Are pay levels finally rising? Yeah – Nah!

A question we are regularly asked is whether pay levels are finally rising.

Unfortuately, to use the popular Kiwi idiom, the answer is “Yeah – Nah” – for the moment at least.

Results of our September 2019 survey of New Zealand pay practices have recently been released to our licensed users. And the good news is that those results do show that the average Base Salary movement for both Top Executives and General Staff is finally lifting – albeit only slightly.

Those results also show that Average Base Salary increases remain significantly higher than CPI movements over the same period.

The majority of those receiving increases are likely to be in roles which have access to a range of rates. The increases received are therefore primarily the result of upward movement within the available range, to reflect increased performance and contribution, rather than a reflection of any increase in the underlying remuneration ranges themselves.

A natural conclusion to draw from this is that with significant numbers of employees receiving increases, underlying remuneration levels would also be rising. Unfortunately this is where the “Nah” part of our earlier answer comes into play.

There is no doubt that increases in Base Salary do influence underlying remuneration levels. There are however many other influences which are also at play.

Chief amongst these is the impact of staff turnover. Historically, new appointees are appointed at a remuneration level which is less than that which was being received by the person they replaced. Even staff moving up (on promotion) within an organisation are typically paid at the lower levels of the remuneration range for the new role, at least until they prove themselves in that new role.

Those decisions effectively moderate the level of influence increases in Base Salary have on any given group. When combined with changes to the benefits received (for example, Bonus and Commission payments) the result is that movements in Median Total Remuneration rates are typically well below Average Base Salary increases, as shown in the chart below.

So what can we learn from these results?

Firstly, Average Base Salary movements are slowly increasing. Employers who wish to retain staff will need to recognise this in deciding on any adjustments given to acknowledge increased performance and contributions.

Secondly, and somewhat counter-intuitively, increases in underlying pay levels will remain constrained by lower appointment levels for new appointees and moderate changes only in the value of other benefits.

In short, employers still face a difficult balancing act: offering existing employees the opportunity of increased earnings through increased performance, while still containing overall costs in the light of ongoing financial constraints.

The MHR RemData service is New Zealand’s longest established commercial pay survey. Originally established in 1959 as the “Greenwood Survey” the survey was purchased by PA Consulting Group in 1980, and operated as “CubikSurvey” from 1999. The service was purchased by the current owner, MHR Global, in 2010.

The service has been managed continuously by Kevin McBride, Managing Director of MHR Global, since 1990, and under his management was the first NZ-based pay survey to move completely online, in 2001.

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