Pressure for large pay rises set to continue into 2023
New Zealand employers are expecting to need to give out hefty pay rises to attract and retain workers in 2023, bucking a call by Reserve Bank governor Adrian Orr for spending and wage rises to be pulled back to help rein in inflation.
Research by remuneration experts Strategic Pay show base salaries are expected to rise by 4.3 per cent in the next year — nearly double the 2.4 per cent forecast for the 2020/21 year.
Chief executive Cathy Hendry said the figure was based on what employers were putting into their budgets for the next 12 months.
“Obviously that came out before the Reserve Bank comments.”
But even with thinking about going into a more recessionary environment, Hendry said many employers had to pay more to retain or attract new staff due to the labour shortage.
The forecasts show general staff and middle management are likely to get the biggest percentage rises with a forecast of 4.5 per cent compared to the 2.4 per cent forecast rise for 2022. CEOs and senior execs were forecast to see an average rise of 3.6 per cent, up from 1.9 per cent in the prior year forecasts.
Hendry said the other factor was how quickly the market was moving with the talent shortage.
In the middle of the year employers were forecasting 3 per cent pay rises but most ended up having to reforecast again. “They were having to find another 2 per cent just to try and meet the market.”
Hendry said it was still an employee-led market. “[We are finding] people are being poached.”
The other surprise factor was the jump in pay rises for those in senior management.
“We were anticipating that movement down at the lower level . . . what surprised us was that the senior level roles were also seeing some big increases too.
“Often those senior roles over the previous Covid period, they were having pay freezes and I guess they are saying show me the money now. Also we had that big upturn in economic conditions so organisations were in a stronger position to be able to give a bit more.”
Hendry said she had not seen such a big jump in pay in 12 years.
“The last time the increases were up at [this] level was pre-GFC.”
“With [the Reserve Bank] saying don’t give people pay increases, employers are saying ‘sure but okay are we just going to lose our staff?’ “If we look at what happened last time we saw this they stayed elevated for two to three years.”
What caused them to come back into line was a market shock — the recession in 2008/09.
Despite the Government making changes to increase immigration to help fill skills shortages, it was still hard to find workers. Hendry said her company had to go through a long process to find a worker to fill a role in Wellington. The only application was a really good candidate based in South Africa.
Employers had to advertise a role and then prove they could not fill it locally before being able to recruit from overseas.
“Then it was another two months before we got the visa and got the person.”
Private sector employers are forecasting the biggest rises with not-forprofit employers the smallest. For general staff private sector employers were expecting to have average rises of 4.7 per cent versus 3.9 per cent in the public sector and 3.5 per cent for non-profits.
Hendry said there was a big jump in pay for graduate roles due to the rise in the minimum wage.
She said for a long time companies had relied on graduates’ desire to work for a big brand but that was no longer enough. “Money talks.”
Strategic Pay surveyed 1621 organisations with 263,420 employees.