3% pay increases the new normal for New Zealand

3% pay increases the new normal for New Zealand

3% pay increases the new normal for New Zealand workers, Mercer survey shows

  • 5 December 2011
  • New Zealand, Auckland

New Zealand workers have received a healthy 3% pay rise over the past 12 months and a return to higher salary increases is off the agenda for employers, according to Mercer’s latest salary survey.

Mercer’s New Zealand Total Remuneration Survey of 179 organisations reveals salary increases have gathered pace in 2010-11: the median pay increase was 3%, compared to 2.5% the previous year.

Sarah Barnaby, Senior Associate in Mercer’s Information Product Solutions business, said while remuneration budgets are slowly rebuilding, gone are the days of hefty pay rises.

“The increased salary movement this year is consistent with the slow improvement of economic and business performance in New Zealand. However, investments in salary budgets are being carefully considered by employers, many of whom haven’t yet recovered from the Global Financial Crisis. Kiwis are still coming to terms with the impact of the global recession and the Christchurch earthquakes and there is a strong sentiment around just trying to get by,” Ms Barnaby said.

“Employees should not expect pay rises of 5% or more - as seen before the recession, in fact 61% of organisations are telling us their HR operating budgets and their budgets for salary increases (51%) are likely to remain the same next year.

“Instead, employers are more likely to focus investments on managing their staff, driving growth and increasing productivity to ensure they stay afloat,” Ms Barnaby said.

Mercer’s survey found salary increases were largely undifferentiated across job families this year, hovering around the general market median of 3%. The biggest changes were seen in marketing which conformed to the national median of 3%, dropping from 4% in 2010. Finance (3.2%) and IT (3.0%) rose substantially from the 1.5% pay increases received 12 months ago.

“As the Christchurch rebuild begins, demand for labour is likely to increase pressure on salary budgets for critical job families, such as construction and engineering, and we could see a reordering of pay increases distributed across various industries - however this isn’t evident as yet. Given uncertainty as to when the rebuild can begin, pressure on salaries in these areas may not be seen until late in 2012.” Ms Barnaby said.

In terms of regional salary movements, Auckland remains the national hotspot where pay movements have risen to 3.8% from 2.5% in 2010. While pay movements in Wellington and regional areas were consistent with the national median of 3%, increasing from 2% and 2.5% respectively in 2010.

Regional data for Christchurch, showed employees received the most conservative pay increase of 2% - a reflection of the instability in the region.

Ms Barnaby said organisations must continue to target their salary budgets towards high performers.

“For salary budgets to go the distance, employers will need to target pay increases to the most critical people in their business and also consider the mix of financial and non-financial rewards.

“While there may be some willingness among the New Zealand community to forego large pay packets in light of the recent earthquakes and market volatility, this goodwill may not last as long as the conservative pay increases are likely to continue,” she said.

Graph one: Job Family movements:

Graph two: Regional movements:

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @Mercer_NZ