Irish employees will receive among the highest absolute salary increases globally next year, according to a new report.

The Mercer 2007 worldwide pay survey says Irish salaries will jump 4.5 per cent next year. With inflation projected to run at 2.5 per cent, according to the survey, workers will see an absolute gain of 2 per cent.

That is the highest in the euro zone and significantly ahead of the 1 per cent absolute increase in France and even the 1.7 per cent rise in Britain. Workers in Germany are facing an effective 0.2 per cent fall in salaries as pay rises of 2.3 per cent fail to match expected inflation of 2.5 per cent.

Globally, salaries are projected to rise by an average of 5.9 per cent, 1.9 percentage points ahead of inflation.

Pay levels in many eastern European states is likely to rise significantly again next year and, according to Mercer, are forecast to be among the highest in the world. Workers in Latvia can look forward to the highest increase in Europe - 11.1 per cent - leaving them notably better off, even after accounting for inflation, which is expected to average 4.3 per cent.

"The European landscape is divided into the emerging markets of the East and the more mature economies of the West," said Steve Gross, global leader of broadbased rewards consulting at Mercer. "The research shows that employees in many eastern European countries can generally expect to benefit from higher salary increases than their western counterparts."

He added that demand for low-cost, well-educated employees was increasing in the accession states and other parts of eastern Europe. "In particular, the need for skilled workers with marketing, engineering and IT expertise continues to drive up salaries," he said.

In the US, salaries are, on average, expected to rise by 3.7 per cent, modestly ahead of the likely inflation rate of 2.4 per cent.