IN TOUCH:Salaries Steady – For Now

Despite tighter markets, salaries have been holding steady over the past year – but that picture could change over 2009, according to recent research by consultancy firm Mercer.
In its analysis of remuneration data from 216 organisations, Mercer’s 2009 Total Remuneration Survey found that the median pay increase in New Zealand was around five percent for the year to February 2009. But the company’s “Market Issues” survey (involving 161 organisations) shows national salaries are expected to rise by just two percent in the year ahead – the lowest forecast figure ever reported in the survey’s history. Eight percent of organisations who responded to the market issues survey plan to reduce workforce numbers, while 17 percent have put freeze on hiring.
Such results show that the global financial crisis is closing in on employers and putting downward pressure on salary budgets, notes Mercer senior associate David Little. But employers who’ve had to work hard to attract and retain talent over recent years of scarcity are understandably reluctant to shed staff. Instead there is more focus on differentiated cost control measures and performance management practices.
Little suggests that avoiding “knee-jerk” responses and future-proofing the organisation’s people decisions requires three-pronged approach:
• managing costs (evaluating both direct and indirect costs, enhancing the effectiveness of performance/reward programmes);
• securing talent (identifying and developing talent to put in critical roles); and
• employee engagement (through regular communication to quell fears, minimise distractions and increase productivity).
Mercer’s research shows that while Wellington had shown stronger pay movements than Auckland over the past few years, that situation has now reversed, if only marginally, with Auckland experiencing salary movements of 5.3 percent versus Wellington’s 5.1 percent.