What's a pay rise worth?
According to SEEK research, just over one in three Australians expect a boost in pay this year. What ever happened to regular pay rises and bonuses?
Employees are reasonable when it comes to expectations around pay rises, says Aaron McEwan, Advisory Leader at global technology company CEB. During the last decade people have recognised the fact that the economic environment has been a tough one and have mostly understood when pay rises have not been forthcoming.
“There is evidence that organisations have managed those expectations, particularly since the GFC,” McEwan says. “People are realistic about what can be achieved in a sluggish economy.”
Andrew Brushfield, Director of Victoria and WA for Robert Half, agrees. Employees naturally recognise the structural changes happening within an economy, he says, whether caused by the GFC, the mining slow-down or the dotcom boom and bust. “These things are bigger than any individual or company,” Brushfield says. “They do affect the perceptions of the individual. People are more aware of these issues than they used to be and are fairly understanding when a pay rise does not happen every year. It may not matter so much because they may be simply happy that they have a job.” As economies gradually and hesitantly pick themselves up from the GFC though, our experts say, the positive expectations of employees around pay rises and bonuses begin to kick back in. “The base salary pay rise expectation is close to 4%,” McEwan says. “But we have recently seen a slight increase in that expectation compared to six months ago. I think that coincides with some shifts in the economy that we have seen in Australia and New Zealand. There is generally a sense that people will get a reasonable increase after years of sluggish increases.”
July’s the magic month for pay rises
Recent research commissioned by SEEK, which surveys 4,800 Australians that are representative of the workforce each year, provides fascinating insight into current attitudes towards pay rises and bonuses. It is disappointing, but perhaps unsurprising with all we know about gender in the workplace, that men (39%) feel more confident about getting a pay rise this year than women (27%). More unexpected is the fact that 24% of staff say they should automatically receive a pay rise no matter how they have been performing. This is balanced out by the fact that 26% say they will only earn a pay rise if they perform well, and by 13% who say their salary rises only when they demand a boost. So, what is a reasonable pay rise? The majority of respondents (63%) are in the 2–5% increase bracket. Only 4% of respondents venture below 2% and a gutsy 5% of people say they expect a rise of over 10%.
In terms of timing, 31% say that the end of financial year, specifically July, is the magic month for more money. The rest of the respondents have an even spread throughout the year. Interestingly, 35% say they don’t discuss their salary with anybody – not even their spouse! Around 42% discuss their salary with their spouse, while 26% are happy to share the figures with their best friend. Those in the 18–34 age group are significantly more likely to discuss salary overall.
How common are bonuses?
The same research looked into attitudes towards bonuses. Here are the main outcomes:
Only 22% have a potential for a bonus as part of their salary package.
28% of males have a potential for a bonus, as opposed to 16% of females.
65% of Australians see a bonus as ‘nice to have but not necessary’.
76% prefer a guaranteed 5% pay rise to a 10% bonus.
73% prefer a 10% bonus to extras such as a gym membership.
Only 26% of those with potential for a bonus feel they are likely to receive a bonus this financial year.
Another 26% say they would be ‘really annoyed’ if they didn’t receive their bonus.
31% say that not receiving a bonus would make them consider looking for a new job.
The average bonus expected before tax is $4,322.40.
At least match CPI
McEwan and Brushfield agree that minimum employee expectations this year are in line with CPI. While staff understand that they may not be in for a life-changing bump in their take-home package, they also don’t expect their employer to leave them behind financially. There is a growing appreciation amongst staff that they must perform well, rather than simply carry out their jobs, to be in line for a raise. “When I started work 25 years ago there was an element of expectation that if you had simply been with a business for long enough, you would get a pay rise,” says Brushfield. “Companies are now evolving a little bit better to become meritocracies. If you have done better than expected then companies are pretty good at acknowledging that by way of salary increase. That is a great thing. I cannot see any downside in that.” “I think people are accepting of the fact that increases and bonuses are linked to performance,” says McEwan. “If somebody were to receive a mixed performance review I don't think they would expect a pay rise above CPI.” McEwan says there is a common myth that Millennials do a great deal of job-hopping in order to drive up their earning capacity, but that this perception is incorrect. “Research shows that Millennials are ‘experience hopping’,” he says. “They are simply trying to gain more experience. But if an organisation provides various experiences and increases the employee’s employability, it turns out Millennials are more loyal and more likely to stay with the business than older generations.”