A widening gap is emerging between employee salary expectations and employer offerings, fuelled by a rising cost of living.
The latest report from Hays highlights increasing employee dissatisfaction, with nearly 40% unhappy with their current pay and a significant majority feeling their salaries don’t reflect their performance. Businesses are struggling to balance addressing cost pressures with attracting and retaining top talent in a competitive market. The rising cost of living is driving employee demand for higher pay increases in FY24/25, with 86% of employers planning to raise salaries in their next review, according to Hays, a recruitment and workforce solutions specialist.
The Hays Salary Guide, Australia’s largest and most comprehensive report on salary and recruitment trends, is now in its 45th year. Based on a survey of over 15,000 respondents, it covers more than 1,270 roles across 26 industries. The report found that the cost of living is the primary reason employees are considering leaving their current jobs for higher salaries. Additionally, there has been a 750% increase in the consideration of cost of living by employers when determining pay raises, and 77% of employees are either looking or planning to look for a new job within the next 12 months.
“The mismatch between what employees want and what employers are willing to offer will play out over the next year, with almost 40 per cent of employees being dissatisfied with their salaries and 73 per cent saying it doesn’t reflect their individual performance,” Hays CEO APAC, Matthew Dickason said. We are seeing a trend of employees expecting higher salary increases over the past three Salary Guide reports. In 2019, 67 per cent of employees expected a pay rise of less than three per cent. In just five years the pendulum has swung to 61 per cent of employees expecting a pay increase of more than 3 per cent.”
The salary increase landscape: Employer intentions vs employee expectations
| Value of salary increase | Salary increase employers intend to pay | Salary increase employees expect |
| 0% | 13% | 15% |
| < 3% | 37% | 24% |
| 3-6% | 38% | 31% |
| 6-10% | 8% | 18% |
| >10% | 4% | 12% |
“When determining the value of a pay rise, employers’ considerations have changed dramatically over the past 12 months, reflecting the current cost of living crisis and the new pay transparency laws. Individual performance remains the number one consideration for a pay increase (84 per cent). Other factors employers will consider include benchmarking for the role, responsibilities (74 per cent), expertise (53 per cent) and the organisation’s performance (50 per cent). This raises the importance of employee retention with the top three drivers of employees looking for a new role including rising cost of living (64 per cent), low prospect of promotion (60 per cent) and poor management and culture (59 per cent). Organisations with set pay structures have also increased salaries significantly from the previous year, indicating that businesses have addressed potential conflicts with the removal of the pay secrecy clause.
The year for action: business activity to increase
“The report also found businesses are becoming more optimistic with 64 per cent believing that business activity will increase in the year ahead, up from 55 per cent last year,” Mr Dickason said.
“While 54 per cent of organisations have also reported that productivity has increased either moderately (36 per cent) or significantly (18 per cent).
“Despite plans to increase business activity, their intention to add to the permanent headcount has risen by only three per cent from last year. However, employers’ intention to increase temporary workers has jumped seven per cent from last year.
For employers, the extremes of the past few years are stabilising, this leaves open the opportunity for the bold to take action now and gain the first mover’s advantage.”
Skills shortage is easing
Skills shortages have not gone away with 24 per cent of employers indicating that they have intensified over the past 12 months. However, there has been a 20 per cent reduction in employers reporting moderate or extreme skills shortages.
“This year, businesses believed that the skills shortages had impacted their workplace with increased workloads (64 per cent), lower productivity (62 per cent) and employee engagement and morale (51 per cent),” Mr Dickason said.
“Extreme skill shortages of the past year have also eased with 47 per cent of businesses reporting no skills shortage, or minor ones, and one in five reporting that skills shortages have eased.
“The construction industry reported the highest level of easing skills shortage. However, education, defence and architecture are facing extreme skills shortages, with 49 per cent reporting that it will impact the effective operation of the business, down from a high of 60 per cent last year.
“The extremes of the past few years are stabilising. Skills shortages are easing, inflation is softening and productivity is up,” Mr Dickason said. “There is a sense of optimism, yet organisations are still cautious.
“Businesses need to take their foot off the brake and realise the advantages of our new highly skilled and adaptable workforce to drive growth. This is the year for action.”
Top five strategies for employers to increase productivity
1. Effective communication (63 per cent)
2. Effective collaboration (50 per cent)
3. Aligning individual objectives with organisation objectives (51 per cent)
4. Streamlining processes (47 per cent)
5. Fostering a sense of purpose (46 per cent)
“Productivity is obviously top of mind for employers – there is reason to believe we have the tools we need to accelerate productivity, and that those measures are already having an impact.
“Organisations reported that they believe the four main blockers to productivity included: a lack of resources or tools, poor communication, poor processes and ineffective leadership,” Mr Dickason said.
“The workforce’s appetite to learn and continue to develop technical and digital skills is at an all-time high. Businesses should take advantage of this eagerness to upskill to avoid losing key talent, with 42 per cent of employees saying training programs would help to increase their productivity.”
The hybrid debate is over
Hybrid working is here to stay with 75 per cent of employees now working in a hybrid or remote arrangement with 92 per cent of employees citing hybrid working as their preferred way of working.
Employers agree, with 74 per cent of employers indicating they have established their onsite versus remote split and will not be changing it.
The report found 46 per employees spent either 2/3 days on site and 2/3 days remote, 19 per cent spent one day remote and four days onsite and 26 per cent of employees used a flexible hybrid method based on employee and business needs.
“If working from home is here to stay, then many organisations will need to look more deeply at the processes and means of communication required for the future,” Mr Dickason said.
Advice for employers
“Salary is always a top priority for employees with 71 per cent saying that a pay rise is the most important factor to their career in the year ahead, but benefits such as learning and development of technical skills (63 per cent) and being able to work flexibly (54 per cent) are also important factors,” Mr Dickason said.
“Brand reputation, DE&I and ESG policies are important strategies organisations should highlight to attract the right talent, and this year’s survey data further highlights their significance. Businesses that are trusted attract the top talent, and employees that trust their employers stay with them longer.
“People are at the heart of a great business – even with great AI and technology available, a skilled workforce with a strong culture is essential to the success of your organisation.”
Advice for professionals
“With skills in demand you still have bargaining power, but it’s important to avoid pricing yourself out of consideration. Yes, employers are investing in salary increases, but margins remain tight. The commercial reality dictates that salary increases can only stretch so far,” Mr Dickason said.
“Consider the whole package when you negotiate a new job or your next pay rise. Think about what you’d really value and what could make a difference to your life and career long-term.”
Download your copy of the Hays Salary Guide.
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