Big business signals plans for wage growth

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Australian companies have signalled intentions to increase salaries.

Some of Australia’s biggest companies have signalled intentions to increase salaries this year in an effort to fill positions for core functions and address mounting tensions over salary expectations. These findings are good news for workers at a time when national wage growth is sluggish.

The findings are from the annual American Express Global Business and Spending Outlook.  The annual global survey, now in its 11th year, explores sentiment of CFOs and senior finance executives from companies with an annual turnover of more than US$500 million.

According to Australian respondents, the real struggle lies in their ability to find talent and then, prevent them from being lured away by competitors.  Half identify at least five core functions they’re currently struggling to fill, and this difficulty limits their ability to do business. These functions include:

  • Management (70%)
  • Production and operations (53%)
  • Administration and support (53%)
  • IT (50%)
  • HR (50%)

Close to two thirds (63%) admitted their best strategy for staff recruitment and retention will be to raise wages this year.  This puts Australian companies ahead of markets like China, Japan, Hong Kong, the UK and US and well ahead of the global average of 37%.

Measures in addition to wage increases being considered by CFOs include improving retirement benefits (57%), allowing flexible work arrangements (50%) and improving the physical working environment (40%).

The findings from American Express come as welcome news for Australian workers with the Australian Bureau of Statistics latest wage growth figures showing hourly wage rates grew by just 2.1% in the year to December 2017, well below the 4% plus levels seen before the Global Financial Crisis.

When separating out public and private sector employees, private sector workers fared even worse with wages rising by just 1.9%.  With inflation running at 1.9% over the same period, it meant that real wage growth for many Australian workers amounted to zero.

Adapting to a younger workforce

The American Express survey reveals generational tension within some of Australia’s largest companies, with mixed salary expectations between older and younger workers. In fact this was the second most frequently cited cause of intergenerational workplace conflict – behind the use of technology.
According to Barry Fletcher, American Express Global Commercial Services Vice President, in a competitive market and with the rising cost of living, companies need to ensure they’re putting their best foot forward to attract quality talent.

“While money is an important factor for any job seeker it’s not the be all and end all.  Expectations are changing and we are increasingly seeing younger workers place high importance on things like an inclusive workplace culture, a company’s CSR commitment, approach to flexibility and use of technology.  The key is to look at the entire package you’re offering and how it stacks up with others.

“Big business now employs one in five workers aged under 30 according to our survey so the emphasis must be on meeting changing employee expectations.  It’s critical if you want to keep staff engaged and loyal.”

Skilled technology workers a must

A hiring focus for companies over the short-term will be centered on technology.  Around a quarter of Australian respondents (27%) said that over the next five years technology will be a major cause of disruption to the competitive dynamics of their industry and the operation and performance of their organisation – a slightly higher result than the global average.

Among Australian respondents, 77% said they are “kept up at night” by the commercial prospects of artificial intelligence (AI), a class of technology they say is likely to have the greatest impact in the years ahead.  This is supported by a Tractica report which shows business investment in AI was a US$202.5 million market in 2015, but is tipped to hit US$11.1 billion by 2024.

And 80% of Australian financial executives said they’re investing in AI capabilities, signalling their belief that AI has the potential to fuel growth and performance. Only respondents in China (87%) and Japan (83%) said they’re investing more in this area.

“While significant emphasis is being placed on technology improvements, and rightly so, equally critical is having the right people in place to navigate businesses into the future” said Fletcher.

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