‘Stand-off’ on salaries as workers feel inflation pain

Wages survey reveals employees plan to walk away in face of employers unlikely to grant rises in next 12 months.

Salary stand-off a future challenge for companies.

Australia faces a “salary stand-off” with employers resisting paying higher wages and employees threatening to walk away as inflation continues to wipe out pay rises.

That’s the message from one of the nation’s leading recruiters, Robert Walters, based on a salary survey that shows four in five white-collar workers will start looking for a new job if they don’t get a pay rise above inflation in the next 12 months.

With 56 per cent of their employers saying they won’t be offering salary increases above inflation, next year will see a gap in expectations around wages, according to the survey of about 1500 employees and companies.

The survey tracks salaries against inflation, and shows that while some jobs have attracted increases of more than 30 per cent, others remain well below CPI.

Big wages rises were recorded for managing directors in sales, marketing and communications (33.3 per cent); chief financial officers in listed companies (28.3 per cent); investment consultants in banking and financial services (19 per cent). The “losers” included HR advisers (6.3 per cent); senior business/finance analysts (5.6 per cent); administration assistants (3.5 per cent); tax/ internal audit managers (3.1 per cent). Some jobs went backwards – in-house legal counsels (-1.4 per cent); and remuneration managers (- 3.7 per cent).

The survey reported that 97 per cent of candidates told researchers the minimum “fair” pay rise during the current cost of living crisis would either need to match or surpass inflation; while 65 per cent of candidates said they expect their employer to consider the rising cost of living when determining salary increases and bonuses over the next 12 months.

Some 74 per cent of candidates agreed inflationary pressures would make them more likely to request a pay rise, and more than half (57 per cent) said they were more focused on maximising earnings than job security over the coming year.

All this has left employers “increasingly bleak” about their ability to retain staff: 83 per cent believe it is somewhat likely, likely or certain that the cost of living will be the central issue in pay negotiations, with 12 per cent saying it would be a certainty. Two-thirds of employers expect the rising cost of living will make it harder for their organisation to retain talent.

Shay Peters, managing director of Robert Walters Australia & New Zealand, believes that the findings are an early warning of a “tipping point” in the labour market.

“We are fast approaching what appears to be the most complex and challenging recruitment environment in recent years – yet another blow to households already feeling the pinch as the cost of living climbs,” he said.

“It’s going to be a labour market that is facing a challenge it hasn’t necessarily faced in recent times. And that’s going to call for a new approach from our clients to bridge that gap. I genuinely don’t believe a number of our client organisations and business partners will be able to match that CPI number because of the financial pressure they’re under as well.”

But despite being unprepared or unable to offer higher pay, Mr Peters doesn’t believe employers will simply let people walk away. Instead they will likely look at alternative ways of retaining talent by offering non-monetary ways to get a good job within their organisations, he said.

“There are alternatives and it’s not just necessarily around the dollar,” Mr Peters said. “And there might be other tools in your toolkit such as adding annual leave to someone’s package or training and development. If you are allowing more flexibility and more annual leave and additional learning and development opportunities, you are creating an environment that might (encourage) an employee to stay.

“What really matters is ensuring ongoing dialogue between employers and employees. If that communication is there, I think employers are far more likely to retain top talent.

The complex labour market of skills shortages, high running costs for companies and high inflation was changing the role of recruiters towards that of intermediaries and advisers.

Mr Peters said that while the pressure on labour would ease if there was a greater supply of worker through immigration or upskilling “it will not ease the whole burden”.