Remuneration budgets look set to increase at a conservative pace this year as signs of economic recover begin to appear.
According to Mercer’s Market Issues Survey of 132 organisations, salary increases have started to rise, after bottoming out at three per cent for the year ending December 2009.
The rate of growth in salaries increased to 3.5 per cent in July 2010, as improving economic conditions led employers back to more competitive labour market conditions.
Derek Berry, principal in Mercer’s Human Capital business said that while remuneration budgets are now slowly rebuilding, there is likely to be a mismatch between employee expectation and pay budget allowance.
“The increased salary movement is consistent with improved economic and business performance over the past six months.
“It reflects greater confidence that the worst of the downturn is now behind us, and with similar stories being told in the media, employees are expecting salary movements to be on par with increased remuneration budgets.
“However, employees should not be expecting pay rises of 5 per cent or more as seen before the GFC, as anticipated salary increase budgets are still conservative.
Berry said that the reason for conservative budgets is not simply fear of a double-dip recession, Australian employers are now struggling to confront a number of other factors.
“Organisations face a difficult landscape when re-thinking their remuneration strategies. Many are still coming to terms with legislative changes, such as the Fair Work Act and the potential impact of the mining and resources tax.”
“On top of a steadily growing skills shortage, these changes have left employers still trying to get their heads around what the post-GFC business environment looks like, especially from multi-nationals that have a head office in a location where the financial crisis has hit hard.”