Remuneration update: movements largely unchanged but there are underlying pressures

Strategic Pay publishes more than 30 remuneration reports each year, based on data sourced from more than 1100 organisations across New Zealand. John McGill looks at the latest findings in the first 2016 New Zealand Remuneration Report and whether there are any indicators of change on the horizon.

We produce our major New Zealand Remuneration survey report at this time of year and review the results with our clients in a series of 11 briefings across the country. The survey itself, and the job evaluation methodology behind it, was introduced into New Zealand in the early 1980s (by what was then Price Waterhouse) and has a long history in the marketplace.

Distilling the data of 500 organisations and more than 140,000 individual roles into a few single percentages is not an easy task but the numbers are interesting and show clearly that, despite virtually no consumer price inflation, overall salary movements are positive and remain in the one percent to three percent range for increases over the past year.

Differences by sector
There are some sector differences with the results for the private sector closer to three percent and those of the public sector nearer two percent. Within individual sectors we see also a range of differences, for example some parts of the engineering and construction sector have recorded higher movements and variations around the forecasts for the next year.

Forecasts are always interesting and subject, of course, to change should circumstances vary. However, our results for the next year, from predictions made in the first two months of this year, are clear. More of the same basically, i.e. similar movements are predicted in the next 12 months to what has occurred in the past year.

What could change
Are there any indications that this picture is likely to change soon? The very low levels of inflation and interest rates, steady levels of unemployment, and continued growth in the economy paint a stable environment for those in work.

Their incomes are growing in real terms – and have done for the past two years – and the environment appears steady at present. Interestingly, there are early indications from expectation surveys, such as the BNZ Business Confidence Survey, that suggest shortages of skilled staff may be increasing which could put pressures on professional, technical and managerial roles.

Differences by region: A tale of two cities?
We looked carefully at our March data for any signs of pay differentials between Auckland and the rest of the country. As yet there is little sign. Generally, organisations in Auckland have been reluctant to pay specific allowances to employees, but we are aware that many organisations operate informal policies within their pay structures. The higher cost of housing/transport is allowed for by tending to pay higher in band or grade in Auckland than elsewhere rather than having a specific, formalised policy in place.

Are we likely to see the development of specific allowances in Auckland? It is likely in my view if house prices continue to outstrip those of the rest of the country. A well-documented example of having such an allowance is in London where a “weighting” for jobs in the broader city has existed since the 1920s for many, but not all, employees. 2014 data shows average house prices in London are 2.4 times the rate of the rest of Britain and this sort of pressure will ensure the allowance is maintained. The London allowance has developed a life of its own though and spread over time. It extends these days, at a lower level admittedly, to Brighton – 80 kilometres south.

In summary, we have seen small movements in the last 12 months and much the same for the year ahead. There seems to be a hint of shortages in skilled roles and much discussion around an Auckland premium, which we recommend keeping a close eye on. 

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