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By Irina Kvirikadze - Senior Manager Data Integrity

Competitive compensation packages play a pivotal role in attracting, retaining, and motivating top talent - essential for delivering value to clients and driving sustainable growth in the consulting industry.

Here, we take a look at expected global and regional salary increases, as well as factors influencing salary adjustment for the year ahead.

Expected Global Salary Growth Projections

Vencon Research’s own findings [i], backed up by other studies [ii], suggest that despite some economic concerns, companies all over the world are inclined to maintain a fairly aggressive approach towards compensation.

Among the primary factors for increasing salary budgets are inflation and cost of living adjustments. Inflationary pressures and rising costs of living have compelled consulting firms to review and adjust their compensation structures accordingly. Expected salary increases in 2024 are, partially a response to inflationary trends to maintain the purchasing power of their employees.

Salary increases and inflation rates exhibit significant variation across countries, yet this overarching trend is observable in many, though not all, countries. According to Vencon Research findings (see Figure 1), average global salary rises in 2024 is 5.2% and inflation rate 3.3%. It's important to highlight that in 2023, salary increases outpaced inflation [iii], and this trend is likely to persist into 2024.

Salary increases can vary depending on the geographic location of the consulting firm within a country and its employees. For example, consultants working in major metropolitan areas with higher costs of living may receive larger salary increases compared to those in smaller cities or rural areas. Consequently, each country [iv] and region should be assessed independently, given the significant disparities in economic conditions. The subsequent section will provide further exploration into expected salary increases at both regional and national levels.

Expected Regional and National Salary Growth Projections

Regional salary increases in 2024 vary from 5% to 5.4% and inflation rates from 2.8% to 3.8% (see Figure 2). In Europe, salary increases vary between 2% to 10.4% and inflation rates from 1.9% to 6.6% (see Figure 3). In Belgium, as the inflation rate stabilizes, salary increases for 2024 are projected to decrease to 4.9% compared to the previous year's increase of over 11%, which was influenced by wage indexation tied to inflation [v]. In Germany expected salary increase is 4.4%, in France 4.1%, in Spain 3.9% and in the United Kingdom 4.8%.

In countries with high inflation rates such as Türkiye, where the predicted inflation rate for 2024 exceeds 50%, the expected salary increase stands at 45.4%[vi]. Nevertheless, companies are implementing additional measures such as frequent salary adjustments and issuing payments in foreign currencies.

In the Americas, encompassing both North and South America, projected salary increases stand at 5.3%. Excluding Argentina, a country experiencing hyperinflation, the highest average salary increases in this region are anticipated in Brazil (6.3%) and Colombia (10.1%) (see Figure 4).

In Canada and the United States of America (USA) expected average salary growth rates are 4% and 4.3% respectively.

It is essential to acknowledge that the anticipated economic growth of individual countries is an also an influential factor. The United States of America holds a central position in this regard, owing to the size and resilience of its market. Furthermore, certain US companies boast sales figures that surpass the gross national product of entire countries. Increasingly, attention is shifting towards APAC (Asia Pacific) while diminishing emphasis on Europe. This transition is further accelerated by sluggish economic growth in Europe and notably in Germany [vii].

According to the Vencon Research study, it is anticipated that a majority of locations in the APAC region will either maintain or surpass their real salary growth rates from 2023 in the year 2024 (see Figure 5). China is anticipated to maintain one of the lowest inflation rates at 1.7% in 2024, trailing only behind Taiwan and Thailand in this region. Despite this, it is expected to experience a notable average salary increase of 5.6%. Conversely, India which is poised to lead the way in projected salary increases within the APAC region, with an impressive figure of 9.7%.

As seen in numerous other countries, the anticipated average salary increases in the Middle East and South Africa are poised to remain robust throughout 2024. Projections indicate that pay raises are expected to reach 6% in Saudi Arabia and South Africa, while in the United Arab Emirates, the figure is slightly lower at 4.2% (refer to Figure 6).

It is essential to note that beyond inflation and cost of living, there are additional pivotal factors that drive salary increases within this sector.

