In order to reduce the cost of living pressures, businesses are now including inflation in their compensation budgets, according to new independent research.
This fiscal year, nearly all (96 per cent) business leaders have boosted their pay budget by an average of 20 per cent.
The findings are based on an independent poll done by specialised recruiter Robert Half among 300 Australian company executives, including 100 CFOs and 100 CIOs. As Australian CIOs report a 26 per cent increase in their compensation budget, technology teams are projected to receive the greatest salary budget increases. With CFOs reporting an average rise of 22 per cent, pay budget increases across finance functions are expected to be much lower.
The survey found that salary budgets in small businesses will increase by an average of 10 per cent, compared to 21 per cent in medium-sized businesses and 29 per cent in large businesses. At the same time, salary budget increases are anticipated to be higher overall in larger organisations compared to smaller organisations. Why? According to the poll, three times as many Australian office workers (44 per cent) cite inflation and the cost of living as their top work-life concerns, followed by high levels of stress (15 per cent) and work-life balance (12 per cent).
Moreover, in the current context, Australian businesses are actively tackling salaries and increasing salary expenditures. When there is high inflation, increasing pay transparency in comparison to other organisations (58 per cent), educating people managers to communicate about pay effectively (52 per cent), and proactively addressing employee compensation concerns (49 per cent), are additional approaches to improve pay equity.
Due to growing inflation and cost of living pressures, more than eight out of ten (81 per cent) employers anticipate increasing employee requests for pay increases in 2022. Nearly all employers (96 per cent) are prepared to grant raises to some of their workers. Just one-third (33 per cent) of employers will give raises to workers without their asking, while 63 per cent will only give raises to those who want them. Only 3 per cent of employers said they wouldn’t raise wages this year.
“The sudden rise in inflation that we have recently seen means that employees who have not received a pay rise from their employer are now on a lower income than a few months ago. Unsurprisingly, rising inflation and cost of living pressures have put salaries in the spotlight for Australian workers as they seek to mitigate any financial challenges,” said David Jones, Senior Managing Director Robert Half Asia Pacific, in announcing Robert Half’s latest survey results.
“Our research highlights that while salary is an important factor to workers, fewer employees intend to raise salary issues with their employer than there are employers who are willing to give a raise.
Less than half of Australian workers (44 per cent) plan to request a pay increase before the end of 2022, but more than three quarters (78 per cent) say they’ll look for a new job if they don’t get one this year. This puts the onus on employers to proactively discuss remuneration plans for the coming year with their current staff or risk losing talented employees.
“In the current changeable economic climate, there’s no doubt that companies are under pressure to evaluate and benchmark their remuneration structure against the market regularly. This reinforces the importance of communication for both parties: employers should frequently address salary expectations with their valued team members, and workers should be upfront about their work-life needs – remuneration or otherwise – to ensure a transparent and satisfactory working relationship.”
“While we know that flexibility has been a significant driver of employees’ and candidates’ decision-making in the wake of the pandemic, remuneration is now becoming a primary concern as it’s expected to impact work-life increasingly. Importantly, salary expectations among contract workers are also rising due to the increased ancillary costs of taking on a role, such as transport and childcare,” concluded Jones.