Australian companies take egalitarian approach to pay

by 13 May 2008

AUSTRALIAN ORGANISATIONS are arguably among the most egalitarian in the world, having one of the smallest pay gaps between low and high paid workers.

In a global Hay Group study measuring the pay gap between average staff levels and senior managers, Australia ranked in the bottom 16 per cent of countries, coming in at 51 out of 61 countries covered by the study.

The reason Australia has a relatively lower pay gap is in part due to our skills shortage being felt across the board, in particular in entry level professions and trades, according to Richard Hardwick, MD of Hay Group Pacific.

“In Australia, with unemployment at or near record low and with skills shortages being felt across most sectors, most workers have enjoyed a relative pay rise,” he said.

There are also other factors affecting Australia’s relatively smaller differentiation between staff and management. Wendy Nicholls, reward information services manager for Hay Group, said there is a clear link between pay gap and the education and skills level of the country’s workforce.

“The larger the population of well-educated and highly trained workers, the smaller the pay disparity,” she said.

“In addition, while in Australia we have an experienced pool of managers, in emerging economies such as China, the scarcity of management talent is putting significant pressure on these senior level salaries”

The study, which analysed the pay data of more than 12 million employees, found the developing economies of China, Thailand, Vietnam, Indonesia and India continue to lead the pay gap rankings in Asia, with China, Thailand and Vietnam topping the global rankings.

As is the case globally, the shortage of management talent in these economies has pushed up salaries at the top end, while the less internationally mobile junior staff are paid in line with local market rates. The widening pay gap is also indicative of the wide divide in skills and capabilities between senior executives and employees.

The shortage of skilled labour and entry level staff in economies such as Australia, New Zealand, Japan and Singapore is reflected by the gap either narrowing or stabilising in the past two years.

“As we face a more global economy and a more global workforce, we anticipate increased pressures on organisations and governments”said Nicholls.

“As salary differences between staff and managers decrease due to labour shortage, a more educated workforce and increasing minimum salaries, organisations will continually need to review their remuneration strategies in different geographies to ensure they are locally competitive and appropriate.”


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