Factors Influencing Salary Trends: Beyond Inflation and Cost of Living

Tight Labour Market and Competition

In 2024, the demand for consulting services continues to increase as businesses face complex challenges such as sustainability initiatives, post-pandemic recovery strategies and digital transformation. In this context, consulting firms are under high pressure to attract and retain top talent to meet client expectations. This heightened demand has translated into competitive salary packages and lucrative benefits for consultants.

Today, it's not only the leading consulting firms competing for talent, but also the MAANG [viii] companies, as well as ever multiplying start-ups. This resonates with the "Z" generation, which has its distinct priorities. They are willing to put in the effort, but seek fair and transparent compensation, alongside a work-life balance conducive to family life, within a communicative, team-oriented environment. This trend predominantly impacts consulting firms operating in mature markets, while emerging markets are not experiencing the same degree of impact at present.

Industry Specialization and Niche Demands

Diversity of client specialization and the rapid emergence of new topics with increasingly shorter life cycles have significantly altered the requirements for potential consultants. Specialized expertise and niche knowledge are now more sought after than ever before. Certain specialized areas within consulting, such as technology, healthcare, or sustainability, may experience higher demand and thus higher salaries. Consultants with expertise in these areas may see larger salary increases compared to those in more general consulting roles or general lines of businesses.

Emerging Industry Trends and Consolidation

Emerging trends and innovations in the consulting industry, such as the adoption of new technologies or methodologies, may influence salary increases. Consultants with skills and expertise in these areas may be in high demand and receive higher compensation as a result.

Apart from that, the consulting landscape has witnessed significant consolidation through mergers and acquisitions, with larger firms acquiring boutique consultancies to expand service offerings and market presence. Salary increases may reflect the impact of industry consolidation, as firms seek to integrate talent seamlessly and align compensation structures across merged entities.

Conclusion

In conclusion, the dynamics of expected salary increases in 2024 within the consulting industry reflect a multifaceted interplay of global economic factors, regional trends, and industry-specific dynamics. Despite economic uncertainties and inflationary pressures, consulting firms are maintaining fairly aggressive compensation strategies to attract and retain top talent crucial for delivering value to clients and sustaining growth.

Across different regions, variations in salary increases and inflation rates underscore the importance of localized analysis and decision-making. Factors such as tight labour markets, industry specialization, and emerging trends significantly influence salary trends, with specialized expertise commanding higher compensation. Furthermore, the ongoing consolidation within the consulting landscape through mergers and acquisitions has implications for salary structures as firms integrate talent and align compensation strategies across entities.

It is interesting to observe how all the market conditions and factors will influence actual salary budget expenditure across all markets in 2024. However, as the consulting industry continues to evolve, a nuanced understanding of salary dynamics remains essential for sustainable growth and success.  To effectively navigate these complexities and ensure competitive compensation packages, it is imperative to base decisions on the most accurate, pertinent, and up-to-date market data available. Failure to do so will perpetuate the challenges currently faced by employers, ultimately eroding efforts in attraction, retention, and motivation, thereby resulting organizations failing to meet their anticipated outcomes.

For more information on this topic or on how you may successfully respond to the issues raised in this article, please contact Vencon Research – as always, we are happy to assist you.

[i] Vencon Research analysis encompassing more than 50 countries.

[ii] Various inflation forecasting and research firms, incl. Kienbaum, Korn Ferry and Willis Towers Watson

[iii] Bremen, John. "Will Pay Increases Exceed Inflation in 2024?" Forbes, 14 Dec. 2023

[iv] Each country and its profile will be thoroughly reviewed in upcoming briefings from Vencon Research.

[v] Vencon Research. "Belgium's Consulting Industry Braces for Government-Enforced Salary Adjustments" Vencon Research

[vi] Considering hyperinflation and data volatility

[vii] DW News. "Germany's Economy Set for Rough Ride in 2024" DW

[viii] Meta (Facebook); Amazon; Apple; Netflix; and Google (Alphabet)

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Discover the challenges facing the consulting industry in 2023, including competition for talent, a tight labor market and increasing salaries in response to rampant inflation. Download our summary report for a concise overview of all 19 points.

