Will a $2 pay rise increase staff retention?

Statistics New Zealand reported that the labour cost index salary and wage rates recently experienced the largest increase since June 2009, rising 2.6 percent in the year to the December 2019 quarter1.

Despite the recent wage growth, many New Zealanders do not feel that their wage is fair for their role.

• The pay gap between those most likely and least likely to resign was around $2 per hour.
• Across sectors, not a single median wage was considered fair – in fact, the median ‘fair’ rate was $28 per hour, $4 higher than the actual median.
• Across sectors, respondents stated it would cost $5 per hour more than their current rate to lure them to a new role.
• Overall, respondents rated their feelings of pay satisfaction as 2.68 out of 5.

“Our data quantifies the business mantra that it is cheaper to retain staff than to recruit staff. Respondents have indicated that businesses need to increase wages by around $2 per hour to retain them, versus the $5 per hour that would let another employer attract them,” said Jonathan Ives, CEO, OneStaff.

“It’s a tight job market for many industries, so it’s important for businesses to understand what factors affect each employee’s satisfaction at work and what it takes to retain staff.”

Contrary to popular belief, earning higher-level tertiary qualifications does not necessarily equate to higher pay in the industrial and trades sectors.

The tenure of workers could be affecting this finding, as the report found a distinct correlation between working for longer at a company and earning more.

• Respondents with a Master’s Degree earned the least at $22 per hour.
• Respondents with a National Certificate earned the highest at $27 per hour.
• Respondents with a High School Certificate earned $24 per hour.
• Pay rises with tenure, though it plateaus after 6-10 years.

“This finding will be music to the ears of many industry associations who have been working hard to attract school leavers and overcome stereotypes around vocational careers,” said Ives.

“Those who have achieved Diplomas and National Certificates paired with on-the-job training are likely to have more tenure in a business at a younger age when compared with, for example, a graduate of a Master’s Degree.

“The report is clear that people wanting career growth in a vocational job should focus on achieving job-specific certification.”

Moreover, an overtime culture is rife throughout the sectors surveyed. The degree to which kiwis are working over their contractual hours is significant, particularly as only around one-third of those working overtime are compensated.

• 59% of respondents stated that they work either one or more hours of overtime each month.
  • 29% work 1-10 hours overtime per month.
  • 25% work 10-40 hours overtime per month.
  • 4% work 40+ hours overtime per month.
• 66% of workers who work overtime each month are not compensated for their extra labour.

“The findings around overtime are quite worrying because in health and safety-sensitive industries, overtime can potentially be dangerous,” said Ives.  

“Fatigued workers are more likely to make mistakes with machinery, equipment and vehicles, so any overtime in these industries does need to be addressed and properly managed.”

Ives added that overtime is unavoidable on certain projects and a degree of overtime – even uncompensated – is widely regarded as part of the job.

“However, employers should strongly consider whether their culture of overtime is healthy for workers or potentially exploitative, given that many employees are either being pushed or are pushing themselves far beyond what should be considered acceptable.”