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Report finds smaller pay increases on the horizon for Australian workers

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Global management consultancy, Hay Group has released the Australian Salary Movement Index report that reveals key trends affecting the pay packets of Australian workers.

Based on a nationwide survey of pay movements, the report by Hay Group reveals that Australians expecting to receive a high pay increase in the new financial year are in for disappointment.

The 2013 Australian Salary Movement Index (ASMI) report has predicted an average pay increase of 3.5% for the coming 12 months across all sectors, the slowest growth rate seen since the GFC, showing a sign of cautiousness within the Australian market.

Hay Group observes that pay increases to fixed wages during the past 12 months were fairly steady at 4.8% for the Resources sector, 4.3% for the Industrial and Service sector and 3.6% for the Financial industry.

Hay Group Senior Consultants and co-authors of the ASMI report, Steven Paola and Trevor Warden attribute the austere pay increases to the volatility impacting the Australian business environment. Paola explains that the prevailing weaker business confidence has resulted in a more conservative approach to salary movements. However, employers now need to think outside the ‘pay square’ when it comes to attracting, energising and retaining talent.

Pay movements in the Resources sector have been visibly impacted by the volatility with comparatively modest increases of 4.8% seen for the previous 12 months. This slowing trajectory mirrors the weakening conditions in the Resources sector, impacted by the high Australian dollar, global uncertainty and sharp fall in commodity prices.

For the coming year, Hay Group forecasts a salary growth of just 4.3% for the Resources sector. However, dramatic pay rises in recent years for many roles in Mining, Oil and Gas will continue to sit well above average in terms of actual pay levels for some time, which means that jobs in the Resources sector, particularly specialist technical roles and those in remote locations, will continue to attract considerable pay premiums. Jobs in Mining Operations, Exploration and Petroleum Engineering currently command Total Annual Reward premiums 30% above the market average.

Not surprisingly, the ‘hottest jobs’ in terms of pay growth can be found in Western Australia with 21.9% higher earnings when compared to the national average salary. Jobs in regional Queensland earn a premium of just 3.4% in Total Annual Reward, which may be attributed to the fact that Queensland mining jobs are located close to regional centres, rather than in remote areas, eliminating the need to entice workers with higher wages to overcome geographic and social isolation.

Among the capital cities, Perth workers are the highest paid with a pay premium of 6.8% above the national average. By contrast, Sydney workers earn the national average salary, while Brisbane workers earn around 0.4% less. Melbourne workers earn salaries 3.1% lower than the market average with Adelaide sitting even further below at -3.2%.

From a global perspective, Australian pay movements in 2012 were well ahead of other mature markets, in particular the US and UK where the challenging economic climate resulted in small movements of 1.5% in the US and marginally higher 1.7% in the UK.

The report also reveals that bonuses are widely used to motivate and reward performance with around 62% of admin and operational roles and 85% of executives having a bonus component of some form within their total package.

Paola observes that the pay packet is perhaps the most tangible way organisations can communicate what is valued, attract the best people, recognise employee contribution and motivate improvements. So it is vital not only to set the bar correctly, but to continually monitor and adjust pay on an ongoing basis.

According to Warden, the report establishes that the market differs substantially across jobs, sectors and geography; hence organisations need to focus on understanding the market that they compete in and apply the appropriate monetary and non-monetary rewards that best fit.

Paola and Warden recommend that organisations wishing to have higher engagement among employees and lower turnover should focus on getting these five fundamentals right: Confidence in the organisation and its leadership; Development by ensuring clear pathways for career development; Selection of the right people for the right job; Reward through fair recognition using both monetary and non-monetary methods; and Enabling employees by giving them what they need to do a good job, and an environment that is positive.

Warden concludes by saying that organisations needs to move beyond pay and focus on creating the right atmosphere with the right balance of monetary and non-monetary rewards to drive productivity, performance, engagement and loyalty.

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