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By Jalol Khodjaev - Senior Consultant
and Osas Ohenhen - Associate Business Development

Key highlights

The global mergers and acquisitions (M&A) market slowed in 2022 with a 35% drop in transaction values. In this context a significant number of management consulting firms providing M&A services as well as pure M&A advisory firms (hereafter together referred to as "M&A consulting firms") experienced negative financial impacts.

Despite declining revenues, M&A consulting firms were cautious in making immediate adjustments to employee compensation. The surveyed firms made minimal to moderate changes to base pay, with variable pay adjustments fluctuating among firms, mostly due to differences in bonus structures. Adjustments to additional benefits (i.e. equity-related pay, allowances, pension plan, non-cash benefits) were minimal.

In 2023, M&A consulting firms may encounter difficulties in attaining well-balanced compensation for their workforce, as the market remains uncertain due to global recession fears and rising interest rates.

Less than half of the M&A consulting firms surveyed plan to raise base pay for employees, while the remaining firms have no intention to implement changes here.

Most firms will keep performance-based bonuses (Bonus 1) unchanged in 2023. About one-third of firms have no plans to change firm-based bonuses (Bonus 2), while the remaining firms appear uncertain about future actions regarding this bonus. Only few firms intend to increase Bonus 3, which derives from the M&A team’s bonus pool.

A majority of firms (over 70%) maintained existing allowances and pension plans, while a small percentage introduced equity-pay (less than 10%) and non-cash benefits (less than 20%) to their compensation plans.

Introduction

Global M&A activity declined in late 2022 due to economic and financing hurdles, such as inflation, higher interest rates, reduced leveraged finance, bond-market concerns, and the potential for a recession.

Vencon Research reached out to M&A consulting firms operating in Western and Central Europe to understand the impact of the economic and financial downturn on their businesses and, potentially, on their workforce and compensation.

In this article, we will explore the survey’s findings, gaining insights into the approaches M&A consulting firms employed to mitigate the repercussions of challenging market conditions on the workforce. 

Global M&A activities slowed substantially in the second half of 2022

The total value of M&A transactions globally fell 35% in 2022 from 2021’s record high, to USD 3,390 billion (refer to Graph 1.). That is the biggest year-over-year percentage drop since 2001, a year when the U.S. economy slid into a recession and the value of global transactions plunged approximately 50%, to USD 1, 866 billion.

The outlook for 2023 still remains clouded for global M&A business due to global recession fears and rising interest rates as national central banks try to curb the inflation in many regions. The estimated year-end transaction volume for 2023 is USD 2,153 billion, which would be 37% lower than the 2022 values.

Market conditions had varying impact on M&A

Vencon Research’s survey results showed that market conditions have had varying impact on the M&A business of M&A consulting firms. A significant number of firms (> 60%) experienced a slightly negative impact, while a small portion (<10%) reported a very negative impact. Interestingly, the firms involved in transactions ranging between €5 to €25 million and €25 to €100 million were the ones that experienced the highest proportion of negative impacts. Roughly a quarter of the firms reported experiencing insignificant impact.

The majority of participants witnessed a decline in the demand for their M&A services. Furthermore, nearly half of the firms reported a decrease in the number of M&A deals and transactions, while approximately one-third of the firms experienced a decline in their overall M&A revenue. None of the firms reported an increase in their M&A revenue.

Graph 1. Value and number of global M&A transactions [1]

M&A consulting firms cautious in adjusting workforce compensation

Retaining top-performers, ensuring financial well-being of employees, as well as maintaining attractiveness for young talent during such economic and financial turmoil was a pressing challenge for M&A consulting firms, as they were forced to make significant cuts in expenses to minimize the negative impact on the overall health of their businesses. Potentially this included adjustments to employee compensation. As such cuts could lead to growing resentment among employees and a high turnover rate, many M&A consulting firms were rather cautious and selective when making compensation adjustments. 

