The past two years have seen a significant rise in salaries throughout New Zealand and no sector has been untouched. Whilst this has been welcomed by the workforce, most employers have found themselves struggling to keep up with the significant and continual increases the market has demanded. With low unemployment, low immigration numbers, and a tight employment market, it is still very much an employee-led market.
According to data from Statistics New Zealand, median weekly earnings from wages and salaries rose by 8.8 percent to $1,189 in the year to the June 2022 quarter.
The 8.8 percent annual increase in median weekly earnings from wages and salaries was the largest annual increase since the series began in 1998. My sense is that they have risen again since then.
The rise in salaries is due to a number of factors, including a growing economy, low unemployment, and government policies aimed at improving living standards for New Zealanders.
One of the primary reasons for the rise in salaries is the strong economic growth that New Zealand experienced post-Covid. Despite the challenges posed by the Covid-19 pandemic, the country’s economy remained resilient.
The growth was driven by a number of factors, including a robust construction sector, strong domestic demand, and the government’s support measures such as the wage subsidy program. Simply put, the demand has been high and the supply low.
With fewer jobseekers than available jobs, workers are put into a stronger bargaining position when it comes to negotiating salaries and as a result employers are competing for talent, leading to higher salaries to attract and retain employees.
Government policies aimed at improving living standards for New Zealanders have also played a role in the rise in salaries.
For most employers, at some point this has been problematic. Keeping up with the steep rise in inflation which has been reflected in salaries, to losing staff to competitors who are paying more, getting into a bidding war when making offers or the problem of pay relativity within a workforce.
Employers are looking at more creative ways to ‘add-value’ to packages without necessarily paying outside of the base salary range.
With cost of living at an all-time high, there is no doubt that while cash in the hand is what employees are needing, a benefits package can sweeten the offer significantly.
This is referred to as a total remuneration approach and refers to not only the base salary an employee receives but also takes into account other forms of compensation such as bonuses, commissions, allowances and benefits.
For example, benefits may include, a company car with full use, health insurances and paid time off.
A total remuneration package is designed to provide a comprehensive compensation structure that recognises the value of the employee’s contribution to the organisation.
It is often used by employers as a way to attract and retain talented employees by offering a competitive and attractive compensation package that goes beyond just a basic salary or wage.
Total remuneration packages can be structured in different ways, depending on the needs and goals of the employer and the preferences of the employee.
With the commentary around the looming economic downturn, my feeling is that we will see some stabilisation in the employment market.
However, as a nation we are still have a low level of immigration and while unemployment may rise in the months to come, I think we are still going to experience a candidate short market in the foreseeable future.
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