MERCER: Salary increases slip to GFC levels

MERCER: Salary increases slip to GFC levels

Mercer: Salary increases slip to GFC levels

  • 23-October-2013
  • Australia, Melbourne
  • Lowest salary movement in five years: 3.1% movement same as during GFC
  • Construction and engineering sectors experiencing decline for the first time since 2009
  • Lower business confidence drives tighter salary budgets
  • Organisations need to look towards employee benefit strategies to retain staff

According to the latest Mercer Total Remuneration Survey, salary movements have slipped significantly and are sitting at the same levels recorded during the global financial crisis at 3.1 per cent, compared to an average fixed pay movement of 4.1 per cent across the last ten years.

Mercer expects minimal movement in the salary figure over the next year, remaining stable at around 3.1 per cent in 2013/2014 and increasing to 3.5 per cent in 2014/2015.

“We are seeing a considerably more conservative approach to remuneration than we have in most of the last decade,” said Leader of Mercer’s Talent Business in the Pacific Market, Garry Adams.

“Smaller pay increases mean employers have to get more out of their workforce for less. There is more pressure than ever for employers to be more innovative with employee rewards and benefits in order to increase productivity in an already relatively high cost environment.

“We know companies who have effective benefits, have better employee morale, significantly lower turnover and offered lower overall salary increases. In a tight budgetary environment we shouldn’t overlook that effective benefits can have a positive impact on the bottom line,” he said.

Mercer’s survey found the most important factors employers consider when setting their remuneration budgets is their organisation’s remuneration market position (76%), current and anticipated economic and business conditions (75%) and their capacity to pay (61%).

“Market competition and benchmarks remain the most important consideration for organisations when setting remuneration budgets because despite tightening budgets employers know they have to remain competitive to attract and keep the best talent,” Mr Adams said.

Evidence of a two-speed economy remains, however the speeds are changing. Mercer’s survey shows variations across Australia with organisations in Western Australia and Queensland showing lower salary increases, while organisations in New South Wales are more likely to give executives a higher premium. Increases are also being observed at non-executive levels such as function heads.

Higher premiums are being paid in technology, retail, pharmaceutical and education, while the construction and engineering sectors are passing on lower increases to executives and experiencing decline for the first time since 2009.

“We are finding smaller organisations have recorded lower turnover, higher salary increases and can be more fluid during times of change. However, larger organisations have a higher rate of pay and broader reward offering but they may be faced with greater administrative burdens in implementing change,” said Mr Adams.

The Mercer Total Remuneration Survey is conducted among HR and talent executives at more than 1,260 organisations around the world, representing a wide variety of industries – looking at the effect of salary increase data and what organisations can expect to see in coming years.

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