People 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 per cent. This is the slowest growth rate seen since the GFC, showing a sign of cautiousness within the Australian market.
During the past 12-month period, Hay Group observed that pay increases to fixed wages were fairly steady at 3.6 per cent for the Financial industry.
“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,” said Hay Group senior consultant Steven Paola, who co-authored the ASMI report with Trevor Warden.
The ‘hottest jobs’ in terms of pay growth can be found in Western Australia. When compared to the national average salary, jobs in regional Western Australia earn 21.9% higher (compared with 16.8% the previous year).
Among the capital cities, Perth workers are the highest paid with a pay premium of 6.8% above the national average. Sydney workers earn the national average salary, while Brisbane workers earn around 0.4% less than the national average. Melbourne and Adelaide workers are respectively 3.1% and 3.2% lower than the market average.
The report also revealed that bonuses are widely used to motivate and reward performance, and the financial services sector achieved the highest number of employees receiving a bonus with a rate of 82% (compared with 58% for other sectors). However, the report states that, “financial services jobs also tend to have a high degree of performance‐based risk, so employees need to meet or exceed targets to receive higher total pay”.
Actual bonus payout rates are below the set target across all employee groups – a trend that has been steady for some time.
“The pay packet is perhaps the most tangible way organisations can communicate what is valued, attract the best people, recognise employee contribution and motivate improvements. So it is vital not simply to set the bar correctly, but to continually monitor and adjust pay on an ongoing basis,” said Paola.
Given the relatively small increase in fixed annual reward that is forecasted for the coming quarters, retaining talent and incentivising performance through traditional pay-related measures may require a rethink.
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.