A few in-demand workers may find an increase of more than 6 per cent.
There will be more job opportunities this year and the bulk of salaried workers can expect a raise, albeit a small one, thanks to strong economic growth and employer confidence, according to the Hays Salary Guide.
The guide, based on a survey of 451 New Zealand employers, representing 374,007 staff, says 23 per cent of employees can expect a salary increase of 3 per cent or more at their next review and 68 per cent will receive a smaller increase.
Employers are planning stepping up their hiring and creating more permanent jobs in the year ahead, said Hays.
"Employers have a positive outlook for the coming year, with 46 per cent expecting to increase permanent headcount and 76 per cent expecting business activity to rise," said Jason Walker, managing director of Hays in New Zealand.
Of those employers expecting staff levels to increase, an overwhelming 90 per cent will hire full-time permanent staff, 29 per cent will increase their use of temporary staff and contractors, 17 per cent will employ part-time staff and 15 per cent will employ casual staff.
Last year, 61 per cent of employers in New Zealand said they would increase salaries by less than 3 per cent, while 28 per cent gave larger increases.
For New Zealanders with half an eye on the Australian job market, the prospects are slightly worse.
More employers in New Zealand than in Australia gave salary increases last year, according to Nick Deligiannis, managing director of Hays in Australia and New Zealand.
"Looking ahead, more employers in New Zealand will give salary increases than in Australia; in Australia, 13 per cent of employers have no plans to raise salaries when they next review, compared to 9 per cent in New Zealand," he said.
And in Australia, 65 per cent of employers intend to increase salaries in their next review by less than 3 per cent, compared with 68 per cent in New Zealand.
In New Zealand, a gap exists between the salary rise expectations of employees and planned employer salary increases, with more than 40 per cent of employees expecting a salary increase of less than 3 per cent, 31 per cent expecting a boost of between 3 and 6 per cent and 12 per cent expecting 6 per cent or more.
Benefits such as private health insurance, above mandatory superannuation and bonuses can help close this distance, said Hays.
Of the employers interviewed, 67 per cent offer flexible salary packaging and they find the most popular benefits to be flexible working hours, flexplace, part-time employment and flexible leave options. Career breaks and phased retirement are also well-received.
Promotion is another route to help reward good workers.
"Career progression opportunities are very important when it comes to employee recognition and retention. Staff want to feel valued and supported and receive training and development opportunities. The top talent, in particular, always want to expand their skills base and keep motivated, so mapping out career paths and offering training and development opportunities are important," said Walker.
Mentorships or additional duties can be effective too, he said.
Importantly, how should employers be communicating the likelihood and range of salary increases to staff?
"The best policy is to be honest. New Zealanders should not expect big salary increases from their employers this year," said Walker.
Employers should openly communicate the company's performance and salary increase expectations, and focus on the benefits that they are offering instead of higher salary increases, he said.
Of course changing jobs can lead to a salary increase but this is not assured.
"If candidates wish to put forward a strong case for a higher salary with a prospective employer they'll need to be able to demonstrate the value they'll bring to the business and how they can contribute something useful beyond the job description," said Walker.
He sees some potential for talent bidding wars in certain sectors happening in the coming months.
"As employers have a positive outlook for the coming year, with 46 per cent expecting to increase permanent headcount and 76 per cent expecting business activity to rise, we do expect competition for good candidates to heat up."
But just 4 per cent of employers intend to increase salaries by 6 per cent or more, so the scope for bidding wars is limited.
Areas where bidding wars are most likely to occur are where shortages are being reported, for instance in accountancy and finance as well as IT and technical professions at the entry to mid-management level. Also in short supply at this level are operations, engineering and sales and marketing professionals. At senior management, operations, technical, engineering and IT professionals are difficult to find.