That’s one key finding from our recently released Hays Salary Guide FY21/22.
For the latest iteration of our salary guide, we spoke to almost 3,500 organisations (representing over 8.8 million employees) across Australia and New Zealand. They shared their views on salary policy, hiring intentions and recruitment trends.
We also surveyed over 3,800 skilled professionals about their salary expectations, career plans and current priorities.
Their feedback shows that while more skilled professionals will receive a pay rise in their next review (67% of employers will increase salaries, compared with 45% last year), overall salary increases are set to sit well below the expectations of employees.
Only 12% of employers intend to increase salaries by 3% or more. Most employers raising salaries intend to limit their increase to 3% or less.
That’s news likely to disappoint a significant number of employees, since 67% believe a salary increase of 3% or more would better reflect their individual performance. They say the efforts they have made to help their employers navigate the pandemic and restore growth justify a higher salary increase.
There’s no doubt that employers should expect and prepare for some challenging salary discussions.
To protect engagement and turnover, our advice is to communicate sensitively with employees about salary increases. More so than ever, when budgets are tight it’s critical to carefully manage salary expectations as part of your retention and engagement strategy.
Here we present our advice on how to approach the salary expectation gap.
Our findings show that 39% of skilled professionals are dissatisfied with their current salary. This is primarily because they believe it inadequately reflects their individual performance over the past year.
Given this, it’s important to have frank and transparent conversations with employees about your organisation’s salary policy. Build understanding with your employees by contextualising your grounds for the salaries you set.
Remember to talk to your employees about your organisation’s performance, budget and the wider economic climate. After all, your employees are more likely to accept your salary offer if they understand the rationale and context behind it.
The salary increase you offer employees can be more attractive if you frame it as one element (admittedly, major) within an overall remuneration package. We suggest you emphasise the overall features of your remuneration package as part of a full-range conversation with employees about their salaries.
As this year’s Hays Salary Guide shows, a wide range of benefits are now on offer across Australian workplaces. According to our survey, the top benefits employees want include:
Think of how your organisation delivers on all these benefits ahead of salary discussions with your employees. Remember, offering additional benefits is one key way to help close the salary expectation gap.
If your employees are expecting more salary than you can offer them after their next review, you could also consider the merits of providing them with greater flexibility.
Our research shows flexibility is the number one benefit skilled professionals are seeking at work today. Remember, 79% of employees want regular flexible working practices, including flexible work hours, work location and work practices.
With remote work and hybrid models of work becoming more common since the pandemic began, it’s no surprise that employees are developing new appreciations for the role flexible work practices can play in their lives. Employers who revert back to the rigid work structures of pre-pandemic days might find themselves in greater conflict with employees in the future.
So, are you able to offer employees additional flexibility? This does not only involve working from home. Compressed work weeks, staggered start and finish times, job sharing and part-time work arrangements are examples of other common flexible working arrangements.
Interestingly, a FlexJobs survey found that more than one quarter of respondents would take a 10-20% pay cut in exchange for flexible work. This means, if you can accommodate it, additional flexible working could help you manage the salary expectation gap.
Although it looks like employers and employees might be at odds regarding salaries in the coming year, organisations still have plenty of scope to negotiate outcomes both parties are satisfied with.
So, before sitting down for salary conversations with your staff this year, consider what additional options you could offer to help align expectations.
Nick Deligiannis, Managing Director, began working at Hays in 1993 and since then he has held a variety of consulting and management roles across the business. In 2004 he was appointed to the Hays Board of Directors. He was made Managing Director of Australia and New Zealand in 2012.
Prior to joining Hays, he had a background in human resource management and marketing, and has formal qualifications in Psychology.
Follow Nick on LinkedIn
Are you in line for a pay rise this year?
How to manage a salary expectation gap
Why it's a great time to look for a new job
Why teamwork is important in the workplace
What to ask for in lieu of a pay rise
47% of employers will expand headcount
Employee retention: What's your game?
How to manage a hybrid team long-term
Responsibility for diversity in the workplace
How to answer difficult interview questions
8 interview questions for teaching position
Don't meet all the requirements - 3 reasons to apply
How to upskill when working from home
View all blogs