Are pay rises on their way back?

In the past 18 months COVID-19 has become something of an ever-present factor in all aspects of life in New Zealand and globally. The question many employers are now facing is whether to continue policies which were designed to cope with reduced income and funding, or are we now at the point where the constraints imposed by Covid-19 need to be lifted.

One key indicator of that impact is to look at how increases in Base Salary have been affected during the past 12 to 18 months. This can be measured by considering two complementary sets of data:

In recent months it has become de rigueur to examine aspects of the impact of COVID-19 (C19) by looking at a variety of key graphics, each illustrating a different aspect of that impact. A similar approach can be adopted in considering the impact of C19 on remuneration practices and policies.

  • The the proportion of employees who are eligible for a salary review, and who have received some sort of adjustment in base salary over the course of a year
  • The average increase in Base Salary for specific groups over that period.

The first chart details the proportion of Top Executives and General Staff who have received increases in Base Salary in the twelve months leading to each data point. The chart clearly illustrates the reduction in the proportion of staff receiving increases in both September 2020 (i.e. six months after the initial arrival of C19) and in March 2021 (after a full twelve months living with C19). That reduction can be largely attributed to the impact of decisions by employers to impose pay freezes, or to defer pay reviews, to maintain employment during a period in which revenue and funding was markedly reduced.

The chart also shows the partial recovery in September 2021, reflecting recognition by employers that such measures cannot be maintained indefinitely, and reinstatement of some form of review is needed to retain key staff.

The second chart confirms this. In this case the impact of C19 is clearly illustrated by the reduced level of increase awarded nationally in the periods ending September 2020 and March 2021. The two results are obviously linked, as an increase in the proportion of staff not receiving an adjustment will reduce the average movement across the sample. Detailed analysis of the spread of increases however also shows that the level of increase typically awarded over this period was lower than that awarded prior to the arrival of Covid-19.

More recently , there are signs of a partial return to pre-Covid levels, with a lift in average increases now showing in September 2021 results. In recent weeks many employment commentators have suggested that it may now be timely for employees to seek a pay review. The results examined above suggest that any such approach may be only partially successful: it may result in an increase ā€“ largely because employers are recognising a need to reduce the constraints previously imposed ā€“ but the level of adjustment may disappoint, as an element of conservatism remains necessary in such decisions as the Covid-19 pandemic continues.

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