Staff churn up despite pay hikes

by 29 May 2007

IN THE grip of a sustained national skills shortage, Australia’s large companies are footing the bill for ever-increasing pay hikes, with annual salaries rising by 4.6 per cent in the 2006–07 year, up from 4.4 per cent in the previous year and 4.0 per cent in 2003–04, according to a national salary survey.

Large companies in the resource boom states of Western Australia and Queensland have been hardest hit with salary increases substantially outpacing the national average at 6.8 per cent and 5.1 per cent respectively.

The survey revealed further negative fallout from the ongoing skills shortfall, with voluntary staff turnover rates at 12.6 per cent for 2006–07, up from 11.5 per cent in the previous year and significantly up from the 9.9 per cent rate in the 2003–04 year.

The survey, which was conducted by the Australian Institute of Management (AIM), found almost 70 per cent of staff in large companies resigned to pursue career progression or promotion opportunities.

“This raises the question of why organisations are not doing more to develop career pathways for their staff,” said Jennifer Alexander, chief executive of AIM NSW/ACT.

“The message for HR professionals is that a competitive salary package, while important, cannot be the only solution to staff retention … It will be important for the HR function to steer companies to improve their focus on developing career pathways for staff through better training, performance management and career development strategies.”

The survey, which was based on responses from 779 companies, including 561 large companies and 218 small companies, also found that only 52.3 per cent of large companies have a dedicated training budget while only 54.5 per cent of salaried staff in large companies have a development plan in place.

“In the current climate, staff need to be assured that they have a future with the organisation, so greater investment in training and career development should be a priority,” said Alexander.

The survey also found the tight job market has prompted employers to look offshore for skilled staff, with 34 per cent of large companies already employing staff from overseas and as many as 63.3 per cent indicating they would be willing to employ overseas candidates if needed to cover a skills shortfall.

Currently, the most common source of migrant labour for large companies is Asia (48 per cent) and the United Kingdom (44 per cent), with the new arrivals primarily filling construction and engineering roles.

Buoyant employment conditions also appear to have slowed take-up of the new WorkChoices regime, with only 47 per cent of large companies intending to revise their HR and pay policies as a result.

“Some companies may be adopting a wait-and-see approach of observing the experiences and impacts on industry peers before deciding whether to jump on board. Others may well have reviewed the new rules and found little scope for change in view of prerequisites relating to company size and the like,” Alexander said.

“Either way, the HR department needs to review the new legislation and confirm that the company has responded appropriately, both at an organisational level in terms of amending pay and HR policies, and at the individual employee level, of ensuring any policy changes are cascaded through to employment agreements.”

Going forward, the employment outlook remains positive with only 8.8 per cent of large companies expecting a decrease in permanent staff levels over the next 12 months, down from 10.7 per cent in the previous year, while over one-half of large companies (50.8 per cent) expect permanent staff numbers to increase.

Overall, large employers are also striving to improve non-salary benefits with a greater proportion of large companies absorbing the cost of fringe benefits tax (FBT) on behalf of staff across all job levels. And among large companies that provide company vehicles, there has been a notable rise – again, across all job levels – in the proportion of organisations that offer these vehicles at no cost to employees.

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