SALARIES HAVE risen 4.1 per cent over the last twelve months, as employers continue to battle with a tight labour market, according to recent research
SALARIES HAVE risen 4.1 per cent over the last 12 months, as employers continue to battle with a tight labour market, according to recent research from Mercer.
However, salary levels have stabilised over the past six months, indicating that employers are finally finding a balance between retaining existing employees and attracting new talent.
“The dual challenges of attracting new staff while keeping current staff happy means organisations are fighting the war for talent on two fronts,” said Ken Gilbert, head of Mercer’s Broad Based Rewards group.
“In 2005, we saw pay rises favouring the total workforce (which includes new staff) over same incumbents (or existing employees) suggesting that companies were paying more to lure new talent. By early 2006 the pendulum had swung back and same incumbents experienced a 4.5 per cent rise, against a 4 per cent rise overall, as companies focused on retaining existing staff.
“Now both are on an even keel at 4.1 per cent, suggesting that companies are being more considered in dealing with the unique problems that come with the lowest unemployment in 30 years, an ageing workforce and growing skills shortages.”
A slight improvement on staff turnover figures also suggests retention programs are starting to gain traction –12 months ago, 36 per cent of organisations indicated that staff turnover had increased, and that has now dropped to 28 per cent.
At the same time, pay increases in two of Australia’s boom industries are beginning to come down from their dizzy heights, to be much closer to the nation’s average. Construction and engineering gained 4.7 per cent, compared to a 6.8 per cent rise recently, and energy rose 4.4 per cent after a 6.2 per cent spike previously.
The mining and resources sector is the standout however, with an annual increase of 5.6 per cent. The survey results also reflect the increasing disparity in the states’ economic performance. Victoria and New South Walesreflect the average movements, with 4.1 per cent increases, while at the other end of the spectrum, Western Australia’s 5 per cent rise reflected its booming job market.
The last six months have also seen a 5 per cent increase in organisations that believe their variable reward programs are effective. There has also been a shift towards variable pay, as both target and actual performance pay has increased for CEOs, senior executives and technical/professional staff.
“Where historically variable pay was for just a small number of high performers … the growing trend to offer it more broadly across organisations continues. And it makes sense in the current situation: organisations don’t have a bottomless pit of money to meet wage costs, so the solution is to link pay to performance, keep fixed wage costs down, and be prepared to pay more where individuals deliver results,” he said.
Nonetheless, companies are still struggling to get the mix right in terms of rewards and incentives that attract and retain talent, but also drive desired behaviours and performance outcomes. The top concerns of HR managers are maintaining competitive remuneration in a tight market and getting variable rewards right, according to the survey.
“Improving the links between performance and reward, by using Key Performance Indicators that are strongly linked to business objectives, is critical. But companies should also look beyond financial rewards,”Gilbert said.
“Rewarding top performers with interesting projects and career opportunities is equally effective, while immediate recognition of effort, like weekends away and gift vouchers can be very cost-effective. Looking at how the total reward offer drives the right employee behaviour, and links to business success is how companies will ensure they get the greatest value out of their rewards spend.”
