INCREASES IN salaries for new hires are in line with pay rises for incumbent employees, indicating a general shift from an employers’ to an employees’ market, according to a survey of more than 300 organisations
INCREASES IN salaries for new hires are in line with pay rises for incumbent employees, indicating a general shift from an employers’ to an employees’market, according to a survey of more than 300 organisations.
Conducted by Mercer Human Resource Consulting, the survey found that current incumbents (the same person in the same organisation in the same job) salary increases and sample-on-sample increases (the total sample, which may contain different organisations or incumbents from one year to the next) pay increases are both running at 3.9 per cent per annum.
“There is an important correlation between what salary candidates for a job are offered, and what current incumbents are paid, signifying a shift from an employer’s market to one more favourable for employees,” said Mercer principal Peter Matters.
“Over the past four or five years, companies have been focusing on improving bottom-line performance, which has often involved restructuring their workforce. People who have remained in their role throughout this period of change are usually high-value employees, reflected in the salary increases and benefits they have received.”
While this is good for individuals, it can have major implications for companies, according to Matters.
“Companies have been focused on getting their retention strategies right while keeping tight control over remuneration by bringing new hires in at lower rates,” he said.
“However we predict this shift in favour of new employees will swing even further over the next 12 to 24 months with relatively low or stable unemployment figures, strong business confidence and a favourable investment environment.”
As a result, he said employers will need sound attraction and retention strategies in place to achieve a balance between attracting quality employees without jeopardising their existing talent.
With a strong economy, there was also a higher voluntary turnover as employees who may have been otherwise satisfied in a position, seek jobs with the prospect of higher pay.
From a job-specific perspective, HR professionals can expect a rise of around 5 per cent, followed by those working in the sciences, with a rise of 4.7 per cent. Insurance specialists can expect the most significant pay increases with a median rise of 5.4 per cent predicted.
From an industry perspective, the survey predicts the biggest pay increases for 2004/05 will be in the pharmaceutical industry, with pay increases of more than 5.1 per cent expected, outstripping the forecast average increase of 3.9 per cent across all industries.
Jobs in manufacturing and the public sector lag behind the average with salaries forecast to increase by 3.5 per cent and 3.1 per cent respectively.
Salaries are also predicted to increase across the Asia-Pacific in 2005, according to a recent Hewitt study. Due in large to a region-wide economic upswing, employers are reporting a more positive outlook for 2005.
Hewitt surveyed more than 1,000 foreign, locally owned and joint-venture companies across the Asia-Pacific, and found that there has been a stark reduction in the number of companies projecting pay freezes for 2005, especially in Australia, China, India, Malaysia and Singapore.
Furthermore, variable pay, as a percentage of total compensation, is still seen by employers as an important means of attracting and engaging senior management. By and large, senior management roles still receive the highest portion of variable pay and it’s expected that the ratio of variable pay to fixed pay will increase from 2004 to 2005 almost across the board.
However high attrition rates continue to be an issue in Asia. The average overall turnover rate among respondents in most markets rose from approximately 10 per cent in 2003 to slightly more than 12 per cent in 2004.
