How salary increases are affecting hiring strategy

Are the 2026 projections too good to be true?

According to new data from advisory company WTW, 2026 salary budgets are expected to keep up with last year’s increase of approximately 3.5 per cent.

As is expected, industry variance remains: in 2025, aerospace and defence increased by 3.9 per cent, and insurance by 3.6 per cent. Looking at 2026 projections, only technology/media/telecommunications is off the mark, sitting at 3.4 per cent.

Inflation expectations have reportedly been regulated across economies, lessening the need for reactive pay increases and providing room for proactive budget and salary planning. But with ongoing economic uncertainty, strategy alone may not be able to mitigate significant changes in the workforce.

As WTW’s ANZ head of work and rewards, Evangeline Daquilanea, highlighted that “beneath the steady medians lie meaningful shifts in how organisations allocate pay, manage complexity and plan for a workforce that continues to evolve faster than traditional budgeting cycles”.

AI is proving to be a significant destabilising factor for hiring patterns. This technology is no longer emerging, and its ability and influence are only growing. According to Daquilanea, it is now a core driver of “how work is designed, valued, and experienced”.

She said: “For HR leaders across Australia, understanding these shifts is critical to building a workforce that is not only future-ready, but resilient, competitive and human-centred.”

From the employee perspective, the impact is being felt. WTW data from 2023–2025 shows a decline of more than 1,000 new hires for entry-level positions nationally. This is particularly apparent in administrative and operational roles, and it is no coincidence that this is where AI is making its mark.

Some of the quickest declining skills include vendor management, transaction processing, technical support, and content editing.

Demands for AI management skills, however, are growing. Generative AI, data analytics, machine learning, automation design, and digital ethics are all in demand and projected to remain so. Daquilanea asserts that automation is sparking an evolution of these entry-level roles, and the focus is now on “roles requiring digital fluency, complex problem solving, and judgement”.

She said: “Competition for AI-adjacent skills continues to drive wage premiums across key industries.”

The last year has also shown decreased voluntary staff turnover, dropping from 12 per cent to 10 per cent, with companies directing budget towards retaining talent and addressing pay compression. This has also led to greater training opportunities, focus on improving employee experience, updating health and wellness schemes, and greater workplace flexibility.

Despite high employee expectations and current compensation projections, both hiring strategies and salaries themselves are tenuous. The integration of AI has sparked a shift that some fear is the first step in replacement, but trends come and go, and a willingness to move with the times will always put employees in good standing for the future.