Swiss companies are forecasting an average salary increase of 1.3% for employees next year, according to the latest survey by KOF. After accounting for an expected inflation rate of 0.5%, this translates to a real wage increase of approximately 0.8%. However, this outlook represents a slight decrease compared to last year's expectations, attributed to a receding shortage of skilled labor and a decline in inflation. This data excludes the impact of new US tariffs imposed on Switzerland, which are expected to negatively affect industrial companies with strong ties to the US.

The construction sector shows greater resilience with an expected wage increase of 1.7%, while the hospitality and restaurant sectors anticipate a 1.5% rise. In contrast, wholesale trade (0.9%) and manufacturing and retail trade (1.1%) sectors are projected to see lower wage growth. The survey, conducted quarterly since 2022, indicates that nominal wage growth expectations have continuously decreased over the past three years, reflecting shifts in the Swiss labor market.

Market Signals

Sector Impacts and Opportunities: IT, telecommunications, energy, utilities, and waste disposal sectors are expected to see the highest wage increases, averaging around 2%. The chemical and pharmaceutical industry anticipates a 1.7% increase. Sectors such as media, building materials, and retail trade are projected to have the lowest wage growth at 1%.
Price Movements and Volatility: Expected wage increases could boost consumer purchasing power, potentially driving demand for goods and services in specific sectors.
Competitor Positioning Changes: Companies in sectors with higher projected wage increases may need to offer more competitive compensation packages to attract and retain talent.

Winners & Losers

Employees in the IT, telecommunications, energy, utilities, and waste disposal sectors are likely to benefit from the most significant real wage increases. Companies in lower-growth sectors, such as media, building materials, and retail trade, may struggle with employee retention if their compensation strategies do not align with broader market trends. Wage increases could stimulate consumer spending, positively impacting businesses meeting this demand, but may also put pressure on supply chains.

Action Timeline

Immediate (24-48h): Assess the potential impact of new US tariffs on companies heavily oriented towards exporting to the US.
Short-term (1-2 weeks): Review compensation strategies to ensure competitiveness, particularly in sectors with higher projected wage growth.
Long-term: Monitor inflation trends, health insurance premium changes, and union negotiations to shape future wage strategies.

Risk Assessment

Regulatory Risks: US tariffs on Switzerland could affect specific industrial sectors.
Market Volatility Factors: Global economic uncertainties, particularly for export-oriented firms, could influence wage growth forecasts.
Geopolitical Tensions: Trade tensions between the US and Switzerland may impact the performance of export-oriented companies.

Key Indicators

Signal for Market/Industry: Expected wage increases signal a potential strengthening of consumer purchasing power.
Leading Indicators and Data Points: The average expected wage increase (1.3%) and projected inflation (0.5%) provide insights into real wage growth.

Regional Perspective

In Switzerland, company performance is viewed as the primary driver for salary adjustments, unlike in Germany where skilled worker shortages play a larger role. Swiss employees anticipate real wage increases, but these may not always meet their expectations, with 36% feeling dissatisfied with their current pay. There is an opportunity for proactive companies to offer competitive salaries to retain talent, as 46% of professionals are considering changing jobs if they don't receive a raise in the next 12 months.

Immediate Implications

What Happens Next: Companies may begin reviewing their compensation packages to ensure they remain competitive.
Time-Sensitive Opportunities or Risks: Companies that adapt quickly to labor market trends by offering competitive salaries can gain an advantage in attracting and retaining talent.

What to Watch

Leading Indicators to Monitor: Inflation trends, changes in health insurance premiums, and the outcomes of union negotiations.
Expected Developments: New trends in wage expectations may emerge as more data becomes available on the impact of US tariffs.
Key Decision Points: Company decisions on salary adjustments based on their performance and market expectations.

Analysis

The survey points to a relatively stable Swiss labor market with expected real wage growth, but one facing potential challenges from external factors like US tariffs and rising cost of living (e.g., health insurance). The importance of proactive compensation strategies for companies seeking to maintain their competitive edge in attracting and retaining talent is highlighted.