Budget 2021: How to play the new wages game

Interviewing for a job is a skill and itmay be worth getting outside help for this.

It does not apply to everyone, but a large number of Australians are now in a rare position to gain a pay rise or a change in the way they work.

There are severe labour shortages in many areas of the Australian workplace so for those who are “in the right place” it’s worth considering taking advantage of the situation.

There is no definitive guide as to how to approach this new environment but this weekend I have prepared my suggestions to employees and employers aided by my own personal experiences playing the labour shortage game.

In my youth I left jobs to gain different experiences and more pay and overall it turned out well but sometimes I hit problems. One was where I took a job that represented too big a promotion and I had to develop the required skills and the time gap was almost catastrophic.

Later I was in a position of hiring people and being approached by employees who had offers from rivals and I (with others) had to decide whether to match and retain the person, or let them go.

What is happening now is not new but it hasn’t happened on a widespread basis for a while.

If you are thinking of playing the game the first thing you must ask yourself is whether you are working in an industry where there is indeed a shortage of skills. For example, in enterprises associated with overseas students and tourists there is a surplus of people so it is a matter of hanging on to your position or deciding to go into something completely different. Your employer will almost certainly let you go as you are easily replaced.

And then there is the question of loyalty. In my early years, loyalty was a big factor in employment relationships but in later years mass retrenchments and restructuring have greatly weakened this.

Nevertheless, during COVID many enterprises went out of their way to hold on to their people and treat them well. And there was a tacit understanding that the employees would respond to the generous treatment and stay with the enterprise. You should be aware that some enterprises will be destroyed if you trigger mass pay rises because they can’t pass on the higher costs.

Here are my rules for the game - first for employees and then for employers.

* For employees, do you have talents that are in short supply? This requires a very pragmatic assessment of what is happening in the business where you are working. You can get a reasonable guide by looking at employment advertisements. SEEK is currently recording record job advertisements and very low applications per advertisement. Labour hire firms have never seen labour so short, propelled by slashed migration and fewer backpackers.

So, there are a lot of areas where skills are in short supply.

* Make a realistic assessment of how good you are and whether you are able to take on a new task.

* Take a step back and ask yourself why are you looking to move? For a great many it will be pay, because salaries have been stagnant for a long time. Many employers have not woken up to the new environment and are still paying at the old rates. For other employees pay is less important. They have enjoyed flexible working arrangements and want to continue them. This particularly applies to young couples with children, where childcare fees can be crippling. In addition, many have enjoyed saving time in commuting.

Another reason to move is that you want a new challenge that offers new opportunities and finally, of course, sometimes the current work environment is not good. These are all good reasons to move but work out what is important to you.

* A large number of job changes come because people are tapped on the shoulder but many come via answering advertisements. You need to check whether the group you are looking to join is a good employer and what is the level of security in the job you are looking taking on.

Way back in 1960 I joined a new finance newspaper launched by Frank Packer and we lasted only 12 months. I was young and had no dependants but if I had had a family that would have been a very high-risk exercise.

* If you are putting yourself on the market via the advertisement route, then get your CV and associated material up to date and attractive. Interviewing for a job is a skill and just because you are good at your normal tasks doesn’t mean you will interview well. It may be worth getting outside help in both CV presentation and interviewing skills.

CV presentation is important.

* Don’t hesitate to be frank and open about the things that are important to you. If pay is a key consideration, then be open with your prospective employer and say that you will only consider the job if it is at a certain pay level, and the same applies to work flexibility.

* If you go to your employer threatening to leave unless there is a pay rise and or work changes make sure you are prepared to carry out your threat. Smart employers will discover that you are “trying them on”. A variation to that is to tell your employer that you don’t want to leave but you have “had this offer”. But again, you must be telling the truth.

Bosses

When it comes to employers the first question is of course whether you can afford to pay an additional sum or to set precedences in worker flexibility. Some enterprises will have latent productivity opportunities to offset the costs but that is difficult if, by offering a higher wage to somebody threatening to leave, you trigger a whole series of wage increases. You are then faced with the situation of either increasing your prices or lowering the profit margins.

But remember, in today’s environment when there is a chronic shortage of skills you might find it necessary to bid even higher to replace the person who is about to resign. Your competitors may have the same problem.

If a group of employees have skills that are absolutely essential to your business, then you may have to pay the new market or you will go out of business. It can be a very difficult dilemma.

Currently this dilemma is being faced by the higher level of accounting and auditing firms---- particularly those that retrenched people in the tough times. Loyalty was lost and they either pay the new rates and pass on the costs or substantially reduce the size and quality of their business.

Some firms have realised the situation and jumped in before people offered their resignations.

As readers will have discovered from my budget coverage, I believe the current situation is very tense in many industries and we are going to see some sharp rises in wage costs which will flow through to inflation and later interest rates.

The current situation will not last for ever so employees need to seriously consider whether they want to take advantage of it.