Aussie workers see 4% pay increase in patchwork economy

Aussie workers see 4% pay increase in patchwork economy

Aussie workers see 4% pay increase in patchwork economy, Mercer survey shows

  • 27 November 2011
  • Australia, Melbourne

The median pay increase for Australian employees was 4% in the 12 months to July this year compared to 3.5% the previous year, with evidence of a dual speed economy alive and well, according to Mercer’s latest salary survey.

Mercer’s Market Issues Survey of 227 organisations reveals not only did salary increases gather pace in the 2010-11 financial year, they were spread evenly across the board, with most sectors reporting the 4% increase. However, the mining sector has outpaced the rest of the nation experiencing the biggest salary increases of up to 6% on average, due to major resources projects increasing demand for labour.

Anthony Shippard, Principal in Mercer’s information product solutions business, said Australian organisations are taking a ‘safe bet’ approach to salary budgets this year by leveling pay hikes with rival industries, however, the resources sector is playing in a league of its own.

“Overall, there’s very little difference in the pay increases between most industry sectors or job families, suggesting employers are essentially keeping up with the Joneses. They want to ensure their remuneration is competitive, but not overly generous,” Mr Shippard said.

Evidence of the nation’s patchwork economy is seen where organisations with operations in Western Australian and Queensland, and particularly in regional centres, continue to outpace the levels of growth and demand experienced in other parts of Australia. The mining states of Western Australia and Queensland experienced median salary increases of 5.2% and 4.5% respectively, compared with New South Wales and Victoria at 4% and South Australia 3.9% - although SA rose substantially from 3% the previous year.

Higher pay increases are also evident in industries servicing the mining sector, with employees in construction and engineering experiencing a 6% median salary increase this year. Conversely retail organisations, struggling in the face of poor consumer confidence and reduced spending, saw salary increases lag the national market at 3.1%.

“Cashed-up resources organisations are paying a premium to attract and retain in-demand skills, while retail sector employers are battling lower consumer spending and falling profits. The retailers simply can’t afford hefty pay rises without the revenue to fund them,” Mr Shippard said.

As the economy nervously observes the Euro zone sovereign debt crisis and capital markets remain volatile, Mercer says employers will need to look beyond cold, hard cash to retain staff.

“The survey found 80% of employers are having trouble retaining staff, but salary alone won’t solve the problem and certainly hasn’t been able to reduce turnover following the past two years of salary increases. In fact, the sector that gave the biggest pay rises – construction and engineering – was also the worst affected by retention issues: 100% of respondent organisations reported retention problems,” Mr Shippard said.

Mercer says there is a tendency for employers to panic when they face retention challenges.

“We see some organisations respond to staff shortages and retention issues by simply throwing money at the problem, thinking higher salaries will encourage people to stay in their jobs. But money is not a motivator on its own – it needs to be part of a broader rewards strategy. Without big salary budgets to differentiate their employment offer, organisations need to focus on other drivers of attraction and retention, including leadership and culture,” Mr Shippard said.

He advises employers to revisit the basics of good people management in order to boost staff retention.

“Employers need to address the fundamentals of good people management. This includes developing strong leaders, providing clarity around career development, delivering quality training and development and putting succession plans in place. These are the strategies that create a loyal workforce,” Mr Shippard said.

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights