Pay rises - for some

AMANDA MORRALL looks at the prickly issue of post-recession pay.

How much are you worth as an employee?

It is a tricky calculation at the best of times. In bad times, it is typically a moot point.

You count yourself lucky to have a job, suppress all thoughts of a pay increase or promotion and accept a regular pay cheque like manna from heaven.

But with the economy signalling recovery and profitability returning to balance sheets, the fear of redundancy is slipping and employee confidence is gaining traction.

Jarrod Moyle, director of Moyle Consulting in Auckland, says expectations are adjusting along with the improved outlook.

"We've certainly noticed there is a restlessness out there where people might have gone a year or more without a pay increase or perhaps had their job changed quite significantly with restructuring taking on new responsibilities," says Moyle.

Overall, there is a "feeling of needing some recognition for those changes", he says.

It could be slow to come.

The unadjusted Labour Cost Index (which factors in performance-related pay increases) shows annual wage growth of 2.5 per cent for the year ending March 2010. That's the smallest annual increase since the index began in 1995 and is down from 2.9 per cent in December 2009.

Executives fared better.

According to a survey by Moyle's firm, almost half New Zealand's chief executives received pay rises last year with a median increase of 5 per cent, a 1.1 per cent drop on a year earlier. Of 455 chief executives, general managers and managing directors, 48 per cent received a salary increase last year. Less than 1 per cent of those surveyed had their pay cut.

The economy may not be out of the woods yet but there may be more room for salary growth than some employers are prepared to acknowledge. And yet, according to a separate survey by Mercer's, employers will be holding on to the purse strings tightly.

Mercer's found that median pay increases (in the 12 months ending February 1, 2010) have slumped to 2.5 per cent. The overall sentiment among the 233 organisations that participated in the survey was that wage and salary increases would stay in that range for a few years yet.

David Little, a senior associate with Mercer's, says pay increases in the 5 per cent range, which is what they were pre-global meltdown, were not sustainable.

"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 however at just under 3 per cent, it seems this type of increase is going to be the new 'normal' for some time."

Cameron Bagrie, chief economist with ANZ, is more optimistic on salary growth.

Bagrie predicts a "half-way house" scenario where salary growth will climb back up to 4 per cent in a few years. At the same time, he also sees inflation increasing to 5 per cent, a direct result of GST being increased to 15 per cent.

Bagrie says employees expecting to be compensated for that could be disappointed.

"People automatically are going to expect to see pay increases of a bigger magnitude but that is not correct because people will be compensated for the GST increase with tax cuts."

Ultimately, employees wanting to better their pay cheque stand the best chance of doing so by improving their game at work, says Moyle, who offers the following advice: Before storming the boss's office or meekly waiting for a pay increase that never happens, do your homework, starting with market surveillance on remuneration.

Find out how much others in similar jobs get paid, both inside and outside your organisation. If colleagues won't disclose it, professional associations or unions might be able to provide salary surveys that give a gauge.

There are also free resources on the internet that provide a less scientific breakdown and a range of salary and wages for most sectors.

Finally, where an employer and employee are at odds about salary expectations - or maybe a job has poor benchmarks for comparison - Moyle says it is not unreasonable to request an independent review by an external consultant.

The shyer employee may tremble at the prospect but Moyle assures it is not unreasonable request. "Some companies are more transparent than others with pay but I don't think it is unfair to ask for evidence as back up as to what the markets pay for that particular role."

- © Fairfax NZ News