More employers across Australia are planning to increase salaries in their next review, according to research from Hays Australia.

The research showed 95% of employers plan to increase salaries in their next review, up from 88% last year and 67% the year before.

The majority, or two-thirds (66%) plan to increase salaries above 3%, a step up from 37% last year and 12% the year prior.

Matthew Dickason, CEO Asia Pacific at Hays, said, “We’re calling this the year of the raise, where the promise of higher salaries reflects the intensity of the skills shortage in today’s jobs market.”

“Despite the increased salary boost, employer and employee expectations still fail to align. Many employees feel undervalued and underpaid. Only 28% are satisfied with their current salary, with most (71%) believing it doesn’t reflect their individual performance,” Dickason added.

According to Hays, there are four key factors motivating employers to increase salaries in their next review: 1. Competition amid a growing skills gap crisis; 2. The ripple effect of falling real wages; 3. The impact of pay transparency; 4. ‘The Great Ask’ where 65% of professionals plan to ask for a pay rise, up from 58% last year and 45% the year before.

Dickason said, “Salary is undoubtedly the most critical factor in attracting, rewarding and retaining employees today, but employers recognise that benefits also play a significant role. While training, ongoing learning and development and career progression opportunities are essential components of a successful benefits program, just 26% of employees are satisfied with their current benefits. 

“They are now placing greater value on emotional salary, the intangible benefits that positively impact their emotional wellbeing and job satisfaction, like more than 20 days of annual leave and wellbeing leave,” Dickason added. “As benefits expand in our post-pandemic world, the emotional elements can make or break the success of your overall package.”

Hays also found that in the past 12 months, staff turnover increased in 45% of organisations, down from 58% the year prior. Nearly half, or 45%, of professionals unquestionably intend to remain with their current employer beyond FY23/24, with another 37% unsure whether they will remain.

Of those intending to or considering changing jobs, an uncompetitive salary is the top reason, cited by 48%. This is ahead of the rising cost of living (46%), a lack of promotional opportunities (42%) and a poor management style or workplace culture (38%).

In terms of headcount, employers intend to increase their permanent (46%) and temporary or contract (22%) headcount. 

Hays also found that the skills shortage crisis impacts operations as 88% of employers are experiencing a skills shortage, while 40% say the impact of skills shortages has intensified in the past 12 months.