As employers conduct midyear salary reviews, the annual salary increase many workers have long grown accustomed to is becoming less automatic, according to the Jamaica Employers’ Federation (JEF), which says companies are increasingly tying pay rises to productivity, performance and what businesses can afford rather than simply the passage of another year.

The changing approach comes at a time when many households are preparing for the new school year, a period when annual salary increases and retroactive payments have traditionally provided a welcome boost to help cover the cost of uniforms, books, transportation and other expenses. While workers continue to feel pressure from higher living costs, employers argue that the economic conditions that once made annual cost-of-living adjustments almost routine have fundamentally changed.

In a recent interview, JEF President Wayne Chen told the Jamaica Observer that the country’s wage culture was shaped during an era when inflation regularly eroded workers’ purchasing power, making annual increases almost automatic in many workplaces.

“I don’t want to be too general about it, but it’s less and less nowadays about automatic wage increases and more about, ‘Let’s negotiate. What value will you bring to the organisation or enterprise?’” Chen said.

CHEN… it’s less and less nowadays about automatic wage increases and more about, ‘Let’s negotiate. What value will you bring to the organisation or enterprise?.

He said many younger workers may not appreciate just how different Jamaica’s economic environment once was.

Bank of Jamaica data show that annual inflation peaked at 80.2 per cent in 1991 before declining to 40.2 per cent in 1992.

“For many, many years Jamaica had double-digit inflation. It’s only in the last decade or so that we have had continuously low single-digit inflation,” Chen reasoned. “A lot of the habits that had become time-honoured, we are finally breaking that cycle.”

Against that backdrop, annual wage increases were often viewed as a necessary cost-of-living adjustment rather than a reward for individual performance. Today, however, Chen said employers are operating in a labour market where skilled workers are scarce, unemployment is at historically low levels and businesses are increasingly competing to attract and retain talent.

“The market is working,” he said. “People who have the skills, the attitudes, the ability to produce value, they are in high demand.”

Rather than applying across-the-board increases, many employers are placing greater emphasis on rewarding employees who demonstrably improve business performance.

“It’s more driven by market demands and market pressure now than any other time,” Chen said.

He was quick to point out, however, that lower headline inflation does not mean workers are no longer facing financial pressure.

Recent geopolitical tensions have pushed fuel prices higher, he noted, while disruptions to global fertiliser supplies have filtered through to the cost of imported agricultural commodities such as corn, soy and wheat, driving up food prices. Closer to home, successive hurricanes have reduced local agricultural output, keeping prices elevated for many fresh produce items.

“So, yes, the most vulnerable in Jamaica have seen a rise in the price of food and energy, and the knock-on for transport has gone up significantly,” Chen told the Business Observer. “I don’t want to dismiss inflation as something that workers are not feeling.”

At the same time, he argued that employers are facing their own pressures.

Pointing to relatively flat earnings among many listed companies, Chen said businesses must avoid granting wage increases that are not supported by productivity gains.

“We have to be careful as we move forward to raise wages without a commensurate improvement in productivity because to raise wages across the board now without a commensurate improvement in productivity is going to get us back to where we were 20 or 30 years ago with high inflation,” he said.

Instead, Chen believes compensation models are gradually changing.

“A lot of our members are moving to put a bigger component of the compensation around key performance targets,” he said. “It’s less about just the automatic increase and more about how much more value is being created.”

He described this year’s salary review cycle as “a mixed bag”, with some companies continuing to approve annual increases while others are taking a more cautious approach to compensation.

“Those companies that have just automatically increased based on cost of living, unless they are doing something else to improve output, it is not sustainable. Those enterprises are not going to succeed. In fact, they’re not going to stay alive and open,” he said.

The Bustamante Industrial Trade Union (BITU), while acknowledging the financial pressures confronting many businesses, argues that workers should not be expected to shoulder those burdens through stagnant wages.

Vice-President Rudolph Thomas said the union continues to pursue salary negotiations using three guiding principles: The extent to which inflation has eroded workers’ purchasing power, wage movements among comparable employers competing for similar skills, and the level of increase that an employer can demonstrate is financially sustainable.

“The pillars of negotiations on wages and fringe benefits are clear: identify and address what inflation has eroded, consider what exists within the competitive market, and pursue agreements that the employer can demonstrate are sustainable,” Thomas said.

He said responsible wage negotiations should not be viewed as a contest between employers and workers but as part of a broader effort to strengthen businesses while improving employees’ standard of living.

“Employers cannot resolve their financial challenges by suppressing workers’ earnings,” Thomas said, adding that businesses should instead focus on improving productivity, expanding value-added services and making greater use of institutions such as the Jamaica Productivity Centre to educate both employers and employees on ways to increase output.

THOMAS…employers cannot resolve their financial challenges by suppressing workers’ earnings.

Thomas told the Jamaica Observer that some employers are already demonstrating that collaborative approach by inviting unions to submit salary claims before annual budgets are finalised, allowing management to properly consider workers’ requests while planning for the year ahead.

That early exchange of information, he said, helps both sides arrive at settlements that are fair, realistic and sustainable over the long term.

He also noted that this period of the year remains particularly significant for many workers.

“This time of year is very sensitive to workers as they usually look towards receiving an increase and retroactive entitlement by way of such increases to assist them with the expense of their children returning to school,” Thomas said.

While stopping short of suggesting employers are broadly withholding annual increases, Thomas said the BITU has encountered cases where negotiated adjustments have not been implemented in keeping with agreed bargaining cycles.

He later clarified that those cycles refer to collective agreements with defined start and end dates, with negotiations for the next agreement expected to begin immediately after the previous one expires. Delays, he said, create uncertainty for workers trying to plan their finances and should be avoided where possible.

Thomas believes businesses can navigate today’s challenging environment without abandoning meaningful wage growth.

“Forward-thinking employers have used these challenges as an opportunity to re-examine, refocus, reinvent and reset their operations,” he said. “Limiting or withholding reasonable increases will not help them realise the benefits of that process.”

Chen encouraged workers who believe their output is undervalued to explore opportunities elsewhere.

“What I would say to every worker in Jamaica is if you are in an enterprise where you don’t think your output is being valued, the market is right now… don’t feel that you are chained to where you are working,” he said.

Chen encouraged workers to continue learning, take advantage of free online courses and develop new skills that would strengthen their ability to negotiate higher wages.

“When you come to work, think of a self-improvement attitude. How do I improve my output?… You can better negotiate for what you want when that time comes,” he said.