New research reveals looming ‘salary stand-off’ as candidates promise to walk away over pay packets that fail to keep up with soaring costs

Almost four in five (79%) white collar workers are warning they expect to start looking for a new job if they do not get a pay rise that beats inflation over the next 12 months – according to the latest Robert Walters’ Salary Survey.

New Zealanders are watching the purchasing power of their pay packets shrink while the price of food, energy, and housing continues to rise. Many will have hoped a salary increase will offset these cost of living pressures – but this new survey shows a growing number of people are facing a ‘real-terms trauma’ as increases in pay increasingly fall below the Consumer Price Index (CPI).

Adding to the fears of a looming stand-off, almost 70% of employers told researchers that they do not expect to offer salary increases above inflation over the coming year.

Mounting pressures

The survey of over 1,000 candidates and employers from across New Zealand found that expectations among the workforce are increasingly growing disconnected from the expectations of those doing the recruiting.

97% of candidates told researchers that the minimum ‘fair’ pay rise during the current cost of living crisis would either need to match or surpass inflation, while 65% of candidates said they expect their employer to consider the rising cost of living when determining salary increases and bonuses over the next 12 months.

79% of candidates agreed inflationary pressures would make them more likely to request a pay rise over the next 12 months and 61% of respondents believed maximising their earning potential was a greater priority than job security over the coming year. Finally, close to three quarters (74%) said fears of a recession, coupled with the rising cost of living, would not discourage them from seeking a change in roles.

All this comes as employers grow increasingly bleak about the extent to which inflationary pressures will complicate typical recruitment and retention practices.

99%% of companies currently recruiting believe it is somewhat likely, likely, very likely or certain that the cost of living will prove the central issue in pay negotiations, with one in ten saying that it would be a certainty.

Most worryingly amid the current skills shortage, 82% of employers surveyed expect the rising cost of living will make it harder for their organisation to retain talent.

Shay Peters, Managing Director of Robert Walters Australia and New Zealand, believes that the findings are an early warning of a looming tipping point:

“We are fast approaching what appears to be the most complex and challenging recruitment environment in recent years – yet another blow to households feeling the pinch as the cost of living climbs.

“Much has been made of the ongoing skills shortage in New Zealand and the power it has given candidates seeking to secure bigger salaries and additional benefits.

“These inflationary pressures may now shift that dynamic, with the previous ‘at all costs’ approach from companies desperate for new recruits now offset by spiraling operating costs and energy bills.

“With the Reserve Bank of New Zealand using all available levers to bring down inflation, the days of surging salary offers may be behind us – for the short term at least”.

Winners and losers

For the first time, sector pay increases revealed in the annual Robert Walters Salary Survey have been plotted against CPI – uncovering the true impact of inflationary pressures on people’s take home pay. Over the twelve months to the September 2022 quarter, CPI rose 7.2%, meaning anyone who received a rise in pay below that figure over the period suffered a ‘real-terms’ pay cut – a salary increase below inflation.

The data reveals that there is a sizable group of occupations which continue to command pay rises above inflation, but also lays bare the growing number of New Zealanders who have already begun to suffer from this pay packet pain. It also shows sector specialism or seniority does little to shield workers from this impact.

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A way forward?

Under such pressures, Shay Peters says that all sides in pay talks must appreciate the pressure the other is facing if they are to reach a sensible balance.

“The Survey shows there’s a fundamental disconnect between candidates and employers, and that will undoubtably cause increasing friction.

“Open and honest conversations are more important than ever, especially with the warning from the RBA that ever-increasing wage offers could drive inflation beyond current predictions.

“We’re finding that where organisations cannot increase salary offers, sign-on bonuses, additional training and boosted leave entitlements can encourage candidates to look beyond mere salary levels and towards an increased quality of life”.

The Survey also shows that employers are increasingly fearful that amid rising operating costs, the inflationary environment will make retaining staff harder – and Robert Walters’ Australia and New Zealand MD says flexibility will provide a real advantage:

“Providing an environment in which people enjoy working will become even more vital when salary expectations cannot be met, with superior employee wellbeing a valuable advantage for organisations seeing their star staff offered wage rises elsewhere.”

Finally, Shay Peters warns that all sides need to keep abreast of market conditions if they are to choose correctly when faced with big decisions:

“Be nimble, be agile and be prepared to adapt to prevailing economic conditions, because those who are bullish today about securing a new job may change their mind if the market softens and recruitment freezes become commonplace.

“In those conditions, a real-terms pay cut may be viewed in a different light – with a wrong decision all the more painful to bare.”

Pay rise vs CPI – Calculation methodology

The Robert Walters Salary Survey analyses the roles and job descriptions for the disciplines in which they recruit to predict salary guidelines based on sector, skillset and experience.

The mean salary range for each role from 2022 was compared against the mean salary range for 2023 to provide the estimated median rise in remuneration, this was then compared to the CPI figure released 26th October 2022 to determine a real terms increase or decrease. The charts show the top and lowest percentages for each sector, plus a couple of additional jobs of interest comparisons.

To access a copy of the 2023 Salary Survey,please click here.

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