Average pay rise 4% in 2010-11, but SMEs warned to nurture employee loyalty with non-financial benefits

Australian businesses paid average pay rises of 4% in the past year with workers in the mining and construction industries seeing the biggest rises, although retail workers are struggling with an average rise of just 3.1%, new Mercer research reveals.

But Mercer principal Anthony Shippard says the discrepancy between the mining sector and other industries means talent may drain from the east coast, warning businesses to ensure they build a culture of loyalty that isn’t just attached to financial reward.

“It’s all very well to say that businesses shouldn’t worry about it because they’re on the east coast, but key staff could be pulled away at the lure of a greater reward,” he says.

“Businesses need to look at retaining employee loyalty in situations that are not just motivated by finances.”

The report points out that despite macroeconomic concerns of a multi-speed economy, most industries have seen remuneration increase roughly in line with every other sector – suggesting employers are attempting to remain competitive in an environment with low unemployment.

That differs from the previous year, when more sectors were out of sync as employers offered more non-monetary benefits.

“There was some consistency in the 2009-10 year, with 70% of people around that 4% mark. But there were some industries such as hospitality that were lagging behind.”

“Businesses in those industries after the financial crisis just didn’t have the budgets for those kind of rises. So it’s taken another yearfor stability to return in the economy and for pay rates to increase.”

The biggest this year was in the construction and engineering sector, with a 6% rise up from 5% last year, with energy following at 5.2%. But the hospitality and recreation, property, manufacturing, pharmaceutical, professional services, finance and educations sectors all recorded rises of 4%.

Some industries were slower. The high-tech industry saw pay rises at just 3.8% – although that’s a jump from just 0.1% last year – and FMCG saw rises of 3.5%, down from 4.4%.

Retail was the slowest, with a rise of just 3.1%, although Shippard says conditions may have improved since the review was compiled.

“You’re able to see the conditions in retail over the past three months, and things are picking up a fair amount,” he says.

“I’d be confident in saying retail was absolutely moving a little bit quicker again, but conditions have been slower based on what we’ve seen in the past few months.”

But while the results suggest more businesses are confident in offering pay rises, Shippard says the figures are also indicative of a bigger problem – a talent drain to the west coast, where pay rises have now exceeded the average for two years in a row.

“The message here is that the sectors that are really pushing the envelope, mining and resources, still requiring more labour and more talent in order to meet demand for their projects.”

Businesses, including SMEs, he says, need to focus on creating loyalty and rewards apart from financial incentives in order to retain them if alternatives are presented.

“These companies can’t afford to keep up with the mining industry. So if you’re looking at pay, the 4% is good and you can be confident in thinking you’re paying with the market.”

“But I would also think firms need to start looking at some kind of short-term incentive structure to differentiate from their pay.”