Return to hefty pay increases not on cards for 2012

Employees should not expect pay rises over 5% as seen before the recession, with over half of organisations in a Mercer survey saying HR operating and salary increases budgets are on hold.

The past twelve months have seen New Zealand workers receiving an average of 3% pay rises, but further salary increases are unlikely in the coming year.

That's according to Mercer’s New Zealand Total Remuneration Survey of about 180 organisations, which shows that compared to last year’s 2.5% increase rate, the median pay increase for 2011 rose to 3%.

The survey found salary increases were largely undifferentiated across job families this year hovering around the general market median of 3%, with the biggest changes seen in marketing, which dropped from 4% in 2010 to a median of 3%.

Finance (3.2%) and IT (3.0%) rose substantially from the 1.5% pay increases received 12 months ago.

Sarah Barnaby, Mercer’s information product solutions senior associate, said while remuneration budgets are slowly rebuilding, hefty pay rises would not be making a rapid return.

“The increased salary movement this year is consistent with the slow improvement of economic and business performance in New Zealand. Kiwis are still coming to terms with the impact of the global recession and the Christchurch earthquakes and there is a strong sentiment around just trying to get by.”

Pay rises for 2012 are expected to stay at current levels as employers review their operational and salary budgets.

“Employees should not expect pay rises over 5% or more as seen before the recession, in fact 61% of organisations are telling us their HR operating budgets and their budgets for salary increases (51%) are likely to remain the same next year,” Ms Barnaby said.

“Instead, employers are more likely to focus investments on managing their staff, driving growth and increasing productivity to ensure they stay afloat.”

Looking at regional salary trends, Auckland remains in the spotlight where pay movements have risen to 3.8% from 2.5% in 2010, while pay movements in Wellington and regional areas remained consistent with the national median of 3%, increasing from 2% and 2.5% respectively.

Ms Barnaby said employers should be focusing on targeting high performers rather than overstepping the budget in order to meet the needs of all employees.

“For salary budgets to go the distance, employers will need to target pay increases to the most critical people in their business and also consider the mix of financial and non-financial rewards.”

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