DESPITE PRESSURE to increase salaries across the workforce given current buoyant economic conditions and strong company performances, Australian employers are rewarding high performing talent in critical roles rather than handing out high across-the-board pay increases
DESPITE PRESSURE to increase salaries across the workforce given current buoyant economic conditions and strong company performances, Australian employers are rewarding high performing talent in critical roles rather than handing out high across-the-board pay increases.
A national survey of more than 300 companies has found that employers are being much more selective in awarding salary increases by identifying where the key talent requirements are and focusing spend in those areas in a bid to keep payroll costs under control.
“Companies are trying to ensure they don’t get into a bidding war, across the board, for talent, despite being under pressure to increase salaries due to the recent increase in interest rates, labour market shortages and the need to offer higher rates to attract new recruits,” said Ken Gilbert, head of the total rewards group at Mercer Human Resource Consulting, which conducted the survey.
It predicts overall salary movements of 4.2 per cent for 2005 – well ahead of the 2.6 per cent CPI rate. However, the data also project a gradual downward trend in salary movements, with companies budgeting for lower increases over the next few years.
“Spending won’t be carte blanche, despite the shift from a buyer’s to a seller’s market. Companies are still looking for efficiencies and productivity improvements, hence they will target pay movements towards key individuals,” Gilbert said.
“And there will be continuing greater focus on variable rewards such as incentives, as the link between performance and reward continues to increase.”
Corporate governance is also influencing pay decisions, in that employers are looking at what they’re paying for on top of how much they pay in incentives, he added. “Companies are placing greater focus on ensuring incentive payments are linked more strongly to company and divisional performance.”
The Market Issues Survey 2005 found the industries with the biggest increases in pay in 2005 will be pharmaceutical, construction/engineering and finance, with salary movements of between 4.8 per cent and 5.8 per cent.
Industries tracking in line with overall market movement include retail, transport, education, hospitality, telecommunications, local government, professional services, community services, health and water/utilities.
Industries that are tracking behind the market in regard to pay movements include manufacturing, FMCG, the public sector and computer services.
Another survey has also found that employers’ intentions to take on more staff are at their highest level since November 2000, raising concerns over the sustainability of Australia’s current economic and employment boom.
A Hudson survey of more than 8,000 Australian employers found that 38 per cent anticipate increasing staffing levels during the June 2005 quarter, compared with only 5.5 per cent who expect to reduce current staffing levels.
In other words, seven times as many employers intend increasing permanent staff levels over the next three months, compared with those that intend to decrease staff numbers.
Anne Hatton, CEO of Hudson Australasia, said that the positive employment outlook for Australia over the next quarter must be tempered with the reality of an economy already operating at full capacity, a shortage of skilled labour and the likelihood of a further interest rate rise in the future.
“The question of sustainability comes into play when we keep seeing results that suggest increasing demand for people that simply aren’t available domestically,” Hatton said.
“The continued demand for people will begin to bite hard, driving up wages in Australia and forcing employers to look off shore for the right level of skills they require to meet the commitments of an economy that is striving to make the most of the buoyant conditions, while they last.”
This demand could come at a cost, however, with the potential for the Australian market overheating completely and businesses finding themselves unable to compete at the increased cost levels, she said.
“We are again stressing the importance of retaining the best people, so if and when there is a correction in the economy, businesses can move with it and be in a position of strength to deliver on their commitments during tougher conditions,” she said.
“Employers need to also think more creatively when implementing hiring and retention solutions. Top talent will be easier to source domestically if employers broaden their potential talent pool to include part-time workers; mothers returning to work and early retirees transitioning back into the workforce.”
