‘The year of the raise?’: 95% of employers plan to increase salaries

More employers than ever intend to increase employee salaries in the next 12 months, despite turbulent market conditions.

According to the FY23–24 Hays Salary Guide, released this week, 95 per cent of employers surveyed intend to increase salaries in the next 12 months. This represents a jump from 88 per cent last year and 67 per cent the year prior.

In terms of how much, 66 per cent of employers plan to increase salaries above 3 per cent – up from 37 per cent last year and 12 per cent the year prior.

Almost four in five survey respondents said it’s reasonable to expect pay rises to keep up with inflation – just 6 per cent disagreed, and 4 per cent strongly disagreed.

On the employee side, 65 per cent are planning on asking for a pay rise in their next remuneration review, compared with 19 per cent who said they won’t ask and 16 per cent who are currently undecided if they will or won’t.

“Despite increased salary intentions, employer and employee expectations are misaligned, with many employees feeling undervalued and underpaid,” Hays said.

“Only 28 per cent of professionals are satisfied with their current salary, with most (71 per cent) believing it doesn’t reflect their individual performance. Two-thirds (66 per cent) say it doesn’t align to external typical salaries.

“Even with most employers intending to increase salaries, jobseekers have an eye on their remuneration – 46 per cent say they’ll negotiate their salary if they don’t receive a pay rise or it fails to meet expectations, and 52 per cent believe they’d benefit financially from changing jobs.”

The rising statistics come despite rising cost pressures across the country. Latest inflation figures show numbers are still trending upwards, and the Reserve Bank of Australia (RBA) is expected to lift interest rates again next Tuesday, 6 June.

Elsewhere, NSW Premier Chris Minns confirmed this week that a two-year wage freeze for state politicians and public service senior executives would be rolled out from 1 July. The freeze will allow for funds to be redirected to nurses, paramedics, teachers and other frontline workers.

Below are the four factors driving salary increases this year, as per the Hays guide.

1. Competition amid a continued and growing skills shortage

“Many employers find that the pipeline of candidates doesn’t meet their requirements. Indeed, 64 per cent of all respondents say there’s a shortage of skills associated with their profession.

“In response, three-quarters of employers have offered larger salary packages than planned to attract skilled candidates.

“Further, many professionals have already benefited from demand for their skills through a salary increase (30 per cent), new job (13 per cent) or both (19 per cent).”

2. The ripple effect of falling real wages

“Employers are sensitive to the hidden cost of falling real wages on employee engagement, mental health and wellbeing, morale and job satisfaction.

“Unless an employee has changed employers or been promoted, the purchasing power of their income has fallen. While few employers can match inflationary pressures, many are stretching salary budgets as far as they can to support staff.”

3. The impact of pay transparency

“The abolition of pay secrecy in Australia and the briefing into pay transparency in New Zealand have prompted some employers to audit salaries, scrutinise disparities, and offer adjustments if required to ensure fair and equal pay.

“In addition, almost two-thirds of employers share how salary levels and pay increases are set, perhaps because they understand doing so improves equity, builds trust and boosts morale. It also aids employees’ bargaining power.”

4. Employees prepared to ask for a raise

“Our data indicates an upward trend in employees’ confidence to negotiate for better compensation.

“This year, 65 per cent of professionals plan to ask for a pay rise, up from 58 per cent last year and 45 per cent the year before.

“Further, 64 per cent admit the skills shortage makes them more confident to ask for a pay rise. Add inflationary and cost-of-living pressures, and employees are more willing than ever to ask for more.”