In 2023, Australian salary budgets surged beyond projections due to higher-than-expected employee turnover and high inflation. According to Mercer’s recently released ‘Australian Salary Outlook 2024’, employers who had planned a median base salary increase of 3 percent ahead of 2023 ended up with increases of 4 percent for the year.
According to Mercer, employee turnover rate in 2022 was the highest in 5 years at 21.4%. The average total turnover in the first half of 2023 was already at 12.3%.
The WPI for the September quarter saw the highest annual growth since March quarter 2009:
Wage Price Index (WPI) rose 1.3 percent in the September quarter 2023 (highest quarterly growth in the 26-year history of the WPI), and 4.0 percent for the year, according to seasonally adjusted data released by the Australian Bureau of Statistics (ABS).
Wage movement in the Private sector:
The report further stated that almost half of all jobs (49 percent) in the private sector recorded a wage movement, with the average hourly wage increase being 5.8 percent compared to 4.3 percent in September quarter, 2022. The main drivers were:
- Jobs paid by individual arrangement that received structured annual salary reviews.
- Scheduled increases from enterprise agreements.
- Award-reliant jobs linked to the Fair Work Commission Annual Wage Review or Aged Care Work Value case decisions.
- Labour market pressure.
- Inflation rises.
In last year’s Mercer survey, 22 percent of employers said they planned to increase salaries in line with or above inflation for 2023. In reality it was 27 percent, and in 2024 25 percent expect to do the same.
What’s in store for 2024 for Australia:
The salary increase forecast will be maintained in 2024.
Mercer Australian salary outlook 2024 forecasts Australia median merit salary increase of 3.5 percent.
Hiring plans to remain cautious.
With economic uncertainty looming and reports of global economic growth slowing in 2024, hiring plans for the next year are projected to remain cautious.
Australia’s unemployment rate expected to rise 4.5 percent by the end of 2024.
Australia’s unemployment rate, sitting at 3.7 percent at the end of 2023, is expected to rise to 4.5 percent by the end of 2024.
The surge in job mobility that we saw in 2022 and 2023 might be finally easing.
The scarcity of job opportunities and ongoing cost of living pressures will all lead to employees being more inclined to stay put in their roles and focus on career progression.
Inflation is expected to decrease to 3.5 percent by mid-2024.
By the end of 2024, inflation is projected to be 3.25 percent, and expected to decrease further to 3 percent by mid 2025, and 2.75 percent by the end of 2025. According to Mercer, 26 percent of the employers they surveyed do not plan to consider inflation into their 2024 salary increase budgets. This figure was at 14 percent in last year’s survey.
Hiring and retention challenges in 2024:
Hiring and retention will continue to remain a primary concern in 2024. A Mercer study states that 60 percent of organisations say they have difficulty hiring or retaining employees in certain roles. Australian respondents to Mercer’s ‘Total Remuneration Survey’, said roles in sales, marketing, and product management; engineering and science; IT, telecom and internet; and production and skilled trades were the most difficult to fill and retain.
LinkedIn, in its recent ‘Talent Trends Report’ says that compared to a year ago, most respondents to its 12-country Workforce Confidence Index have shown they are less confident in their prospective career progress. As seen in the graph below, Australia is lagging considerably in this aspect.
Source Global Talent Trends | LinkedIn Talent Solutions
The 2023 Skills Priority List Report from Jobs and Skills Australia shows that 36 percent of occupations were in national shortage in the country. And skills shortages among professional group occupations remained severe (48 percent in this category were in shortage).
Median merit salary increases in other APAC regions for 2024:
Salary budget trends within different industries for 2024:
The Mercer Australian Salary Outlook for 2024 anticipates robust salary budget increases across various industries, with most sectors, excluding non-financial services, non-manufacturing, and transportation equipment, projecting a growth of over 3.5 percent. Particularly noteworthy is the manufacturing, chemicals, and energy sectors, which are set for an even more substantial increase, expecting a 4 percent surge in salary budgets for the upcoming year.
What do companies need to consider for 2024?
Come 2024, companies need to focus on the following to remain competitive in the current labour market:
- Having a robust retention policy in place.
- Review total remuneration strategy to ensure it is both sustainable and competitive, allowing for modest increases, employee benefits, learning and development programs and other retention strategies.
The salary budget forecasts remain high for 2024. However, with economic growth slowing down potentially leading to a more cautious approach in hiring, coupled with a higher unemployment rate and a lower employee turnover, pressure on salary adjustments for 2024 may ease.
Sources:
- pdf-2023-TRS-Australian-salary-outlook-executive-summary.pdf (mercer.com)
- Wage Price Index, Australia, September 2023 | Australian Bureau of Statistics (abs.gov.au)
- Quarterly wages growth highest in WPI history | Australian Bureau of Statistics (abs.gov.au)
- Global Talent Trends | LinkedIn Talent Solutions
- Economic Outlook | Statement on Monetary Policy – August 2023 | RBA
- Projected salary increase in Malaysia in 2024 | Human Resources Online