More employees in Australia will receive a pay rise this coming financial year than the previous year, with skills shortages creating a “once-in-a-career market”, according to Hays Australia.

Hays’ Salary Guide, based on a survey of over 4,400 organisations, found 88% will increase salaries in their next review, up from 67% last year.

Of those employers planning to increase salaries in their next review, 37% plan to raise salaries above 3%, up from 12% of employers who did so last year. Meanwhile, over half (51%) will increase salaries by less than 3%.

Employers say the skills shortage has forced them to offer higher salaries than otherwise planned, 34% ‘substantially’ higher and 43% ‘nominally’ higher. This pressure is most notable for construction, human resources, trades & labour, engineering, executive and sales professionals. Conversely, contact centre professionals are least impacted.

The majority, or 84%, of the more than 4,800 skilled professionals Hays also spoke to say their performance and the demand for their skills merits an increase greater than 3%. Over half (56%) say the skills shortage has made them more confident to ask for a pay rise and 54% have already benefited from the skills shortage through a salary increase, new job or both. Despite this, 31% are satisfied with their current salary.

Meanwhile, an uncompetitive salary is the top factor motivating 49% of job searches (up from 39% last year). It ranks ahead of a lack of promotional opportunities and poor management or culture.

“Intense competition for skilled professionals will translate into gradual salary increases this coming financial year,” said Nick Deligiannis, Managing Director of Hays in Australia & New Zealand. “Moving away from the salary stability stance of recent years, employers say the skills shortage is the reason increases are higher than planned. Already 91% are experiencing a skills shortage. 83% say it will impact the effective operation or growth plans of their organisation, up from 64% last year.”

This is fuelling a once-in-a-career market,” Deligiannis said. “Previously camouflaged by skilled migration, and further impacted by headcount growth, skills shortages have reached a level unmatched in our 46 years in recruitment and sparked deliberate salary increases from employers. However, while both the value and extent of salary increases is rising, employees’ expectations are growing faster. In a job-rich, candidate-poor market, they feel more assured of their worth and have prioritised a pay rise.”

Further research from Hays found that 77% of employers expect business activity to increase in the year ahead, up from 72% last year. Furthermore, 43% expect the economy to strengthen in the next six to 12 months.

More than half, or 61%, of employers intend to increase permanent staff levels in FY22/23, up from 47% last year while 36% will increase their use of temporary and contract staff, up from 15% the year prior.

Over a third, or 35%, of employers have improved benefits and working practices to entice more staff.

Hays also found that flexible working continues to evolve, with 64% of employees looking for an adaptive hybrid approach. On skilling, 18% of employers cite upskilling as their key strategy to overcome the decreased access to talent. Meanwhile, employees have upskilled in the past year to improve their job prospects with 45% having grown their technical skills, 36% their soft skills and 26% their digital skills while 15% said they reskilled.