Adjustments to base pay (fixed salary)

Less than half of the M&A consulting firms surveyed implemented a moderate increase in base pay for their entry to mid-level employees[2], with only a small percentage (<10%) opting for significant raises at this level. At approximately one-third of the firms, senior employees[3] experienced a moderate rise in their base pay. None of the surveyed firms opted to reduce base pay.

However, a considerable number of M&A consulting firms (around 70%) chose not to make any changes to base pay for senior employees, whereas nearly half of the firms applied a similar approach with respect to base pay for entry to mid-level employees. It can be inferred that these firms viewed unstable financial and market conditions as a temporary phenomenon. Consequently, they approached base pay adjustments with caution, recognizing that once implemented, these changes may be challenging to reverse when the situation stabilizes and returns to its previous levels.

Adjustments to variable pay (bonuses)

The survey findings revealed that M&A consulting firms had diverse variable pay/bonus structures. Therefore the adjustments made to this compensation component varied.

For the purpose of this research and for effective comparison, we have defined three types of variable pay/bonus:

Bonus 1 (also known as personal or individual bonus): This refers to a financial reward granted to an individual employee based on personal performance or contribution to the firm. It is typically independent of a bonus pool and is not directly linked to the overall performance of the firm or a specific business area. Such bonuses are awarded based on the achievement of personal KPIs.

Bonus 2 (also known as firm-performance or firm-based bonus): This type of bonus is awarded to an individual employee based on the financial success of the firm. It may be determined by factors such as profitability, revenue growth, or the attainment of other firm-wide metrics. The award can be a portion of a bonus pool allocated to employees or a percentage of the firm’s EBIT or similar financial indicators. The distribution of this bonus category may consider factors such as job role, career level, and other relevant considerations.

Bonus 3: This bonus category involves a share of the overall bonus pool or a separate/dedicated bonus pool specifically allocated to the M&A team. The size of the bonus pool, allocation, or similar factors is typically determined by various criteria, including the successful completion of M&A transactions, meeting or exceeding performance metrics of the M&A team, achieving targets or KPIs, and other relevant indicators.

Note: In pure M&A advisory firms Bonus 2 (firm-based bonus) and Bonus 3 (bonus allocated from bonus pool) are not considered as separate, but rather refer to the same concept.

Among the M&A consulting firms surveyed, Bonus 1 was frequently granted to entry to mid-level employees, while Bonus 3 was more commonly provided to senior employees. A majority of the firms offered a combination of bonuses to their M&A teams. Approximately 40% of the firms provided all three bonus components (Bonus 1, Bonus 2, and Bonus 3) to their senior employees, whereas only a quarter of the firms afforded the same offerings to entry to mid-level employees. Around 40% of the firms offered a combination of two bonuses (Bonus 1+Bonus 2, Bonus 1+Bonus 3, Bonus 2+Bonus 3) to employees in both groups. The remaining surveyed firms offered either Bonus 1 (over 15% - exclusively for entry to mid-level employees), or Bonus 2 (less than 10% - exclusively for senior employees), or Bonus 3 (less than 10% - offered to both groups).

In terms of adjustments to Bonus 1, most M&A consulting firms (above 70%) made no changes, despite the challenging economic and financial conditions. Only some firms (20%) moderately decreased Bonus 1 for senior-level employees. The remaining few firms either made moderate increases to Bonus 1 or implemented significant reductions to it.

As for Bonus 2, approximately half of the M&A consulting firms implemented a moderate decrease for entry to mid-level employees, while around 40% of the firms did the same for senior-level employees. One-third of the firms chose not to make any changes to Bonus 2 for entry to mid-level employees, while around 50% of the firms took a similar approach for senior employees. Less than one-fifth of the firms opted for a moderate increase in Bonus 2 for both groups. A significant portion of the surveyed firms made no changes to Bonus 2.

Finally, for Bonus 3, over half of the M&A consulting firms opted for a moderate decrease for entry to mid-level employees, while the remaining firms maintained the bonus at the same level. On the other hand, approximately 40% of the firms implemented moderate and/or significant decreases in Bonus 3 for senior employees, while the remaining firms made no changes to the bonus for the same level.

