New Zealand wages hold up despite tough times

Media Release
New Zealand wages hold up despite tough times - change is imminent Mercer salary survey reveals

Monday 18thMay 2009

Despite the tough economic circumstances salary movements in New Zealand have held steady over the past twelve months, but employees shouldn’t be expecting the same level of pay increases in the coming year according to new research recently conducted by Mercer.

Mercer’s 2009 Total Remuneration Survey, which analysed remuneration data from 216 organisations, has found that the median pay increase in New Zealand was around five per cent for the year to February 2009.

But a very different picture is expected in the year ahead: Mercer’s 2009 Market Issues Survey, a study of remuneration and human capital forecasts, shows that national salaries are anticipated to rise by just two per cent in the year to February 2010 – the lowest forecast figure ever reported in the survey’s history.

Mercer’s Market Issues Survey, which covered 161 organisations, also found that New Zealand organisations are adapting operations to cope with the economic climate: the number of those planning to reduce operating spend has increased by 40 per cent over the past twelve months as a result of reduced export revenues, weak business sentiment and sharply curtailed investment placing pressure on New Zealand businesses.

Furthermore, eight per cent of organisations plan to reduce workforce numbers, while 17 per cent of organisations have put a freeze on hiring.

David Little, Senior Associate and Leader of Mercer’s Information Product Solutions business, said the results show the global financial crisis is closing in on employers and placing downward pressures on salary budgets, however, employers still have to grapple with the challenges of retaining and engaging their key talent in very uncertain times.

“Although New Zealand’s unemployment rate is still one of the lowest in the world, for many, this year will be their first experience of a softening economic environment and organisations will need to develop the flexibility to act defensively and offensively as conditions change,” Mr Little said.

“Employers have spent the last two to three years working enormously hard to attract and retain talent when talent was scarce. Now many organisations are reporting a reluctance to let go of staff they have worked so very hard to find and are switching their focus to differentiated cost control measures.

“This may mean refraining from broad-brush cost-containment measures such as blanket workforce reductions, or across the board salary and wage freezes, and instead using limited remuneration and development budgets to reward the most productive performers in an effort to retain the talent required to cope with the current pressures; and be ready with the right skills on board for when the cycle starts to upswing,” he said.

Mr Little said Mercer is seeing a much greater focus on performance management practices as employers want to know who their most productive workers are and lift performance where needed in order to remain viable and competitive – this is especially since skill requirements are changing and organisations face vastly different operating conditions ahead.

He adds that avoiding knee-jerk responses and future-proofing ‘people’ decisions requires a three pronged approach, which includes:

• Managing costs – Evaluating cost saving initiatives in terms of direct savings as well as possible indirect costs resulting from the disruption the initiatives may cause, and enhancing the effectiveness of performance and reward programmes;
• Securing talent – Identifying star performers and rewarding them by a continued investment in career and skills development, particularly when monetary rewards may be limited; and getting key talent into critical roles.
• Employee engagement – Keeping employees up to date on business issues and ensuring they understand the implications of the current conditions helps to create necessary buy-in for changes that may need to be made. Regular communication is vital to quell fears, minimise distractions and increase productivity.
.
Salary movements by region:
Mercer’s research shows that over the past couple of years, Wellington had been showing stronger pay movements than those experienced by the private sector-dominated region of Auckland.

However, the trends in these two cities have now reversed: Auckland saw salary movements of 5.3 per cent in 2009, as opposed to the 5.1 per cent movements experienced in Wellington.

Salary movements by job family:
Mr Little said this year, for the first time, Mercer’s Market Issues Survey illustrates that respondents reported there were no problematic job families when it came to hiring the right people for the job – clearly reflecting the current economic conditions.

“Whereas previously, the engineering, IT and sales and marketing job families were listed as most problematic by over 50 per cent of organisations participating in the Mercer survey, this year, participants noted that, aside from engineering being somewhat difficult, every other job family is generally not a problem when it comes to hiring.

“Again, the findings present a very different picture to that of 12 months ago,” he said.

Mr Little noted that given the current climate, it is not unreasonable for employees to feel concerned about the economic situation and the impact this may have on job security, potential plans for finding a new job or starting a new career.
“New Zealand organisations are having to adapt, but before making changes it is important to fully understand the flow-on implications and associated hidden costs so that the right initiatives are selected and the changes are well managed and communicated, minimising disruption to employee engagement and productivity,” he concluded.

ENDS

© Scoop Media