After a period of rapid wage growth, Australian employers are set to experience a more moderate pay rise landscape.
The AHRI’s Quarterly Work Outlook report suggests that a combination of factors, including easing recruitment pressures, is contributing to this trend.
AHRI’s Quarterly Work Outlook report (December quarter) reveals the mean basic pay increase in organisations (excluding bonuses) is expected to be 2.7% for the year to October 2025. This is down from 3.8% for the 12 months to July 2025 and lower than the CPI inflation at 2.8% in the 12 months to September. This drop adds to further evidence that the surge in wage growth over the past couple of years may have peaked. An easing of recruitment difficulties is believed to be one of the key reasons for the moderation in wage pressures, with the proportion of organisations reporting recruitment difficulties dropping to 30% in the December quarter – down from 39% in the September quarter. AHRI’s survey of over 600 senior HR professionals and decision makers across Australia also indicates that excessive workloads, coupled with rising living costs, are driving increased stress in workplaces.
The survey also examined absence management and psychosocial hazards. The data showed that 80% of organisations rate themselves as managing psychosocial risks ‘very effectively’ or ‘somewhat effectively’. Yet, in the 12 months to September 2024, 38% of employers reported that these claims and complaints had increased while 13% said they had decreased compared to the preceding year.
The most common causes of claims regarding psychosocial hazards over the last two financial years were job demands (30%) and conflict or poor workplace relations (23%).
In addition, the number of organisations citing stress as a reason for unscheduled absences rose from 42% to 50% over the last year. For the second consecutive year, cost-of-living pressures were cited as the main cause of stress.
Other key findings were:
● The AHRI Net Employment Intentions Index, which measures the difference between the proportion of employers that expect to increase staff levels and those that expect to decrease staff levels, rose to +44 in the December quarter. This represents the second highest figure for net employment intentions since the survey began in the June quarter of 2023.
● 47% of organisations intend to increase staff levels in the December quarter, compared with 3% that anticipate reducing the size of their workforce.
● The turnover rate for the 12 months up to the end of September 2024 was 16%, up 1% from the previous quarter, indicating ongoing challenges in retaining talent despite a softening labour market.
● 30% of organisations reported turnover rates of 20% or more, up from 27% in the previous quarter.
● The four most common causes of unscheduled absence are home responsibilities (75%), minor illnesses (73%), long-term health conditions (56%) and stress (50%).
● The share of organisations planning redundancies fell marginally to 25% (down from 27%); however, the trend line remains broadly upwards.
AHRI CEO Sarah McCann-Bartlett said the wage intentions data adds to further evidence that the surge in wage growth over the past couple of years may have peaked. “This may help ease concerns around the gap between low productivity and relatively strong wage growth, which has been of concern to both employers and policymakers,” McCann-Bartlett said.
However, she cautioned that a drop in pay increase expectations, combined with redundancy activity taking place within some organisations, could lead to engagement challenges for managers and HR practitioners as we head into 2025. “With CPI inflation at 2.8% in the 12 months to September, many employers will not be offering inflation-matching pay increases to workers who continue to be weighed down by rising living costs and high levels of debt,” McCann-Bartlett said. “This could represent an engagement challenge for HR practitioners and line managers. These challenges could be compounded among the many organisations that are reorganising their workplaces for future challenges including digitisation, automation and AI”.
McCann-Bartlett also advised that organisations concerned about psychosocial safety and high employee turnover should consider if they need to invest more in people management and training. “Only 28% of employers said they invest in leadership and management capability to improve psychosocial safety. This suggests that there is ample scope for Australian workplaces to improve in this area given the main factors behind the rising psychosocial claims reported in this survey are all connected with the quality of people management,” McCann-Bartlett said.
“Effective leadership and management can enhance the psychological wellbeing of workers and improve productivity through improved work performance, lower absenteeism and better retention rates.”
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