Overall the messages about pay movements in the last year have been fairly consistent across the different survey providers. Average increases for operational and general management roles have tended around the 2.5 to 3% mark across the different surveys we have seen. The Labour Cost Index finished the 12 months to March 2018 at 1.8% overall. These increases are at similar levels to what we have seen in recent years.
There is a very real question around what the next 12 to 36 months will bring. We are not convinced it will more of the same. What we know so far is that the minimum wage is set to rise to $20 per hour. This is a 21.2% rise over the next 3 years on top of this year’s initial 4.8% increase to the minimum wage to $16.50. There isn’t any indication as to how the remaining minimum wage increases will be implemented in the next 3 years. One possibility is minimum wage movements occurring more frequently than annually in April as a ‘phase in’ approach. We will keep you updated as government announcements are made.
The rise in the minimum wage has far greater consequences than just those paid at or close to the minimum wage. The question of relativities is an important one as we see the rise in equal pay claims and give consideration to workforce structures and the tight labour market. To add some further complexity the government last week announced its team of 10 that have been tasked with looking at Fair Pay Agreements which could impact roles and/or industries if introduced.
We are starting to see benefits and incentives being considered and introduced more as part of recruitment and retention strategies and in some cases to help with costs. A move in this direction does require careful planning and consideration for any unintended consequences which could take a few years to show e.g. impacts on ability to raise capital, sharing of net profit beyond company means or in some cases employee worth. Consideration should also be given to tax implications and potential for rising costs. We would recommend you seek advice before implementing benefits including from your accountant.
If you would like to review your remuneration practices and strategies, or benchmark your current pay rates contact mandy@growhr.co.nz.