Four out of five SMEs will increase salaries in 2010: Survey

About 78% of SMEs are planning to increase salaries over the next 12 months as the Australian economy continues to improve, a new Grant Thornton International business report has revealed.

Additionally, 23% of SMEs intend to increase salaries above the level of inflation during 2010.

Tony Markwell, national head of privately held business at Grant Thornton Australia, says the figures demonstrate how resilient the economy, and businesses, have remained during the financial crisis.

“Some industries really felt it hard, but many SMEs didn’t feel any impact from the financial crisis at all. Perhaps some lost about 10% in turnover, but that’s fairly simple to recover from.”

“I think the SME base really managed their cost base well last year and kept salary increases to a moderate amount in order to keep people in their organisations. But now they are catching up, and need to repay what would have been given out last year.”

The survey, which compiled responses from 250 privately held businesses, also found 73% of businesses had either increased employee levels over the past 12 months, or kept them the same. Markwell says this gives businesses a good position from which to keep staff on board.

“One of the things I think the SME market was very flexible with, was in terms of staffing. They reduced hours, reallocated positions and redeployed to keep people in the organisations, and they found different ways to keep people on.”

“And those were good things. But now businesses are going to need to introduce pay rises as protection mechanisms, in order to catch up to the market.”

Markwell says as the economy recovers, there will be a number of businesses across the country looking to hire. If employers do not offer appropriate pay rises, he says, they could find the staff who stayed put during the financial crisis could be among the first to leave.”

“A big attraction is the mining sector. I had one person I know tell a story of a guy doing tasks that put him fairly low on the pay scale, but then he went into the mining industry and initially doubled his money.”

If nothing else, Markwell says businesses should be willing to increase pay in order to keep good talent from disappearing.

“SMEs are nervous because of the wall of talent which will approach now, similar to what happened during the high growth period of two years ago. Many had a hard time. What pay rises will do is essentially act as a defensive mechanism for your business.”