Key Points:

The rising costs of living are prompting calls for pay increases, but employers say high prices are hitting businesses too and workers will have to push hard for a raise.

Employees are now demanding and receiving compensation for higher inflation, says Westpac chief economist Brendan O'Donovan, who predicts a "miniature wage-price spiral" as salary pressure continues.

Salaries have been picking up pace over the past couple of years and are set to rise even more rapidly over the next 12 months.

O'Donovan is forecasting a 1.1 per cent increase in the mean salary this quarter and expects the labour cost index to reach a record 3.6 per cent this year.

However, employees will need to present a business case for a pay rise as firms become more cost-conscious.

Business New Zealand chief executive Phil O'Reilly says price increases mean companies have less capacity to increase pay.

Alasdair Thompson, Employers and Manufacturers Association chief executive, says it's hard to get business credit from banks now, interest rates are high, and the high exchange rate is eating into exporters' profits. "So if an employee says, 'The cost of living has risen, give me more money,' that's not going to work."

The key to gaining a salary increase is understanding what the benefit to the employer will be. Don't look like an "increase beggar", says Auckland Chamber of Commerce chief executive Michael Barnett. "Show the value you bring over and above what someone else might offer, your point of difference from others in the market."

Frog Recruitment director Jane Kennelly agrees: "It is never good to just state you want a salary increase - you need to be able to demonstrate why you deserve a pay rise."

To support their case, employees need to consider how they can increase their productivity and the success of the business and outline their strategies to achieve this, Thompson says. Employees must be able to tangibly link the reason for seeking a pay rise to something that is going to benefit the organisation.

Julie Cressey, of Madison Recruitment, says knowing your impact on productivity, profitability and sustainability is key, as well as understanding how you are measured in the role.

Articulate the future value you can bring to the role through continuing to develop professionally, Bartlett says, and point out what you have done to enhance your skills and be able to show you have excelled in key aspects.

Proactive employees are cherished inside organisations. Workers should be specific about extra tasks or areas of responsibility they've added to their position, and their accomplishments - especially revenue earned or saved for the organisation, Kennelly says.

Examples include positive customer feedback, special projects taken on over and above the position description and delivered well, systems and procedures implemented that have created efficiency in the organisation, and working extra hours.

If an employee has good skills, drive and commitment, then they've got something to sell and can put that to their employer, Thompson says.

To understand their worth, Annemarie Duff, of SEEK Limited, recommends employees investigate what other employers are offering in similar jobs. And Kennelly says there has been an increase in people canvassing her agency to research their market worth this year.

Advise your employer you want to discuss a salary increase when preparing for pay rise negotiations, and have the discussion face to face, says Kennelly. Never bring up the topic in a social situation and maintain professional decorum. A good tip is to pretend you're negotiating on behalf of someone else. Present supporting documentation, such as a list of key achievements.

An employee should know what increase they want and not be drawn into "jockeying for position", Kennelly says, but also be aware this isn't a situation where the employer is left with no option. Threatening to leave can leave a sour taste in an employer's mouth. Be firm in negotiating, but don't get emotional. Instead, have a good attitude and be confident.

An employer likes to hear you are committed to the firm - so express it, adds Thompson.

If an employer turns down a request for a salary increase, ask why they said no because the answer could indicate whether or not to stay in the organisation. Explore other opportunities available and then make the decision.

Ultimately, the biggest saving businesses can make is retaining their current, highly productive staff. The cost of going back to market, having that role vacant and filling it has a huge bottom-line impact on businesses.

Barnett estimates the cost to an employer of replacing an employee is probably more than 125 per cent of their salary. Cressey frequently hears of "huge" counter offers being made to prevent staff accepting employment offers from other organisations in the current market.


Each year the Auckland Chamber of Commerce surveys members to find out what employees are being paid in the region.

The membership database predominantly comprises Small and Medium Enterprises (companies with less than 10 employees). There were more than 2500 responses last year.

Popular top earners:

CEO / MD - $126,422.

General manager - $120,827.

ICT manager - $104,363.

National sales manager - $109,145.

HR manager - $99,523.

Finance manager - $98,645.

Marketing manager - $98,277.

These figures are averages including allowances such as bonuses and commissions, vehicles, and any other income subject to fringe benefit tax such as medical insurance, low interest loans or superannuation.


Office manager Anna has worked for a professional business services firm for three years.

As often happens, her role has developed into a broad collection of tasks and functions.

They include supplier management for the organisation's technology and telephone systems.

Recently, Anna felt it was time to broach the topic of a pay rise.

She says she loves her job, but "I just wanted to feel I was getting the right money".

Anna was uncomfortable asking for a pay increase. "I was worried my boss might say 'no', because reviews had been happening annually." However, she was aware that her position was diverse, more time was needed to do the job, and that other people in the company had received increases.

Anna took a three-step approach to preparing for the conversation. She:

Called an agency to find out what other opportunities were out there to get an idea of comparable salaries.

Reviewed her initial job description to see what had changed as her role had developed, listing things she was doing that involved more responsibility.

Emailed her boss and asked for a meeting to discuss a pay rise. "I really felt I could not ask face to face."

Anna was nervous at the meeting, but she was successful in securing an increase. She says having reference information to hand really helped.

In this case she presented her job description together with a list of additional tasks she had taken on during her time in the role, plus a list of the achievements.

In one area, she was able to show that a small modification to the telephone system of about $1000 had saved the company a portion of a part-time salary.