Adjustment to additional benefits (i.e. equity-related pay, allowances, pension plans)

Roughly half of the surveyed firms provide additional benefits, either separately or in combination, primarily for their senior employees. Across all surveyed M&A consulting firms, the adjustments made to equity and additional benefits were minimal in magnitude. This can be attributed, to some extent, to the fact that only a small number of companies included these additional benefits in their offerings to the workforce.

Outlook for 2023: expectations and future changes in compensation

The global M&A business outlook for 2023 remains uncertain due to fears of a global recession and rising interest rates introduced by central banks to curb inflation in many regions. This gloomy perspective is unfortunately maintained when looking at statistical data on 2023 M&A activity so far. A report from the GlobalData Insurance Intelligence Center reveals a significant decline of M&A deals by 44% to USD 413 billion in Q1 2023, down from $744 billion in Q1 2022. The year-end deal volume projected for 2023 is anticipated to reach USD 2,153 billion - a significant decrease of 37% compared to the figure recorded in 2022. This indicated that ensuring well-balanced compensation for the workforce may remain a pressing challenge for M&A consulting firms.

Vencon Research’s survey revealed that just under half of the M&A consulting firms intended to raise base pay for entry, mid-level and senior employees, while the remainder had no plans to adjust base pay at any level.

Despite the financial uncertainty, the majority of firms (over 60%) intended to keep performance-based bonuses (Bonus 1) unchanged in 2023.

As far as firm-based bonuses (Bonus 2), many M&A consulting firms (over 60%) did not provide a response. It appears challenging for them to accurately anticipate their firms’ performance in 2023. Nevertheless, about one-third of firms indicated no intention to make any changes to Bonus 2.

In terms of Bonus 3, which is allocated from an M&A team's bonus pool, few firms (<20%) reported an intention to increase it. However, the rest of the firms intended no changes or found it difficult to provide a definitive answer due to the prevailing uncertainties.

Regarding additional benefits, the majority of firms (over 70%) intended not to make any changes to allowances and pension plans, while the rest faced difficulties in providing a definitive answer. However, a small number of firms (less than 10%) introduced equity-pay, and non-cash benefits (less than 20%) as a new component in their compensation plans, while others either didn't offer these components, mentioned no changes, or didn't respond.

Vencon Research Advisory

Should you or your team seek further guidance on how your firm can adjust, or your competitors have adjusted, compensation strategies amid challenging market conditions, please reach out to us here at Vencon Research. We are, as always, eager to assist you and provide valuable insights.

Disclaimer

Please note that the survey insights are based on the analysis of a carefully chosen group of survey participants. Therefore, while the report may provide valuable insights, it is important to acknowledge that it may not offer a comprehensive representation of all M&A consulting firms. However, the information regarding compensation structures, including the bonus pool, remains highly relevant and can still provide valuable insights for a wide range of M&A consulting firms. 

Sources:

1.       The Institute for Mergers, Acquisitions and Alliances (IMAA), https://imaa-institute.org/mergers-and-acquisitions-statistics/

2.       GlobalData Insurance Intelligence Center, https://imaa-institute.org/mergers-and-acquisitions-statistics/

Notes:

[1] Data for 2023 is estimated

[2] Entry to mid-level employees (from Analyst to Manager levels)

[3] Senior employees (from Senior Manager to Partner/Managing Director)

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In the consulting industry, compensation isn't just about salaries— it's a strategic tool for attracting top talent, managing finances, staying competitive, and ensuring fairness. At the heart of this strategy lies salary benchmarking, a practice that aligns compensation with industry norms.

In this briefing, we'll explore the twelve crucial factors that drive success, ensuring consulting firms can attract top talent, manage costs effectively, stay competitive, and maintain fairness within their organizations. These factors are thoughtfully grouped into four relevant categories, providing a comprehensive framework for compensation strategies tailored to the needs of the consulting industry and its professionals.

Talent Acquisition and Retention

Talent acquisition and retention are critical for consulting firms to maintain their competitive edge and deliver high-quality services to clients. Ensuring that consultants are adequately compensated and incentivized is key to attracting and retaining top talent.

