New Zealand wages stall as cost of living rises

Media Release

New Zealand wages stall as cost of living rises, Mercer survey shows

Wednesday 13th April 2011

Despite a rising cost of living, New Zealand’s patchy economic recovery has seen pay increases stall at a median of 2.5% over the past six months, and are not expected to go any higher next year, according to a Mercer remuneration survey.

Mercer’s Market Issues Survey of pay trends at 91 organisations reveals salary increases, after peaking at 5.2% in early 2009, have dipped to 2.5% at February 2011.

However, Sarah Barnaby, Senior Associate in Mercer’s Information Product Solutions business, said a national figure of 2.5% is becoming less relevant as a salary reference point as employers should be targeting pay rises to where they are needed most in line with business objectives.

“While the median salary movement figure is 2.5%, this belies the need for employers to identify differentiating factors within their organisations - such as performance, role type and skill and geography - in order to determine a rewards strategy,” Ms Barnarby said.

“Kiwis are still coming to terms with the impact of the recession on their businesses, any cautious optimism about the economy has been tempered by the impact of the Christchurch earthquakes, and organisations will continue to target their spending to focus on growth. This does not leave much scope for passing on substantial pay increases to everyone,” she said.

“Organisations who continue to rely on the national figure as a determinant, and don’t differentiate within their workforce, will drive critical employees into the arms of another organisation, or even across the Tasman to Australia,” she said.

Mercer’s survey revealed half of respondents already differentiate between employees according to job family or industry sector.

“Targeting pay increases to the most in-demand or hard-to-find skills is an effective way to ‘do more with less’, particularly when budgets are under pressure. Organisations should continue to benchmark externally to ensure they remain competitive with roles and skills that are demanding a premium,” Ms Barnaby said.

Regional differences:
When compared to the last 12 months, salary movements have remained the same in all regions, apart from Auckland where pay movements fell from 3.5% to 2.5% in 2010. Regional areas remain at the national median of 2.5%, while salary movements in Wellington have increased from 2.0% to 2.5%.

Job Families:
The continued economic growth has had differing consequences for salary movements in various job families, for example, current employees in more senior roles received the biggest increases.

“For employees at senior levels, the median increase was 0% in July 2010, so there is an element of catch up going on. Many senior executives took salary freezes due to poor financial performance post GFC, and it became socially unacceptable for the ‘rich to be seen getting richer’ in the recession.

“In the past six months the media spotlight has gone off executive pay increases and there are clearly organisations making the most of this in an effort to retain their leaders,” she said.

Job families above the national market median:
- Top Management
- Sales
- Marketing

Job families below the national market median:
- Administration
- Retail
- Contact Centre
- Legal

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About Mercer:
Mercer is a leading global provider of consulting, outsourcing and investment services, with more than 25,000 clients worldwide. Mercer consultants help clients design and manage health, retirement and other benefits and optimise human capital. The firm also provides customised administration, technology and total benefit outsourcing solutions. Mercer's investment services include global leadership in investment consulting and multimanager investment management.

Mercer's global network of more than 19,000 employees, based in over 40 countries, helps ensure integrated, worldwide solutions. Our consultants work with clients to develop solutions that address global and country-specific challenges and opportunities. Mercer is experienced in assisting both major and growing, midsize companies.

For more information, visit www.mercer.co.nz

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