IBM's ‘New Zealand 2003 Remuneration Report’

IBM Business Consulting Services Releases Bi-annual

‘New Zealand 2003 Remuneration Report’

IBM BCS Report reveals greater use of performance pay and widening gap between private and public sectors

Auckland, 17 June 2003 – IBM Business Consulting Services (BCS) has released the findings of its bi-annual ‘New Zealand 2003 Remuneration Report’, which identified a widening gap between public and private sector remuneration levels. The latest edition of the IBM BCS Report also confirms greater international influence on salaries for technical and professional employees, as well as an increased use of performance-based pay and incentives in the private sector.

A valuable aid to senior executives in setting realistic salary policies, the IBM BCS ‘New Zealand 2003 Remuneration Report’ surveys nearly 200 organisations from a wide range of industries, including: manufacturing; distribution; retail; finance; and the public sector.

John McGill, Senior Consultant at IBM Business Consulting Services, New Zealand, says the 2003 IBM BCS Report confirms modest overall wage increases over the last twelve months. “While this modest increase is not surprising considering the current low level of unemployment, the most significant findings are the underlying trends. For example, the IBM BCS Report confirms a widening gap between private and public sector pay. This discrepancy in senior management remuneration levels was identified by the State Services Commission last year. However, the 2003 IBM BCS Report suggests the gap is greater than previously thought, and may lead to significant pay issues for that sector.”

Key findings of the 2003 Report:

1) Modest average rise of 4.2% in 2003.

2) Pay for top jobs increases by 4.6%

3) Public sector pay now up to

4) 50% behind private sector

5) Performance bonuses more popular - 35% of total package in some cases

Moderate overall increase with no wage blow outs expected

The actual average rise in payroll for the past twelve months across all sectors was 4.2%. “This moderate increase reflects the present economic environment in which wage costs remain generally well contained,” explained Mr McGill. “Furthermore, there are no indications that pay increases will rise dramatically from current levels, as the IBM BCS Report’s participating organisations anticipate an average rise of 3.6% for the year to March 2004.”

New Zealand’s growing internationalisation boosts pay for technically skilled

While the remuneration increase of 2.8% for those at the lower end of the pay scale remains consistent with previous years, the latest IBM BCS Report reveals remuneration for middle and senior management growing at higher levels than in recent times. Mr McGill comments, “the 2003 Report shows that middle management, especially specialist and technical positions, enjoyed an average salary increase of 4.3%, up from 1.8% last year, while senior management had an average increase of 4.6%, compared to 2.5% in 2002. This reflects the growing influence of international trends on remuneration for technical and professional employees in New Zealand.”

Pay linked to performance in the private sector

Variable pay, which includes performance bonuses, has continued to grow as a percentage of total remuneration. “Five years ago, variable pay comprised no more than 13% in most remuneration packages across all sectors. Today, performance incentives and bonuses have boosted variable pay components to levels as high as 35% for some positions. Given the robust linkages between pay and performance which typically result in greater variable pay following good economic results, the private sector in New Zealand appears to be more relaxed about higher pay levels,” said Mr McGill.

Widening gap between public and private sector remuneration

Meanwhile, senior management remuneration in the public sector is falling further behind the private sector. While the State Services Commission acknowledges the discrepancy has existed since the mid-1990s with differences as great as 25%, the latest IBM BCS Report shows that the gap is in fact widening. Certain senior jobs in the public sector are now paid up to 50% less than equivalent positions in private enterprise. Although the IBM BCS Report recognises some government sectors, notably education, have received significant pay increases recently, these have been based on relatively low existing levels. With pay policies making senior public sector positions less attractive for many professionals, state agencies will need to confront a growing dilemma of adequate resourcing,” said Mr McGill.

About the IBM BCS ‘New Zealand Remuneration Report’

The six monthly IBM BCS ‘New Zealand Remuneration Report’ is widely recognised as one of New Zealand’s most comprehensive analyses of remuneration and employment practices. For more than fifteen years the New Zealand Remuneration Report has been published by PricewaterhouseCoopers Consulting - which was acquired by IBM in September 2002 and became IBM Business Consulting Services. Today, the IBM BCS ‘New Zealand Remuneration Report’ involves almost 200 organisations from a wide range of industries in both the commercial and public sectors. The IBM BCS Report findings enable these organisations to establish realistic remuneration policies for their employees.

The IBM BCS Report’s comprehensive research is conducted using IBM Business Consulting Services’ extensive Remuneration Database. By providing sound and reliable information, the IBM BCS Remuneration Database overcomes the difficulty of identifying accurate marketplace remunerations for jobs of similar size and responsibility. As a result, organisations are kept up to date with existing trends and developments concerning the remuneration of all salaried personnel.

The IBM BCS Report evaluates employment positions using the IBM Business Consulting Services Job Evaluation Methodology. After taking into account a total of ten measurement factors, the Job Evaluation Methodology allocates a points score for each position. The ten factors include the level of education and length of practical experience required to perform each function; the managerial scope of the position and level of influence within the organisation; as well as the complexity of problem solving expected with the role.

About IBM Business Consulting Services
With more than 60,000 consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world’s largest consulting services organisation. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build and run those solutions in a way that delivers bottom-line business value. More information on IBM and IBM Business Consulting Services is available at www.ibm.co.nz

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