A friend recently bemoaned his static pay packet. “I haven’t had a decent pay rise for years,” he said. “It’s so hard to get an increase at my employer that I’ve given up on asking for one.”
With the performance-review period fast approaching for many companies, I wondered how many other employees have given up on asking for merit-based pay rises, or are willing to settle for meagre pay increases, despite taking on more work and responsibility in the past year.
And how many business have completely doused pay-rise expectations among their workers.
What’s your view?
- Have you stop asking for merit-based pay rises?
- Is it risky to demand a bigger pay rise in this environment?
- As a small business owner, are you finding it harder to lift prices?
Wages growth is the worst in 17 years, according to the Australian Bureau of Statistics, and with it now below the inflation rate, real wages are going backwards. And that only tells half the story, as many workers put in more hours to keep their job, or take on greater responsibility for no extra pay.
How much of this slow wages growth is self-inflicted as employees, like my friend earlier, give up on asking for merit-based pay rises? Yes, a weak household sector and sluggish demand are hurting many companies -- but by enough for wages growth to be the slowest in 17 years?
The Australian sharemarket is trading near a six-year high, the impending corporate reporting season is likely to show decent earnings growth, property prices have rallied, and superannuation balances have improved. Interest rates are at record lows, inflation is manageable, and there are signs of a slight improvement in the jobs market, thanks partly to a stronger housing sector.
Dun & Bradstreet this week reported that the outlook for sales among businesses surveyed hit an 11-year high, with almost half expecting increased activity in the fourth quarter, and only 9 per cent predicting fewer sales. I have doubts about this upbeat response, but business clearly sees some sales improvement ahead, and potential for higher prices.
Yes, the economy has a challenging outlook. But if real wages growth almost grinds to a halt in these conditions, heaven help us when the economy really slows and companies have to take a chainsaw to their costs and staffing.
Unrelenting negativity from the federal budget and general economic gloom are surely taking their toll on employees who think things are too bad to push for a decent pay rise, even though that is not true of all sectors or all companies, some of which are enjoying record profits.
There are a few problems with persistent slow wages growth. Apart from the obvious negative effects for the economy and workers, slow or no wages growth means much higher catch-up is required when conditions improve. An employee who goes, say, five years without a decent rise suddenly finds his or her wages have been badly eroded when inflation starts rising.
I understand companies seeking wage restraint in this economy, and employees accepting low or no merit-based pay rises with the unemployment rate at 6 per cent, and excess supply of workers in some industries, and in the graduate market. What I don’t understand is employees who deserve pay rises giving up on asking for them because they have been seduced by all the negativity, much of it false, about Australia’s economy.
I don’t know too many managers who dish out big merit-based increases to staff who do not push for them. Or companies that provide big “catch-up” pay rises when conditions improve.
Staff who give up on merit-based pay rises inevitably damage their career. They stop recording their achievements, lose some ambition, and unwittingly end up devaluing their service. Inevitably, their manager puts them in the “they won’t push for a pay rise category” and allocates a small pay-rise pool to employees who complain loudest.
So take extra time before this performance-review season to record your achievements. Carefully consider what the market rate is for your job and how you compare. Build a well-argued case to achieve that pay rise, or price increase, if you are small business owner.
If a pay rise is not forthcoming, seek an explanation from your manager and put him or her on notice that you expect a rise next year. In my experience, staff often underestimate how effective it can be to push for a pay rise early, and set clear expectations for their manager.
If that does not work, consider how to “lift” your pay without earning a higher rate. That might involve putting in less “discretionary effort”, or offloading some responsibilities. It does not have to be confrontational, a veiled threat of resignation, or a sign you have become a slacker. Rather, it is recognition that you cannot take on more and more work and responsibilities without any extra pay.
If you are good at your job, committed, ask for a pay rise in a professional manner, and respond sensibly, your employer will eventually get the message. If not, it’s probably time to leave.
Having a strategy to achieve pay rises in a difficult market has to be better than just assuming nobody is getting them. It’s a safe bet that your boss, and his or her boss, is approaching their pay more aggressively than many of their direct reports.