Dialogue: Salaries shrug off global gloom

Employers are increasingly aware of New Zealand's vulnerability to events overseas, writes DELWYN NEILL.

Despite dire predictions, world events in the latter part of last year had little impact on salary raises in 2001 or on employers' intentions to raise salaries in the coming 12 months.

Sheffield's 2002 Salary Review reveals that employers are adopting a steady-as-she-goes approach to salary increases this year and are generally optimistic about economic conditions.

The annual survey canvasses approximately 300 organisations on what they paid, and plan to pay, their salaried staff.



So what has happened? The results overall are remarkably consistent with last year, suggesting that employers are taking a long-term view to the current instability around the world, seeking to ride it out rather than make knee-jerk reactions.

Among the surveyed organisations, 88 per cent made salary adjustments for senior managers last year, and the median increase in base salary was 4 per cent. Slightly more (94 per cent) did so for middle management and other salaried staff and the median increase was 3 per cent in base salary.

Incentive schemes continue to rise in popularity.

Sheffield has observed this trend building over the past decade and expects it to continue as an effective means of extracting the best performance from top executives.

This trend is particularly apparent at senior management level, where there were performance payments in 78 per cent of organisations surveyed.

Consistent with last year, 56 per cent of these payments are directly related to company profit.

The targets appear to be set at challenging levels.

Only 24 per cent of senior management, and 19 per cent of middle management and other salaried staff, were paid out 100 per cent of their target.

In both categories, approximately 65 per cent were paid less than what they could have earned, and just a fraction achieved above-target payments.

Which industries did the best? As in previous years, staff in professional-services firms enjoyed the largest increases, perhaps reflecting the challenges of attracting and retaining knowledge workers.

Although Sheffield has seen some evidence of a brain gain, especially at management levels, since the September 11 terrorist attacks on the US, employers are still facing tough times combating the brain drain.

It was also a good year to be working in finance and banking, construction and property and exporting/importing.

In these sectors there were large increases for both senior and middle management. This is not surprising, given the prosperous times these sectors have experienced in the past year.

What are employers most concerned about this year?

As in previous years, domestic growth and exchange rates continue to be the economic issues of most concern.

A new entrant on the list of factors - international influences - rated at number three, demonstrating that employers are acutely aware of New Zealand's susceptibility to overseas events and will continue to keep a close eye on developments.

How is the economy expected to fare this year? Employers appear to consider that the downturn has reached a trough and that the economy will improve.

There is a dramatic decline in the number expecting the economy to worsen over the next 12 months, down to just 7 per cent.

There is a corresponding rise in the numbers expecting the economy to improve and approximately half of all respondents predict the economy will stay the same.

Predictions regarding staff numbers for the coming year also reflect this optimism.

An overwhelming majority of respondents expect staff numbers to either increase or remain the same.

Although the number predicting increased sales revenues is down slightly, it remains high at 65 per cent. Only 10 per cent expect sales revenue to decline.

With the majority expecting the economy and sales revenue to either remain steady or improve this year, organisations are predicting a median increase of 3 per cent in base salaries for both senior management and middle management and other salaried staff.

So in New Zealand at least, despite the terrorist attacks and their fall-out, it appears to be business as usual this year.

* Delwyn Neill is a consultant in the organisational performance team at Sheffield.

* A related article from the Council of Trade Unions was not available for today. It will appear in tomorrow's Business Herald.