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Salary increases will be hard earned this year as companies face tighter economic times, a recruitment agency is warning.
A new survey shows a quarter of New Zealand finance and IT sector employers froze staff salaries last year, reflecting a tighter job market.
Recruitment agency Robert Half surveyed 250 hiring managers and 501 workers in November last year.
Its managing director Megan Alexander said businesses will be managing costs and looking closely at salaries.
"All companies have to watch costs because otherwise they can't make a profit and therefore they can't sustain their living. They have to be prudent about managing their cost structure. It's not a case of just continuing to increase salaries, they've had to really look at where they're going to spend and what value they're getting from each of those salaries. That's the shift that's happened."
Its survey showed 24 percent of respondents froze salaries while 70 percent increased salaries to keep pace with the cost of living.
Alexander said businesses were facing a balancing act when it came to remuneration.
"In the last few months in particular, New Zealand companies have grappled with rising costs and tighter profit margins, prompting them to initiate restructuring and reallocate resources.
"As a result, companies are being more selective with who they give salary increases to, favouring top-performing talent rather than giving a rise to everyone," Alexander said.
"Some employees have seen a pay freeze the past year, suggesting companies rely heavily on non-financial benefits to retain talent. While these benefits can be a valuable tool, especially when salary increases are not feasible, they are unlikely to be a sustainable long-term solution on their own."
Private sector wages grew by 6.6 percent in the year to December 2023, above inflation which rose 4.7 percent over that time.
"During 2023, New Zealand businesses were open to increasing salaries in a bid to remain competitive in the shifting job market following immense change in previous years," Alexander said.
The December quarter saw annual growth in private sector wages above six percent and employee salary negotiations were often successful. However, the tides have changed at the start of the new year with financial stability again at the absolute top of the business agenda."
The Robert Half survey shows how employers have remunerated staff salary remains the key motivator for both employees staying with their company and candidates thinking about a new role.
More than one third, 36 percent, of New Zealand workers point to salary when asked what the most important factor is when considering a new role.
While salary remains the primary motivator for most candidates, 64 percent have identified a variety of non-salary elements as the number one driving force when considering a new job.
Aside from salary, the top three factors identified as the most significant aspect when considering a new job were flexibility (12 percent), benefits (10 percent) and company culture (9 percent).
"The key lies in regularly reviewing and benchmarking compensation policies against market trends. By striking a balance between competitiveness and financial sustainability, businesses can successfully navigate the demands of the current job market," Alexander said.