Pro HR

Show Me The Money

After a long period of low inflation and low wage and salary rises pressure is building in the remuneration market. There are a number of factors having an impact, most of which have featured prominently in the media.

The new Government’s pledge to increase the minimum wage will be good news for those on low wages and will undoubtedly also have a ripple effect to workers on rates above the minimum, where previous margins between the rates of different groups of employees will be eroded.

Shortages of skilled workers are being experienced now and in certain occupations are predicted to accelerate as digital transformation occurs across industries and occupations. Employers are having to pay more to recruit and then may also need to address internal relativity issues with existing employees whose pay has not kept pace with the market.

The cost of housing in Auckland is putting pressure on wages and salaries and also contributing to labour shortages. Employers struggle to recruit in occupations with national public sector salary scales that do not reflect the cost of living in Auckland and we are seeing Aucklanders relocate to the regions (for many good reasons as we know).

The Government pay equity settlement for 55,000 care and support workers is likely to have far reaching effects as those costs come to bear on large numbers of low paid workers over the next five years. They certainly deserve better remuneration but their supervisors and colleagues who now see their pay relativity diminished and wages compressed will very likely be seeking a consequential adjustment.

All of these factors are driving up expectations that potentially will hit businesses hard if they are not in a position to pass wage rises on through price increases to consumers. These factors will impact differently depending on whether you are in the private sector, not-for-profit or public sector and whether you are in Auckland or the ‘rest of New Zealand’ and the extent to which skill shortages may affect your business.

There is plenty of research to show that for most people salary is not the primary motivator of performance or retention. Other factors drive employee engagement which in turn is linked to performance and retention, including:

  • Learning and development
  • Career opportunities
  • Work that has purpose and meaning
  • Work life balance
  • Quality of leadership and people management

However, feeling valued is very important and may become the thing that tips the balance for existing staff to look elsewhere if your remuneration gets too far behind the market. Likewise it can be the deciding factor in which job a candidate chooses if all other things are equal.

You don’t have to be the best payer to recruit and retain staff but it certainly helps if you can manage remuneration well. There are a range of factors to consider that can make a positive difference to your remuneration and recognition practices:

• Aim to keep in reasonable touch with the market for your industry and/or location. Use remuneration surveys or your networks to regularly check what’s happening.

• Have a clear remuneration structure and process. Make sure people understand how pay levels are set, how it links to performance, how they can progress.

• When people reach a ceiling at the maximum salary the job is worth or don’t have career progression available, be transparent and creative about how to keep them challenged and rewarded. Consider one-off payments instead of base salary increases or other non-monetary benefits. Try to assign interesting projects or extra responsibility that provides development and satisfaction.

• Keep your promises – do salary reviews when they are due and communicate well about the reasons for pay rises or the lack of them.

• Consider the total package you offer employees – are there benefits aside from salary that are cost-effective to provide and attractive to employees? Make sure these are visible and not taken for granted. When communicating about remuneration remind people about the extras they receive (such as funding for study, phones, health insurance, car parking, extra leave)

• Be active and deliberate about non- monetary recognition for good work and commitment. Thank people often, show appreciation with a small gift or morning tea. Acknowledge birthdays, length of service, passing exams and other milestones.

• Celebrate success and recognise achievements in front of peers with awards, a certificate, commendations at team meetings or in newsletters.

Pay attention to the drivers of engagement noted above to promote retention and engagement of existing staff and make sure you tell the story of your culture and work environment to prospective employees to support your market reputation and to ensure you attract the attention of desirable candidates.