National Salary Survey 2007 - Large Company Survey findings

Staff churn up despite pay hikes

In the grip of a sustained national skills shortage, Australia's large companies are footing the bill for ever-increasing pay hikes, with annual salaries rising by 4.6 per cent in the 2006/2007 year, up from 4.4 per cent in the previous year and 4.0 per cent in 2003/2004, according to the nation's leading salary survey.

Large companies in the resource boom states of Western Australia and Queensland have been hardest hit with salary increases substantially outpacing the national average at 6.8 per cent and 5.1 per cent respectively.

The Australian Institute of Management's (AIM) National Salary Survey 2007 was based on the responses of 779 companies, comprising large companies (561 contributors) and small companies (218 contributors).

The Survey revealed further negative fallout from the ongoing skills shortfall, with voluntary staff turnover rates at 12.6 per cent for 2006/2007, up from 11.5 per cent in the previous year and significantly up from the 9.9 per cent rate in the 2003/2004 year.

As indicated in the Survey, the top reason for staff resignations, cited by 60.9 per cent of large company employees, was to pursue career progression or promotion opportunities.

“This raises the question of why organisations are not doing more to develop career pathways for their staff,” said Dr Jennifer Alexander, Chief Executive, AIM NSW & ACT.

“Employers still believe that the key to staff retention is improving pay and financial benefits, but this alone is clearly not solving the problem. More needs to be done on training and career development to convince staff that the organisation cares about and can meet their career aspirations,” added Dr Alexander.

Indeed, the Survey indicated that in 2006/2007, only 52.3 per cent of large companies have a dedicated training budget while only 54.5 per cent of salaried staff in large companies have a development plan in place.

“In the current climate, staff need to be assured that they have a future with the organisation, so greater investment in training and career development should be a priority,” said Dr Alexander.

Not only has the tight job market pushed up salaries in all states, it has also caused employers to look offshore for skilled staff.

According to the survey, 34 per cent of large companies already employ staff from overseas with as many as 63.3 per cent indicating they would be willing to employ overseas candidates if needed to cover a skills shortfall. Currently, the most common source of migrant labour for large companies is Asia (48 per cent) and the United Kingdom (44 per cent), with the new arrivals primarily filling construction and engineering roles.

Buoyant employment conditions also appear to have slowed take-up of the new WorkChoices regime with only 47 per cent of large companies intending to revise their HR and pay policies as a result.

On an industry-specific front, the Survey recorded the highest salary increases for the Mining/Quarrying industry at 6.1 per cent, followed by the Banking/Finance and Construction/Engineering industries at 5.7 and 5.6 per cent respectively.

“The Mining/Quarrying industry has dominated national pay scales this year on the back of a thriving resources sector and our Survey shows this trend is set to continue. According to our forecasts, pay rises in this industry will continue to lead the pack next year at 6.2 per cent, signaling ongoing optimism for growth in the sector,” said Dr Alexander.

Going forward, the employment outlook remains positive with only 8.8 per cent of large companies expecting a decrease in permanent staff levels over the next 12 months, down from 10.7 percent in the previous year, while over one-half of large companies (50.8 per cent) expect permanent staff numbers to increase.

Overall, large employers are also striving to improve non-salary benefits with a greater proportion of large companies absorbing the cost of fringe benefits tax (FBT) on behalf of staff across all job levels. And among large companies that provide company vehicles, there has been a notable rise, again across all job levels, in the proportion of organisations that offer these vehicles at no cost to employees.

Despite this, the proportion of large companies making additional superannuation contributions for employees above the Superannuation Guarantee Contribution (SGC) requirement fell by 4.7 per cent from the previous year, to 39.1 per cent.

“And when you consider that compared to last year, a lower proportion of staff below senior management level are making additional salary sacrifice payments toward their own super, you quickly get the picture that Australians may not be providing adequately for their retirement,” said Dr Alexander.

“There is clearly a need for an education campaign to ensure all staff understand that if they are to have a sufficient nest egg for the future, consistent super payments above the SGC rate should be made throughout their working life and not just at the later stages in their career,” said Dr Alexander.

Other highlights of the 2007 Survey of large companies include:

• The highest annual salary movement by job level, was recorded for Senior Executives (5.1 per cent) while Salaried Staff had the lowest average salary rise (4.2 per cent). According to forecasts, Senior Executives will continue to receive the highest pay rises in the year ahead at 5.0 per cent, while Professional/Technical and Salaried Staff will have the lowest increases at 4.3 per cent and 4.4 per cent, respectively
• On an industry-basis, the lowest salary increases were recorded for the Electronics/IT industry (3.2 per cent) followed by Retail (3.6 per cent) and Manufacturing/Food/Beverage/Tobacco (4.0 per cent) with the latter suffering the largest decline of all, down 1.1 per cent from the previous year. Forecasts for 2007/2008 again record the lowest rises for the Electronic/IT industry (3.2 per cent), followed by Agriculture/Forestry/Fishing/Farming (3.3 per cent). Industries recording the highest forecast rises for 2007/2008 are Mining/Quarrying (6.2 per cent), Business/Professional Services (5.7 per cent) and Construction/Engineering (5.5 per cent)
• By job family, the highest salary increase was recorded for General Management positions (4.8 per cent) and the lowest, for the Manufacturing/Supply/Distribution and Administration job families, at 4.1 per cent. The greatest improvement in forecast salary movements since those reported in last year's survey are for the Human Resources, Information Technology and Manufacturing/Supply/Distribution job families – all 0.4 per cent higher than previous year's forecasts
• New South Wales/Australian Capital Territory recorded the lowest salary rise of 4.1 per cent, followed by South Australia/Northern Territory (4.3 per cent), Victoria/Tasmania (4.6 per cent) and Queensland (5.1 per cent). Western Australia (WA) registered the highest salary rise of 6.8 per cent. Salary forecasts for the year ahead predict the highest rises for QLD (5.7 per cent), followed by WA (5.3 per cent), VIC/TAS (4.5 per cent), SA/NT (4.3 per cent) and NSW/ACT (4.2 per cent).

About the National Salary Survey 2007

A total of 779 private and publicly listed companies from a broad range of industries contributed to the 43rd Australian Institute of Management's National Salary Survey 2007. The Large Company (more than $10 million turnover) edition reports the data of 561 organisations, and the Small Company ($2 million - $10 million turnover) reports from 218. For more information go to www.aimsurveys.com.au.

For further information please contact: Vivienne Hardy at CallidusPR on (02) 9283 4111 or 0411 208 951 or Su Lin Ho at CallidusPR on (02) 9283 4111 or 0421 616 617.