000 data points from our 2020 annual compensation surveys.

Real wage growth is low

During 2020, we observed a considerable reduction in salary budgets in Brazil as a result of the negative economic effects of COVID-19. Estimates of voluntary merit increases dropped from 1.5% to 1.2%, while total increases, which also include the mandatory salary increase defined in negotiations between employees’ and employers’ unions, dropped from 5.1% to 3.4%.

total salary increase (estimated) in Brazil in 2021

Reductions in mandatory salary increases were also observed when compared to previous periods. In 2020 a significant portion of union agreements were negotiated without applying any salary adjustment; while in other agreements, salary increases were equivalent to the accumulated inflation of the previous 12-month period. In previous years, collective agreements were generally negotiated between 1% and 1.5% above annual inflation rates. For 2021, Brazilian companies estimate total salary increases of 4.6% and merit increases of 1.6% on average.

2021 estimated increases
Figure 1. Economic Indicators for Brazil in 2021
GDP CPI Total salary increase Merit increase
3.4% 3.4% 4.6% 1.6%

Variable pay is contracting

The impact of the pandemic on variable pay in Brazil can be seen, even if discreetly. In 2016, bonuses for leadership positions (managers and above) reached, on average, 79% of target, gradually increasing to 95% by 2019. In 2020, variable pay decreased to 92%.

For 2021, companies estimate a payment level lower than 2020, but it is still early to predict the percentage of reduction.

Bar graph showing bonus paid compared to target. - description below
Figure 2. Bonus paid compared to target (historical series)

Bar graph showing bonus paid compared to target. 2011: 109%, 2012: 93%, 2013: 87%, 2014: 85%, 2015: 82%, 2016: 79%, 2017: 86%, 2018: 94%, 2019: 95%, 2020: 92%

Digital skills continue to be highly sought after

While digital transformation for many organizations is not a recent event – with some companies having started their journeys over a decade ago, we have seen a real push in the last two years by almost every organization to bring this concept to life in their business, and even now more urgently as a result of the pandemic.

According to data from the Willis Towers Watson 2020 High Tech Compensation Survey - Brazil, functions that presented a significant increase in total headcount from 2019 to 2020 are:

A list of percentage increase in reported positions at the professional level. - description below
Figure 3: Hot jobs in high tech with significant job growth

A list of percentage increase in reported positions at the professional level. User interface / experience design: 81%, Fullstack, back-end and front-end development: 81%, data science: 79%, data engineer: 14%, agile/scrum master: 14%.

Many companies are not structured to develop these skills internally and must look for digital talent in other organizations, often paying a high premium to attract these professionals. As a result, digital functions have shown a faster salary growth compared to more traditional ones, on average 3% higher as observed in our latest survey for the technology sector.

Gender pay equality remains a hot topic

Promoting a better balance between male and female compensation is a more and more important in the business environment in Brazil, as well as in society in general. Many companies have already established committees to address the issue and develop strategies that promote diversity and inclusion.

However, we still observe inequalities, not only in pay differences between genders, but in the proportion between men and women in leadership positions. A recent survey from Willis Towers Watson showed that on average, for each female professional in VP/Director positions, there are three male professionals. For the position of CEO, the difference is even greater: one to nine.

Leadership roles bar graph. - description below
Figure 4. Leadership roles (male versus female)

Leadership roles bar graph. For CEO/President, 91% are Male, 9% Female. For VP/Director, 77% are Male, 23% Female. For Senior Manager, 71% are Male, 29% Female. For Manager, 67% are Male, 33% Female.

When we compare base salary by gender, and then factor in age, we observe significant differences in pay in employees 45 and older.

Line graph showing differences in pay by age and gender. - description below
Figure 5: Differences in base salary by age (male x female)

Line graph showing differences in pay by age and gender. Base salary for men and women ages 20 through 45 appears to be similar. The gap between men and women begins to widen around age 45, with men making approximately 17% more. By age 60, this percentage grows to 32%.

But when we compare gender pay based on similar positions, the delta drops quite a bit, not exceeding 5% favoring males.

Gender pay gap by position
Figure 6: Differences in base salary by position (male versus female)
  Gap - Female to Male
VP / Director -4.7%
Senior Manager -2.9%
Manager -3.7%
Supervisor -3.2%
Professional -5.3%

Senior Director, Rewards Data and Software – Latin America

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