Despite talk of an economic slowdown, salaries have risen by 4.7% over the past 12 months, the highest movement in over three years, according to a survey.

Mercer's latest Market Issues Survey of over 380 organisations, which looks at remuneration trends and the top business issues facing employers, found that pay for 'same incumbents' (the same person in the same job) has increased by 4.7%, up from last year's 4.5% increase. Meanwhile, overall fixed pay budgets rose by 4.4%, which was an increase from the 4.2% rise seen 12 months ago.

Spokesman David Abusah says the continued salary growth could impact on inflation.

"We're seeing an interesting dilemma at the moment where there is mounting pressure from a broader economic policy perspective to curb wages growth, but employers are responding to pressure of another kind - to attract and retain the best talent."

He adds that the fact the fixed pay budget increases are lower than same incumbent movements suggests companies are maintaining a strong focus on retaining existing talent rather than simply relying on buying critical talent from outside the organisation.

"For the third year running, attraction and retention ranks as the top reward issue facing businesses, with 93% of employers rating it is a very important issue. With unemployment reaching a new record low last week and the skills shortage showing no sign of easing, it seems that pressure for wage growth will continue for some time yet," says Abusah.