Employers Forced to Pay More for Less - Survey

23 May 2007
Employers Forced to Pay More for Less- Mercer NZ Remuneration Survey

Employers in New Zealand are being forced to corral their talent in the face of increased labour market churn and a tight labour market. According to Mercer’s latest Total Remuneration Survey in New Zealand, employers are paying increasing amounts to retain their staff and are not able to attract candidates for the lower wages they had been able to get away with six and twelve months ago.

The survey found fixed remuneration packages have increased by 5.5 per cent at the median in the past year for same incumbents (same person in the same role); and the overall market movement has been higher than it has been over the last 12 to 18 months, reaching 3 per cent at the median for executives.

Martin Turner, Principal at Mercer said: “While employers are increasing wages and utilising benefits to motivate and retain existing staff, employees are taking advantage of the tight labour market and robust economy, increasing momentum for average staff turnover which has increased from 11 to 16 per cent over the past six months.

“Compared to six months ago when confidence in the economy was lower than it is currently, and higher pay and reward was a solid anchor for loyal staff, employees are now able to demand more from their employers with confidence the tight labour market will support them,” he said.

But the real fly in the ointment for employers is that as pay rates continue to increase, confidence in employees has declined significantly with Mercer’s survey reporting that over the past 12 months the proportion of employers who are confident in the capability of their people to adequately meet the needs of the organisation, has fallen from 68 per cent to 46 per cent, and only 8 per cent of the organisations surveyed said employees met all of their needs.

“Employers are dealing with the consequences of the skills shortage and the compromises they made 6 to 12 months ago in recruiting people with lower skill sets to fill vacancies, only to find they are paying more for less,” Mr Turner said.

“The realisation is hitting home that employers will need to start investing more time and money in training and talent management of employees to raise the bar on performance and meet business demands,” he said.

It appears while the bulk of churn is happening at senior professional and middle management level, employers are still paying more to attract talent across all levels, particularly for executives who are the hardest to find.

“Signs of a leadership drought would explain why employers were willing to entice executives with a median 3 per cent increase in fixed packages (for new employees) since last year, compared to a median 0.7 per cent increase to attract middle management,” Mr Turner said. For top management who have remained in their roles over the twelve month period, the returns have been even greater with this group enjoying a 7.5 per cent increase at the median.

“A snap shot of performance bonus payments in the private sector reflects this glitch in the market with 56.1 per cent of executive incumbents having received a bonus in the last 12 months, compared with 37.1 per cent who received a bonus at lower levels in the organisational hierarchy,” he said.

Mr Turner said, “The time is right for employers to utilise all drivers for staff engagement, not just pay.”

“As well as training and career development opportunities, it is more critical than ever that employers assess the organisation’s internal labour market, identify key motivators for employee loyalty and implement flexible workforce practices and transition to retirement strategies to retain key individuals for longer.

“Assessing and planning for the types of skills and people the organisation will need over the next five years is critical and will allow employers to create appropriate career paths and talent management frameworks to ensure the organisation’s workforce will meet current and future business goals,” he said.

Regional wage movements

Employees in Wellington have continued to enjoy greater increases than the rest of the nation with fixed remuneration packages for same incumbents increasing at the median by 6.7 per cent over the past 12 months, compared with 5.5 per cent in Auckland.

Hot jobs and industries

Increases for employees in the IT sector are well ahead of other job sectors with these employees attracting 7.3 per cent at the median, followed by engineers who received an increase of 5 per cent.

Conversely, employees in administration roles have not been as fortunate as last year when they received a median increase of 6.8 per cent while this year the increase was 4.3 per cent.

The median increases for finance and accounting roles were 5.5 per cent, followed by sales roles jumping 5.4 per cent, HR personnel at 4.9 per cent and marketers receiving 5 per cent.

The latest remuneration trends are presented at Mercer’s Human Resource and Remuneration Forums held across New Zealand in May and November. These Forums incorporate findings from the following Mercer surveys:
Global Cost of Living Survey (more than 200 cities)
Global Quality of Living Survey (approximately 200 cities)
New Zealand Total Remuneration Survey (362 participating organisations)
New Zealand HR Market Issues Survey (164 participating organisations

For the full report, please visit, www.mercerhr.co.nz.

ENDS

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