SMEs forced to boost salaries as talent war heats up

Small business owners’ determination to hang on to skilled staff forced them to increase wages by 4.3% in 2009, compared to a 3.7% increase seen at larger firms.

The data, contained in the annual national salary survey produced by the Australian Institute of Management, predicts average salaries will increase 3.8% in 2010, with senior managers tipped to do the best.

The AIM survey, which classifies companies with less than $10 million in annual turnover as small and companies above this threshold as large, showed both the level of pay rises and the number of firms handing out wage increases fell during 2009-10 as the downturn rocked many firms.

Just over 40% of firms of all sizes reported a decrease in permanent staff numbers during the period, although job cuts were less prevalent at the smaller end of the market, with 31.5% of small companies reporting a reduction in staff levels – another sign of how keen SMEs are to hang on to their best people.

The highest annual average salary movement by job level was recorded for senior executives (up 3.8%) while salaried staff had the lowest average salary rise (3.5%).

On an industry basis, the highest average salary increases were recorded for the business and professional services industry (up 4.99%), while the lowest increases were generally reported within the various manufacturing sub-groups (between 3.16% and 3.57%).

The largest decline in average salary over the period was reported for the electronics/IT Industry, which saw salaries fall 1.5% as compared with last year.

AIM says it expects pay levels to increase at broadly similar rates in 2010, with the total average salary increase tipped to be 3.8%.

Around 47% of small companies plan to increase permanent staff levels in the coming year, while 40% are planning to boost training budgets.

Susan Herron, chief executive of the Victorian and Tasmanian division of AIM, said companies need to continue to invest in training and education if they want to keep their best staff on board.

“Although pay will always remain an important factor, key to success in all sectors will be recognising that employees – Gen Ys in particular – are looking for their employer to provide career development opportunities. Crucial to satisfying that requirement is providing training and professional development for employees that meet corporate and employee goals.”