Low inflation and a general lack of business confidence means plenty of people will go without a meaningful pay rise this year.
Jason Walker, managing director of Hays New Zealand, says pay packets won't get much heavier any time soon. The results of the company's annual salary survey shows that 64 per cent of the nation's employers are looking to increase salaries by less than 3 per cent — and most of those businesses are based in the North Island.
Almost two-thirds (64 per cent) of employers will give skilled professionals a pay rise of less than 3 per cent in their next review. According to the survey 22 per cent of North Island employers, compared to 18 per cent of South Island employers, will increase salaries between 3 and 6 per cent. Fewer professionals will receive an increase while the value of the increases will fall.
"There are not going to be any massive windfalls and the odd thing about it is the unemployment rate is down to just over 4 per cent so the old rules of supply and demand just aren't holding up," says Walker.
"There are skill shortages, all organisations are saying the impact on productivity is about getting the right talent on board, and yet it seems to be that every employer out there is really managing their firms without having to increase salaries."
Walker warns that people in low-skill jobs that could be done by a machine are on the back foot.
"If you are in a role that can be replaced by technology — and you start pushing for a salary increase — companies will start looking at technology to do repetitive tasks. That is a risk over the coming years with the minimum wage going up to $20 an hour.
"That's not to say I don't support the minimum wage, but as costs get higher at entry-level roles, organisations will look at alternatives to do
the work; whether that is off-shoring or increasing technology."
Walker says we are in a period of "unusually low business sentiment", a possible hangover from the GFC as companies remain cautious, and any confidence that started to form last year was extinguished by the change of government.
"We started to see things moving upwards until the last election — I think the result surprised everyone — and companies have been a little bit uncertain as to what the landscape is going to be," he says.
"I think businesses are looking for a little bit of direction [from government] so they can make some really important decisions around increasing headcount and put some incremental salary increases in place.
"If you look at the business confidence graphs coming out since December, you will see the sentiment has dropped significantly, which really doesn't correlate with some of the information we are seeing coming through economic data.
"Businesses are waiting to see what direction the Government will take, and we started to see that pick-up when the Government said it would spend $28 billion in the next 10 years in Auckland — that had a big impact on the Auckland market.
"And what comes with government investment is a lot more private investment and development. So we have seen a real improvement of confidence in Auckland.
"In Wellington we are seeing the government sectors start to recruit again. Christchurch is stable."
Walker says government decisions drive confidence, "and if you're not confident you don't recruit more staff, you don't grow".
"And we said this after the GFC; there needs to be a catalyst of confidence, as opposed to a catalyst for growth. When people are confident they move jobs, and when organisations are confident they hire more people; and salaries improve."
According to the Hays salary survey; 22 per cent of people who asked for a pay rise got it; 16 per cent asked and didn't get one and surprisingly the remaining 62 per cent didn't ask for a pay rise at all.
"It's quite a nerve-racking experience asking for a pay rise, but 55 per cent of employees are planning to ask for a one at their next pay review," says Walker.
"So asking for a pay rise is very much top of mind. Housing affordability, rent, rates, and fuel costs are going up. And there are some inflationary pressures; households are finding it harder to make ends meet."
He says people planning to ask the boss for a bit more need to get their ducks in a row, and tell their boss what they plan to discuss when asking for a meeting.
"It is best to ask for an official meeting, don't ambush your boss. You want them to be prepared so they come into that meeting with that mind set."
"If you really want to increase the odds of getting a pay rise, there are some techniques and some work you need to do before you sit down for that meeting.
"Some organisations' salaries are linked to a particular grade, and no matter how much you increase your responsibility you won't be paid above your grade. Therefore you need to understand how your own internal salary mechanism works.
"And the other part is to establish what the average salary is for someone doing your level of work in similar sized organisations — that type of information is on the Hays website among others."
Walker says that if your role has changed, that could be a valid argument for a pay rise; if not then you need to look back to establish the last time you got a pay increase.
"Because if you have been given a pay increase within the past 12 months it is unlikely you will get another increase until the next wage round.
"Finally, have a fall-back position. If the answer is 'no' today then try to set a date for when it can be discussed again. Or try to negotiate additional benefits such as more paid holiday time, additional workplace flexibility, health benefits, or car park. Also worth raising is some kind of KPI bonus linked to increased performance on either a quarterly, six-monthly or annual basis.
"Ideally you'll get a pay rise, but there is more than one way to increase your overall package."
■ The Hays survey was sent to 486 organisations in New Zealand representing more than 181,000 employees.