Australian organisations are losing employees to competitors because pay growth has fallen to a 12-year low.
Almost half (49 per cent) of organisations expect permanent employee numbers to remain the same in the coming year, up from 36.4 per cent last year.
Six in 10 employees leaving an organisation are moving sideways into a similar role and more than four out of 10 employees say the reason they are leaving is due to money.
These are the findings of this year's Australian Institute of Management (AIM) National Salary Survey, which is in its 51st year.
The survey is based on the responses of more than 557 organisations across Australia, covering more than 25,000 employees and 282 job roles.
In the 2015 survey, the average salary movement is +3.4 per cent, which is lower than the +3.6 per cent recorded in 2014 and the lowest since 2003.
There was an increase in some sectors, such as IT and business and professional services. Employers do not expect the situation to improve, forecasting the average salary to drop a further 0.2 percentage points (pp) next year to +3.2 per cent.
Acting CEO of AIM Group, Tony Gleeson, said wavering business confidence and a tighter labour market means organisations have their hands tied when it comes to pay rises, and organisations need to be more creative to retain employees.
“Lower pay movements across the board should not be the reason why organisations are losing their employees,” Gleeson said.
“Employers need to be creative when looking for ways to keep their people. When you consider how expensive losing employees can be, along with the loss of corporate knowledge and disruption to clients and employees, this should be a real focus for organisations in the year ahead."
While there has been an increase in the number of organisations offering flexible work arrangements, this year’s survey highlights that fewer organisations offered variable rewards schemes to employees across all job levels.
“Bonus schemes, profit sharing, performance or project-based pay are types of variable schemes that are low-risk options with a huge upside for employees and productivity overall,” Gleeson said.
Gleeson said the survey finds the top two reasons why employees leave to take on another job, are for a new challenge (80.4 per cent), and limited career advancement opportunities (55.3 per cent), followed by insufficient financial reward (44.7 per cent) and conflict with their manager or other employees (26.6 per cent).
“The financial component of work is only part of overall job satisfaction. Employees need to feel connected to an organisation, and have the opportunity to grow and develop,” Gleeson said. The survey highlights that of the top five human resources challenges posing the greatest risk to organisations, the need to develop effective leaders comes out at number one.
“The good news is more than half of respondents said if companies get leadership development right, then this could supercharge the business,” Gleeson said.
Skill shortages
A weaker employment market means employers are looking offshore less to fill general skills gaps. Last year 42.9 per cent of companies reported difficulty recruiting some employees due to skill shortages, however, only 35.2 per cent per cent of organisations reported this difficulty this year.
However, there are still challenges for employers when recruiting for some jobs, most commonly professional technical roles and sales and marketing.
The survey shows migrant workers are most commonly employed to fill professional technical positions (84.4 per cent) with the highest percentage being from UK (54.5per cent), Europe (excl. UK) (41.5 per cent), Asia (excluding China) (39.8 per cent), South Africa (26.8 per cent), North America (22.8 per cent), New Zealand (19.5 per cent) and China (12.2 per cent).
“A third of people employed to professional technical and sales and marketing roles are migrants, reflecting the demand from organisations for specialist skills, mostly for project work," he said.
"The high percentage of migrants from Europe also possibly reflects the desire of employees to leave the economic volatility of Europe for work opportunities in Australia,” Gleeson said. Employee numbers stabilising employers are much more positive about the number of permanent employees in the or coming year.
In 2014, one in five (20.5 per c ent) organisations said they expect a decrease in permanent employees numbers, compared to just one in ten (10.9 per cemt) in the 2015 survey.
Half of organisations (49 per cent) expect permanent employees numbers to remain the same in the coming year, up from 36.4 per cent last year. Half of the organisations surveyed believe employee numbers will remain the same – a significant improvement on last year.
This sentiment is good news for Australian organisations, and a sign we may be seeing some stabilisation in the Australian workforce in the coming year,” Gleeson said. All states and territories except Victoria and Tasmania expect lower average salary movements in the coming year. Western Australia is experiencing the highest growth but anticipates the highest drop over the coming year.