The cost of living is driving employee demand for higher pay rises in FY24/25 as 86 percent of employers plan to increase salaries in their next review, according to recruitment and workforce solutions specialists Hays.
The Hays Salary Guide is New Zealand’s largest and most comprehensive report on salary and recruitment trends. In its 45th year, it is based on a survey of more than 15,000 respondents, covering more than 1,270 roles across 26 different industries.
The report found that the cost of living was the number one reason employees were looking to leave their current employer in pursuit of a higher salary.
The cost of living has also driven a 750 percent increase in employers’ considerations in determining the value of a pay rise, while 77 percent of employees are either looking for or planning to look for a new job in the next 12 months.
“The mismatch between what employees want and what employers are willing to offer will play out over the next year, with almost 40 percent of employees being dissatisfied with their salaries and 73 percent saying it doesn’t reflect their individual performance,” Hays NZ Managing Director David Trollope said.
“We are seeing a trend of employees expecting higher salary increases over the past three reports. In 2019, 67 percent of employees expected a pay rise of less than three per cent. In just five years the pendulum has swung to 61 percent of employees expecting a pay increase of more than three percent.”
Trollope added that when determining the value of a pay rise, employers’ considerations have changed significantly over the past 12 months, reflecting the current cost of living crisis and the new pay transparency laws.
“Individual performance remains the number one consideration for a pay increase (84 percent). Other factors employers will consider include benchmarking for the role, responsibilities (74 percent), expertise (53 percent) and the organisation’s performance (50 percent).”
Organisations with set pay structures have also increased salaries dramatically from the previous year, indicating that businesses have addressed potential conflicts with the removal of the pay secrecy clause.
“This raises the importance of employee retention, with the top three drivers of employees looking for a new role including the rising cost of living (64 percent), low prospect of promotion (60 percent) and poor management and culture (59 percent),” said Trollope.
“The report also found businesses are becoming more optimistic with 64 percent believing that business activity will increase in the year ahead, up from 55 percent last year. While 54 percent of organisations have also reported that productivity has increased either moderately (36 percent) or significantly (18 percent).”
For employers, the extremes of the past few years are stabilising. This leaves open the opportunity for the bold to take action now and gain the first mover’s advantage.
“Despite plans to increase business activity, employers’ intention to add to the permanent headcount has risen by only three percent from last year. However, employers’ intention to increase temporary workers has jumped seven percent from last year. This has been fuelled in part by contingent workforces.”
Skills shortages have not gone away, with 24 percent of employers indicating that they have intensified over the past 12 months. However, there has been a 20 percent reduction in employers reporting moderate or extreme skills shortages.
“This year, businesses believed that the skills shortages had impacted their workplace with increased workloads (64 percent), lower productivity (62 percent) and employee engagement and morale (51 percent). However, more than half of businesses reported that overtime had remained the same and turnover had decreased or remained the same (63 percent). Extreme skill shortages of the past year have also eased, with 47 percent of businesses reporting no skills shortage or minor ones, and one in five reported that skills shortages have eased,” said Trollope.
“The construction industry reported the highest level of easing skills shortage. However, education, defence and architecture are facing extreme skills shortages, with 49 percent reporting that it will impact the effective operation of the business, down from a high of 60 percent last year. The extremes of the past few years are stabilising. Skills shortages are easing, inflation is softening and productivity is up. There is a sense of optimism, yet organisations are still cautious. Businesses need to take their foot off the brake and realise the advantages of our new highly skilled and adaptable workforce to drive growth. This is the year for action.”
The productivity puzzle – Top five strategies for employers to increase productivity
- Effective communication (63 percent)
- Effective collaboration (50 percent)
- Aligning individual objectives with organisation objectives (51 percent)
- Streamlining processes (47 percent)
- Fostering a sense of purpose (46 percent)
“Productivity is obviously top of mind for employers—there is reason to believe we have the tools we need to accelerate productivity and that those measures are already having an impact. Organisations reported that they believe the four main blockers to productivity include a lack of resources or tools, poor communication, poor processes, and ineffective leadership,” Trollope said.
“The workforce’s appetite to learn and continue to develop technical and digital skills is at an all-time high. Businesses should take advantage of this eagerness to upskill to avoid losing key talent, with 42 percent of employees saying training programs would help to increase their productivity.”
Hybrid working is here to stay, with 75 percent of employees now working in a hybrid or remote arrangement, with 92 percent of employees citing hybrid working as their preferred way of working.
Employers agree, with 74 percent of employers indicating they have established the onsite-versus-remote split and will not change it.
The report found 46 percent of employees spent either two to three days on site and two to three days remote, 19 percent spent one day remote and four days onsite, and 26 percent of employees used a flexible hybrid method based on employee and business needs.
“If working from home is here to stay, then many organisations will need to look more deeply at the processes and means of communication required for the future,” Trollope said.
Trollope added that salary was always a top priority for employees, with 71 percent saying that a pay rise is the most important factor to their career in the year ahead, but benefits such as learning and development of technical skills (63 percent) and being able to work flexibly (54 percent) were also important factors.
“Brand reputation, DE&I, and ESG policies are important strategies organisations should highlight to attract the right talent, and this year’s survey data further highlights their significance. Businesses that are trusted attract top talent, and employees who trust their employers stay with them longer. People are at the heart of a great business – even with great AI and technology available, a skilled workforce with a strong culture is essential to the success of your organisation,” said Trollope.
“With skills in demand, you still have bargaining power, but it’s important to avoid pricing yourself out of consideration. Yes, employers are investing in salary increases, but margins remain tight. The commercial reality dictates that salary increases can only stretch so far. Consider the whole package when you negotiate a new job or your next pay rise. Think about what you’d really value and what could make a difference to your life and career long-term.”
Download your copy of the Hays Salary Guide.
To read more news, click here.