Cost Consideration and Financial Management

Managing costs effectively is vital for consulting firms to maintain profitability and sustainable growth. Salary benchmarking helps firms optimize their financial resources while ensuring competitive compensation for employees.

Market Dynamics and Strategic Planning

Understanding market dynamics and aligning with industry standards are essential for consulting firms to adapt to changing market conditions and drive strategic decision-making.

Compliance and Fairness

Ensuring compliance with labour laws and maintaining fairness in compensation practices are fundamental for fostering a positive work environment and minimizing legal risks.

As a trusted HR partner for the consulting industry, Vencon Research is here to help you unlock the full potential of your team. Contact us to learn more about how we can support your HR needs and drive success for your business.

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By Veronika von Strachwitz-Camara - Business Development Senior Manager

Within the broader world of management consulting, so-called economic consulting firms provide services related to economic analysis, forecasting, and litigation support, aiding clients in achieving strategic goals and mitigating risks in evolving business environments.

Economic consulting firms tend to experience increased demand for their expertise during times of disruption and market uncertainty, such as occurred on a global scale and across industries during the COVID-19 pandemic.

Economic consultants have found themselves at the forefront of pandemic response within business, assisting clients in analysing market trends, making informed decisions, and devising strategies to weather the storm. In turn, the increased demand for expert economic insights during uncertain times has contributed to the upward trajectory of economic consulting salaries.

Economic Consulting across Sectors

Economic consultants serve a wide range of industries, and the impact of the pandemic and subsequent global unease has varied by sector. Some industries, such as healthcare and technology, saw increased demand for consulting services, which in many cases have led to salary increases.

Another sector with growing demand for economic consulting, energy and sustainability, has seen increasing growth due to the impact of climate change; as economic consulting services are called on to, for example, predict consequences of investments in certain markets and geographies.

Governments seek economic consulting services to inform policy formulation, assess economic impacts of proposed changes, and ensure data-driven decision-making. The scale and urgency of recent macro-level challenges have propelled government engagement with economic consultants to new heights. National economies faced unprecedented disruptions in the pandemic, as well as with recent geopolitical shifts such as the Ukraine war, prompting governments to seek strategies that could mitigate adverse effects and accelerate recovery or restructuring of business.

At the same time, the surge in demand hasn't been uniform across all sectors. Industries like travel, hospitality, and retail have been severely affected by events ranging from the pandemic to breakdowns in regional security, leading to decreased demand for economic consulting services in these areas.

Growth Trajectory: Economic Consulting Salaries

The overall surge in government and industry demand for economic consulting services has had a direct impact on salaries in the field. Economic consultants with expertise in areas such as macroeconomic modelling, fiscal policy analysis, and public finance have seen their skills become even more valued. Governments are competing with private sector firms to secure top talent, driving up the salaries of consultants with a proven track record in addressing complex economic challenges.

HR-sourced economic consulting salary data collected by Vencon Research as well as numerous discussions with clients in the field confirm the trend, showing in part drastic increases in economic consulting salaries.

This increased demand is not confined to developed economies; emerging markets are also recognizing the importance of economic consulting in shaping their economic recovery trajectories. As governments strive to strike the delicate balance between safeguarding public health and revitalizing economies, they turn to economic consultants for insights that can steer their policy decisions in the right direction.

It's important to note that economic consulting is a highly specialized field, and compensation can be influenced by a wide range of factors. To get a more accurate and up-to-date picture of salary trends in economic consulting, it's advisable to consult industry reports, salary surveys, and reach out to professionals in the field or specific firms for the most current information. Additionally, economic conditions and salary trends can change over time, so it's essential to consider the context of the specific time period you are interested in.

First-sourced Salary Data from Vencon Research Benchmarking Surveys

To get an accurate and up-to-date picture of salary trends in economic consulting, you can consult Vencon Research’s specialised Economic Consulting (ECO) salary surveys for the most current information.

Please feel free to reach out to one of our experts.

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