4%+: The salary increase you should budget for

Average salaries rose 4.2% this year, as skills shortages continued to plague Australian employers, according to a new survey.

The Australian Institute of Management’s 48^th annual National Salary Survey, which included contributions from 511 private and public listed companies, recorded an overall 4.2% increase in salaries, up from a 4.1% increase last year.

It also highlighted the growing number of employers looking overseas for new employees.

In the survey, 61.9% of large companies recorded an increase in their overall staff numbers, up from 52.6% the year before.

Over two-thirds (70.2%) of large companies indicated that they were considering hiring staff from overseas in order to fill skills shortfalls, up from 65.5% last year.

The most desperate sectors are construction and engineering, marketing and sales, and manufacturing/supply and distribution.

Matt Drinan, AIM’s head of research, says there are a number of reasons for the push towards overseas recruitment including a tight overall labour market with specific skill shortages on top.

“The mining sector is creating a push in technical, construction and also sales jobs that didn’t exist here before.”

“The creation of new jobs by most companies, coupled with low unemployment numbers, has made it hard for all organisations to find enough local employees,” he says.

The salary increases lend weight to claims that Australia has a patchwork economy (see table below). Salaries increased the most in Western Australia, and the least in Victoria, where there have been a spate of job losses in recent months.

Pressure on Queensland’s wage bill is likely to reduce in the coming year, with an expected average salary increase of 3.7% in the next year, compared to an increase of 4.4% this year.

But Drinan warns the final increases could well be higher, as respondents are usually conservative in the forecasts.

Average salary increases by state

Source: AIM/LeadingCompany

Mining, business and utilities had the highest increases this year, as projected, while distribution, agriculture, and hospitality and recreation had the lowest (see table below).

Average salary increases by Industry

Source: AIM/LeadingCompany

Voluntary staff turnover is “continuing to plague companies” with a “comparatively high” average rate of 12.2% compared to previous years.

AIM recommends that leading companies increase benefits such as training and development opportunities as an effective way of retaining good employees.