Salaries and jobs still under pressure: Survey

The high level of confidence among Australian companies will not prevent them from cutting jobs and employee salaries in 2010, a new survey has found.

Mercer’s Market Issues Survey found the rate of salary growth fell to 3.5% in July 2009 from 4% six months before, as employers continue to cut labour costs.

The salary growth rate is expected to further fall to 3% in the next 12 months, the survey of 287 organisations found.

Around 30% of businesses expect to reduce their workforce in the next six months, although 28% say they will hire new employees, especially in specialist roles.

This points to an “emerging dichotomy” in the Australian market, Turner says, where high demand for specialist skills will apply pressure on remuneration budgets as employers compete for critical skills.

“Organisations will need to work harder at maintaining the loyalty of employees in an environment where certain talent remains scarce, as well as increasingly being required to manage costs and keep driving productivity,” he says.

“Simply benchmarking against peers, in terms of salary movements, is no longer enough.”

Salary restrictions remain a central part of business cost cutting strategies, with 28% of employers planning to reduce fixed reward budgets this year and 16% not planning to provide an increase. In addition, 44% of employers say they will keep fixed reward spending at current levels over the next twelve months.

But Mercer human capital business principal Martin Turner warns businesses need to balance their salary management with the need to retain staff as the economy recovers.

“Organisations that have retained the required skills and workforce numbers to support their growth, when the economy does improve, will be the ones that thrive,” Turner says.

“Those that have been able to balance short-term priorities with long-term needs by targeting cost containment measures to specific areas of the workforce, as opposed to across the board cuts, will have set themselves apart for future growth.”

Industries still able to attract higher than average wages include engineering, with a current average salary increase of 6.8%; construction at 5%; marketing at 4.1%; science at 3.9% and technical jobs at 3.8%.

The industry with the worst salary increase is supply and distribution, with a 2.8% salary growth. It is followed by IT at 2.9%; clerical at 3.3%; and customer service and sales, both at 3.4%.

Despite the downturn in mining and construction sectors, Western Australia’s salary growth rate remained higher than the national average, at 3.8%. In second place, Queensland was just on average at 3.5% salary growth, while the rest of the country lagged behind.

“The softening of economic growth has seen a convergence of the two speed economy. The differentiation between Western Australia and Queensland relative to the rest of Australia is now much less pronounced than during the times when the mining and construction sectors were running hot,” Turner says.

But this trend is expected to reverse as the economy picks up.

The survey found high performance expectations for the next twelve months, with 41% of businesses expecting a performance improvement, up from 33% six months ago.