As inflation rises, employers lift wages in a bid to stop workers leaving
The spiralling cost of living is pushing employers to increase their salary budgets by an average of 20% to account for inflation, according to Robert Half’s 2022 Salary Guide. Nearly all of the 300 Australian hiring managers surveyed said they were prepared to raise awards to a portion of their workforce.
Inflation, currently at 6.1%, has outstripped wage growth in Australia, according to the June Wage Price Index data released by the Australian Bureau of Statistics. Real wages have fallen by 3.5% over the past year to a level not seen since 2011.
With money worries a chief concern among employees, this pre-emptive move by employers is a response to the high turnover of employees in the current job market. The survey reveals that 78% of employees say they are likely to look for a new role if they don’t receive a pay rise this year.
Despite a dissatisfaction with salaries, only 44% of employees say they will ask for an increase, putting the onus on employers to pay them more.
Employees can shy away from addressing salary concerns for fear of it being confrontational, and often find it easier to simply look elsewhere or seek out a competing offer in order to secure a pay rise internally, says David Jones, Senior Managing Director of Robert Half APAC. “The reality of this is that once an employee is looking elsewhere, they are halfway out the door. To this end, our research finds nearly half of employers are proactively addressing employee salary concerns rather than waiting for the employee to come to them.”
If employees don’t take the initiative, they are likely to miss out as 63% of businesses say they will only extend pay rises to employees who ask for them. A third intended to extend raises without their employees asking and only 3% had no plans to give raises this year.
Those to benefit from the most significant salary rises will be technical staff, as Australian CIOs say that are planning a 26% increase in their salary budget on average. Pay rises across the finance sector are expected to be slightly lower with CFOs revealing an average rise of 22%. Not surprisingly, the largest companies will be able to afford the most with smaller organisations increasing wages by an average of 10%.
Aside from increasing salary budgets, more than half Australian businesses claim to be actively addressing pay equity by increasing pay transparency as a way of attracting people into their ranks. HR departments are also being primed to clearly communicate pay strategy to employees and become more proactive about addressing employee concerns around salaries.
“What we are seeing in a tight labour market is that the value of communication cannot be underestimated. Workers are aware of their bargaining power in the market, so it is important that people managers are engaging in conversations with their employees to understand individual concerns on a regular basis,” says Jones.
Benchmarking salaries against the market or conducting salary reviews on an annual basis is not sufficient in today’s climate – the pressure of inflation coupled with the competitive market means businesses should adopt an ‘always-on’ approach to their remuneration strategies, says Jones.
At the same time, if workers are concerned about a lack of pay transparency – for instance believing that their peers are being paid more than them or receiving bonuses that they have not been privy to – this can be a driving factor for the worker to seek employment elsewhere.
“Clear communication around the salary banding, remuneration review timeline, or bonus structure brings team members into alignment about their value to the company. Similarly, providing greater transparency around how a company’s salary structure sits compared to other organisations can also reduce concerns that the grass is greener elsewhere,” says Jones.
In many cases, he says, an open dialogue with employees can also expand the conversation beyond salary – career progression and work-life balance remain priorities for workers. Addressing salary alongside these issues can not only reduce the pressure on employers to reward their team on money alone but can lead to a more satisfied and engaged employee in the long term.
