Pay rise conflict: why there is a widening gap in expectations

If you are seeking a big pay increase this year, you may be disappointed, a new report by global group Hays has found.

Rising living costs have widened the mismatch between the wage rises workers want, and the increases their bosses are prepared to pay.

A new salary study by recruitment giant Hays says almost two-thirds of employees expect a pay rise above 3 per cent this year, but half of employees intend to pay only 0-3 per cent.

The Hays Salary Guide, which covers 1270 roles across 26 industries, says higher living costs are prompting more employees to consider leaving their employer for a higher pay packet.

Hays Asia Pacific CEO Matthew Dickason said this year 40 per cent of professionals were dissatisfied with their salaries, up from 28 per cent last year.

“There’s an ongoing misalignment that seems to be getting worse – the trend is that employees are expecting higher salaries,” he said.

“The size of the pay rise that employers are willing to give has decreased.”

The research, covering more than 15,000 respondents, found 13 per cent of employers planned no pay rise this year, and 15 per cent of workers did not expect one.

Please can I have more money? Employers are less likely to give.

Mr Dickason said the finding that 86 per cent of employers would increase salaries was “good news, but that’s down from last year where it was 95 per cent”.

“Sixty-one per cent of employees expect a pay rise of more than 3 per cent this year,” he said.

In 2019 two-thirds of employees expected smaller pay increases, below 3 per cent, so “it’s flipped completely the other way”, Mr Dickason said.

“We are seeing cost of living is the predominant factor in terms of employees decisions to seek new opportunities,” he said.

“Inflation has continued to impact daily life. Employees are increasingly prioritising salary in the next 12 months over and above anything else.”

CreationWealth senior financial adviser Andrew Zbik said many employees still had the upper hand when negotiating salaries.

“Everyone’s feeling the pinch of the cost of living,” he said.

“Your employer is probably feeling the pinch at the moment too.”

Mr Zbik said one strategy for workers could be to negotiate a stepped increase in their pay over the year ahead, perhaps some now and some in six months.

“But if you are only getting a 1 per cent pay rise, it means you are getting a pay cut this year,” he said.

Hays chief executive Asia Pacific Matthew Dickason.

“You have a right to at least maintain parity with inflation, and I think a good employer will at least match inflation.”

Australia’s current annual inflation rate is 3.6 per cent.

Mr Zbik said people looking to switch jobs higher pay should research their industry, because there was falling demand in some sectors and roles.

The Hays research found skills shortages were still hurting employers but have moderated, with 47 per cent of businesses now reporting little or no shortages.

“Only one quarter of employers are forced to offer substantially higher salaries than otherwise planned,” Mr Dickason said.

Hybrid working appears here to stay”, with 75 per cent of employees now working remotely or in a hybrid arrangement, and 74 per cent of employers saying they have established an onsite-remote split and will not be changing it.

Mr Dickason said 97 per cent of organisations offered some sort of hybrid working model.

“Just over half of all employees said a lack of hybrid working would make them look for a new job,” he said.

Originally published as Pay rise conflict: why there is a widening gap in expectations