Russian employers increase salaries to retain employees

In 2024, in the context of a continuing shortage of personnel, competition between companies in terms of the level of salaries offered to employees may reach a new level, according to HR industry experts and trade union representatives interviewed by Kommersant. According to their information, some employers are already abandoning the existing informal industry agreements, which last year allowed businesses to increase salaries at approximately the same low pace.

In 2023, the demand for labor, according to TsMAKP experts, increased to record levels in recent years: the number of vacancies exceeded the number of employees by almost 2 million (for more details, see “Kommersant” dated September 12, 2023). At the end of the year, Russian employers identified the main challenge encountered as hiring new and retaining existing employees. At the same time, most companies named increasing salaries as the main tool for this. According to economists surveyed by Kommersant at the end of the year, their growth in 2024 will be 1.3–1.6% in real terms (see Kommersant on December 20, 2023). The beginning of the year so far confirms the forecasts of experts: for example, on Friday AvtoVAZ announced an advanced indexation of tariff rates and salaries of workers by 9% from February 1, 2024 instead of July 1.

Experts interviewed by Kommersant believe that at the end of the year, the increase in wages may be even higher than expected – due to a change in companies’ approach to indexation. “Previously, many large enterprises, one might say, agreed with each other that they would increase the salaries of mass personnel by approximately the same amount. Now, according to our data, such informal agreements no longer work,” says Pavel Kudyukin, a member of the council of the Confederation of Labor of Russia. “Such agreements could exist at the shareholder level and often related not only to salary policy, but also to the transfer of employees from one business to another,” agrees Vladislav Bykhanov, partner at the recruiting company Cornerstone. As Yulia Zabazarnykh, a partner at the consulting company Kontakt InterSearch Russia, notes, even in the case where there were no informal agreements, the company’s HR specialists tried to exchange data on the tariff schedules of their companies, for example, through “club research”, which took place quite regularly. “There were agreements on the level of rates, but another thing is that not all companies honestly complied with them and, for example, did not inflate staff salaries due to the variable part of the salary,” notes a Kommersant source in a personnel company.

The need to work in a workforce shortage situation may have made employers less tolerant of each other. Now, as a Kommersant source in the oil industry says, mutual agreements in the personnel sector have been abandoned, for example, by the Irkutsk Oil Company and SIBUR Holding. “Previously, they considered it unacceptable to poach specialists from each other, but since the end of last year this practice has begun to grow,” the source notes. “Our employees receive offers from competing companies – from those who have more resources and are ready to increase the wage fund at a faster pace. For example, raw materials companies and enterprises of the military-industrial complex are actively hiring,” says Yuri Gorkovenko, deputy general director of RT-Invest Transport Systems.

If earlier employees were ready to stay in their place because of the team, social package and employer brand, now salary is the only criterion, explains Vladislav Bykhanov. This, according to him, is also due to the generally favorable situation on the labor market for them, with the expansion of information opportunities – now it is easier for workers to move from industry to industry, since there are more sources of knowledge about alternative vacancies. “In such a situation, industry agreements simply cease to fulfill their function,” the expert sums up. “The wage race is just beginning to gain momentum,” agrees Yulia Zabazarnykh.

Anastasia Manuilova