Salary outlook 2023: three things employers can do when salaries lag inflation 

New Zealand employers are budgeting for a 3.0% median salary increase in 2023, unchanged from the increase for 2022, according to Mercer’s New Zealand Total Remuneration Survey.

The cautious approach will come as a hard truth for many employees faced with cost of living increases running above 7% as the New Zealand economy continues its strong recovery from the pandemic¹.

This year’s findings also reveal that some sectors are poised to receive significant salary increases. IT marketing, engineering and manufacturing are offering premium wages for hard-to-fill roles.

For example, Information Systems Architecture specialist professionals and managers reported a year-on-year salary increase as high as 13% and 6% respectively, indicating a high demand for this position. Organisations will need to provide a compelling value proposition, including competitive base pay, to attract and retain the talent they need.

Attracting and retaining the best people is more important than ever in 2023. More than a third of organisations are reporting increased staff turnover this year with voluntary attrition rising to its highest point in five years². With 35,000 jobs added to the New Zealand economy within the most previous quarter, the unemployment rate has maintained near record lows and continues to exceed expectations as both employment opportunities and workforce participation increase¹.

Two-thirds of executives now say they are facing crisis from labour shortages.

In response, more than a third (38%) of HR leaders say their top priority is improving their total rewards package. From flexibility and leave to well-being programs and corporate discounts, communicating the non-salary benefits on offer to staff is becoming an increasingly critical part of the retention toolkit.

An uncertain economic outlook, rising inflation and a tighter-than-ever labour market mean employers need to be competitive, agile and purposeful to attract and retain talent. Here are three recommendations for organisations to consider:

The best employers take a data-driven approach to set salary budgets and pay increases informed by both market conditions and business priorities. Benchmarking against the market with the latest rewards intelligence is the best start for navigating the year ahead.