Australians expecting to receive a high pay increase in the new financial year could be disappointed, according to a nation-wide survey of pay movements released today by global management consulting firm, Hay Group.
The 2013 Australian Salary Movement Index (ASMI) report has predicted the average pay increase for the coming 12 months across all sectors will be 3.5% - the slowest growth rate seen since the GFC.
During the past 12-month period, Hay Group observed that pay increases to fixed wages were fairly steady at 4.8% for the resources sector, 4.3% for the industrial and service sector and 3.6% for the financial industry.
Hay Group Senior Consultants and co-authors of the ASMI report, Steven Paola and Trevor Warden, believe the volatility impacting the Australian business environment has led to more austere pay increases.
“The prevailing weaker business confidence has resulted in a more conservative approach to salary movements. Workers expecting increases to be similar or even higher than in recent years may be disappointed and employers now need to think outside the ‘pay square’ when it comes to attracting, energising and retaining talent,” says Paola.
Hay reports that the ‘hottest jobs’ in terms of pay growth can be found in Western Australia. When compared to the national average salary, jobs in regional WA earn 21.9% higher (compared with 16.8% the previous year).
Meanwhile, jobs in regional Queensland earn a premium of just 3.4% in Total Annual Reward. This contrast with WA may be attributed to the fact that Queensland mining jobs are located close to regional centres, rather than in remote parts of the state. For this reason, workers do not require such high wages as enticement to overcome geographic and social isolation.
Among the capital cities, Perth workers are the highest paid, with a pay premium of 6.8% above the national average (this is up from 1.3% the previous year). Sydney workers earn the national average salary, while Brisbane workers earn around 0.4% less than the national average. Melbourne workers earn salaries 3.1% lower than the market average and Adelaide sits even further below, at -3.2%.
The report also reveals that bonuses are widely used to motivate and reward performance with around 62% of admin and operational roles and 85% of executives having a bonus component of some form within their total package.
Interestingly, actual bonus payout rates are below the set target across all employee groups – a trend that has been steady for some time. The financial services sector achieved the highest number of employees receiving a bonus with a rate of 82% (compared with 58 per cent for other sectors).
Given the relatively small increase in fixed annual reward that is forecasted for the coming quarters, Warden says retaining talent and incentivising performance through traditional pay-related measures may require a rethink.
“It is clear from this report that the market differs substantially across jobs, sectors and geography, hence organisations need to focus on understanding the market that they compete in and apply the appropriate monetary and non-monetary rewards that best fit,” explained Warden.
Paola and Warden recommend that organisations wishing to have higher engagement among employees and lower turnover should focus on getting these five fundamentals right:
Confidence – in the organisation and its leadership, providing clear direction - line of sight - and support
Development – ensuring clear pathways for career development and progression are in place and communicated
Selection – ensure you are selecting the right people for the right job in order to maximise employee contribution and minimise turnover costs
Reward – fair (internal and external) recognition of both monetary and non-monetary methods, ensuring it’s a good fit for the organisation
Enabling employees – giving people what they need to do a good job, and an environment that is positive and one that fosters innovation and creativity
“Organisations needs to move beyond pay and focus on creating the right atmosphere with the right balance of monetary and non-monetary rewards to drive productivity, performance, engagement and loyalty,” recommends Warden.