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NZ wages finally impacted by global credit crisis

New Zealand wages finally impacted by global financial crisis - Mercer salary survey finds

The recession has finally affected New Zealand pay packets, with salary growth slowing to 2.5 per cent over the past 12 months, according to a Mercer remuneration survey.

After several bumper years, where salary growth peaked at 5.2 per cent in February last year, Mercer’s latest remuneration survey, which analysed data from 233 organisations across the general market, revealed that the median pay increase in New Zealand has dropped to 2.5 per cent for the year to February 2010, and are forecast to remain under 3 per cent for the next two years.

Mercer says that despite signs of a recovery and a boost in business confidence, it will be a while before we experience a corresponding upswing in our pay packets.

David Little, Senior Associate in Mercer’s Information Product Solution business, said pay data tends to be a ‘lag’ indicator, with the effect of the recession being figured into salary budgets last year.

“The pay increases of around 5 per cent, just prior to the global financial crisis, were perhaps unsustainably high. The fall to 2.5 per cent is a return to more normal levels of growth. In fact, with salary forecasts for 2011 and 2012 hovering at just under 3 per cent, it seems this type of increase is going to be the new ‘normal’ for some time,” he said

The survey reveals a more optimistic mood among businesses – 51 per cent are expecting better results in the coming year, compared to just 14 per cent a year before, and 41 per cent plan to increase their operating budget. Until these hopes are realised, however, Mercer says employers will tread carefully.

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“Whilst all the foundations are in place for economic recovery, the salary movement forecasts indicate that organisations are waiting to see results before they hike their remuneration budgets. Kiwis are still coming to terms with the impact of the recession on their businesses and organisations will continue to target their spending to focus on growth. For example, sales teams are expected to grow by 5.7 per cent, whereas finance and legal teams will grow by less than 1 per cent,” he said.

Mercer’s research shows that against the background of the recession, the number of executive perks on offer declined. While benefits such as cars, and personal insurances accounted for 10 per cent of private sector executives’ packages the previous year, this halved in the year to February 2010.

However, the nation’s straitened circumstances failed to dent employees’ short-term bonuses, with staff at all levels in both the public and private sector, seeing an increase of 1 per cent.

While recovery to pay packets may slow, the labour market recovery appears to be gathering pace. The proportion of employers finding it more difficult to find employees has increased from 17 per cent in 2009, to just under 50 per cent in the last six months.

“After a tough 12 months, the job market has turned the corner, as evidenced by the falling unemployment rate. While this is good news for job seekers, employers will be looking to assess how the recession and their response to it, has impacted on their ability to attract and retain key staff. . It also means that those modest salary growth forecasts of 2-3 per cent may be wishful thinking, as competition for talent inevitably pushes salaries upwards,” Mr Little said.

Regional differences:
When compared to the last 12 months, salary movements have fallen in all regions. Auckland employees fared the best, with same incumbent pay movements falling from 5.3 per cent in 2009 to 3.5 per cent in 2010. Wellington saw pay movement fall from 5.1 per cent to 2 per cent over the past 12 months and regional areas fell to 2.5 per cent.

Job Families:
All job families saw a significant decrease in salary movements since 12 months ago. Whilst Sales had the highest increase, at 3.5 per cent, IT had the largest movement overall, dropping from 4.5 per cent to 1.1 per cent.

Mr Little also noted that for professional roles within the Research and Science job family, the ratio of pay, compared to a position of equivalent seniority in the general market decreases as the position’s seniority increases.

“This is one reason why the recently announced $225 million investment for research, science and technology will be welcomed. Innovation is crucial to New Zealand’s knowledge economy, so it’s time something was done to address this under-resourced and under remunerated sector,” he explained.


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