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New Zealand
Auckland, 14 May 2008

New Zealand workers have finally caught up with the rising salaries of their bosses after years of significantly lower pay increases, Mercer’s latest remuneration review has found.

Mercer’s Market Issues Survey found that salary movements are the strongest that New Zealanders have seen for a number of years, although this varied across job levels. Overall fixed pay movements for same incumbents (the same person in the same role) below management level, saw ‘staff’ salaries rise 5.8 per cent in the 12 months to March 2008, and they fared better than ‘executives’ whose pay increased by 5.2 per cent over the same period.

This is in contrast to the situation 12 months ago when ‘staff’ received increases of 4.8 per cent, compared with their bosses who enjoyed a higher salary increase of 5.8 per cent in 2007.

Martin Turner, Head of Mercer’s Human Capital business in New Zealand said this is a sign that employers are finally realising the value of their total workforce and also that retention strategies are working.

“Employers are now paying a premium right across their talent pool but they are seeing a return on this investment. Voluntary turnover has dropped significantly in the last six months, falling from 23 per cent to 18 per cent.

“We believe this can also be attributed to a slowing economy which is creating a sense of nervousness among employees. It indicates that employers are getting the message on how to keep their workforce loyal, and employees are staying put in places where they’re receiving robust pay increases,” he said.

The survey found over 50 per cent of employers believe that the global economy is going to have a negative impact on their business, but this has not yet alleviated pressure on wages with employers not only paying more to retain staff, but also increasing starting packages to attract new staff.

For example, ‘professionals’ entering the workforce have enjoyed a significant increase of 4.0 per cent in 2008, compared to a 0.4 per cent increase 12 months ago. Similarly, employers are paying more to hire new managers, with starting packages increasing this year by 2.5 per cent, as opposed to 0.7 per cent in 2007.

“Despite the recent news of a significant drop in the number of people in jobs, New Zealand’s unemployment rate is still one of the lowest in the world and significant skills shortages are still evident. It will take a lot for an economic slowdown to affect New Zealand’s job market, and employers are being stretched to their limits with salaries increasing above inflation in an effort to both attract and retain talent,” Mr Turner said.

Mr Turner adds, that those feeling the pinch need to get smarter about where they invest.

“If businesses want to buffer themselves from these salary increases, they need to find ways of slowing the tide, for example, segmenting their workforce, identifying key value drivers and linking performance and reward accordingly. Performance and reward was listed among the top five remuneration issues of major concern to employers in the Market Issues Survey,” Mr Turner said.

“However, what we’re also seeing is a mismatch between the operating results organisations want to achieve and the performance of employees to meet these expectations.

“The decline in levels of confidence in organisations’ people capability over the past six months suggests the imperative is becoming stronger for organisations to invest in the learning and development of their people,” he concluded.

Other key survey findings:

Salary movements by region:

• A shortage of talent in regional centres saw a 5.3 per cent increase in median same incumbent pay movements this year, up from 4.8 per cent in 2007.
   
• Salary increases for Auckland-based employees dropped from 5.5 per cent in 2007, to 5.2 per cent this year, with pay increases in Wellington falling from 6.7 per cent 12 months ago, to 5.1 per cent in 2008.

Salary movements by job family:

• The number of job families becoming more competitive is growing, causing employers to pay a premium for employees in marketing, engineering, finance and accounting and HR roles in 2008.
   
• The median same incumbent movements for these job families were:
  • Marketing- 7.7% (up from 5% in 2007)
  • Engineering- 7.4% (up from 5% in 2007)
  • Finance and accounting- 7% (up from 5.5% in 2007)
  • HR- 6.2% (up from 4.9% in 2007)
  • IT- 6.9% (falling from 7.3% in 2007)

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