Salary clamp stays put

The economy is better, but don’t expect big pay rises, writes Daniel Hoy

Economic conditions continue to improve, but salaries are recovering slowly.

Employees should not be expecting salaries to come back to pre-economic collapse levels quickly, but companies are looking at ways to keep their staff happy, putting work and life balance back on the negotiating table.

Mercers latest salary survey has found that salary growth is yet to return to the pace seen before the global financial crisis. Growth in fixed pay bottomed out at only 3 per cent for the year ending December 2009, but it is forecast to rise by 4 per cent over the next two years as conditions improve.

However, it will not be as high as the 5 per cent rises seen before the downturn.

Martin Turner, principal in Mercers’ human capital business, says though economic conditions are improving, employees should not expect organisations to play catch-up with salaries.

“It’s a matter of both parties understanding recovery isn’t instant. If employees have faced pay freezes and now expect organisations to make up for it, they’ll be disappointed. However, a resurgent jobs market means employers need to retain staff, so they are feeling the pressure to increase salary budgets,” Turner says.

Against this background, Mercer says employers will need to be smarter in the way they structure their reward offer and it should be a combination of cash and non-cash rewards.

“Many employers placed a greater emphasis on non-cash rewards over the past two years, but are now starting to increase the cash component of their reward offering as conditions improve. They still need to get the non-cash component right, however, and ensure their offering is aligned with what employees want,” Turner says.

Mercers’ survey found that organisations were looking outside the remuneration box and considering other human resources levers with which to increase their spending: 24 per cent were considering recognition programs and 22 per cent work/lifestyle benefits.

“By understanding what rewards employees really want, organisations can allocate their remuneration budget for long-term initiatives that effectively reward and retain their people,” Turner says.

Despite better economic conditions, there are still few differences in salary movements between different industries.

“The job families that had been seeing healthy salary movements before the downturn are still being affected by it,” Turner says.

“The engineering and construction sectors are not expected to race ahead of the pack until next year.”