For manufacturers, in fact any Australian business, having a happy and content workforce is vital to the success of the company.
So it will be disappointing for readers to hear that four out of every five Australians are unhappy where they work and are planning to leave their current role in search of new challenges, and more money.
AIM’s (Australian Institute of Management) 2016 National Salary Survey makes sobering reading. The findings show that Australian living standards are now under more pressure than ever before with wage growth falling in line with the rate of inflation, a statistic rarely seen in Australia over the past three decades.
Now in its 52nd year, AIM’s 2016 survey of more than 500 Australian organisations, covering about 25,000 employees and around 270 job roles, found that the overall salary increase is currently sitting at 3%, which is a decrease from the 3.4% reported in 2015 and the lowest reported percentage since 2012, dropping 1.1% overall in four years.
Sam Bell, AIM’s GM for Policy & Advocacy, describes it as a significant decline especially as it is forecasted to continue in 2017 in many industries, especially in Queensland and WA, both of which have been affected by the mining downturn.
“For the last decade we have been accustomed or expected to salary increases of 4 to 5%.” But he admits some industries do better than others in good times and bad times. “But now employees are receiving 2 to 3% on average, which is causing some movement in the market because people are expecting greater financial rewards,” Bell said.
The survey reveals four out of five people (82%) are looking for new challenges, with two thirds looking for new opportunities within their industry. More than half (56.5%) cited limited career advancement opportunities with 44.4% looking for better financial reward.
Bell said this situation is caused by two major issues. “Firstly the slower economic conditions are contributing to less career advancement. In the good times people were getting regular promotions, but now with the slower economy, those internal promotions are not happening.
“People are not moving up the ladder as fast as they would like, so they look at opportunities outside their workplace, often at competitors, to get that promotion.”
Secondly, Bell says, employees are not happy with the 2 to 3% salary increase and are changing jobs to get more, which is a costly exercise for companies.
Cost of recruiting
Getting new people is fine, but what many manufacturers don’t realise is that the cost of recruiting a new staff member is around $26,400, which includes the exit process of the employee, the recruitment of a new employee and the training of him/her to fulfil the role.
“It’s a significant amount, and if they are leaving due to lack of promotion or salary increase, companies have to realise that there is a big cost to replace them.” Bell says keeping salary increases very low, can be very costly as in most cases it’s the best people who leave. “I don’t think many managers realise how much it costs to replace someone, plus the disruption that causes to the business.” David Pich, AIM’s CEO, says retaining staff is no easy feat.
“Employees can become restless in roles that have limited career advancements or where they don’t enjoy their time at work. “Combine that with a volatile property and rental market and the pressure to contribute more to their superannuation fund, it’s no wonder staff are becoming disillusioned and feel the need to move jobs as a perceived guarantee to a salary increase,” said Pich.
The survey found one in three (34.5%) Australian businesses are making contributions above the superannuation guarantee (9.5%). However, the proportion of employees who are salary sacrificing has dropped across the board since last year, suggesting Australian employees are putting less focus on their retirement, choosing instead to use their disposable incomes to maintain their current standard of living.
Pich encourages business leaders to reassess their current pay model and suggests creating a positive and inspiring workplace culture to decrease staff turnover and retain human resource.
“People don’t leave companies; they leave leaders. Great managers and leaders make decisions that impact people’s lives and that impact can be felt well beyond the workplace. “We spend about a third of our working-age lives doing just that – working. So it is vital our experiences in the workplace are positive as they impact on our overall well-being and on society as a whole.
“At AIM, we’re constantly encouraging our Members to invest in building a positive workplace culture, by having open streams of conversation and offering training and professional development support,” Pich said.
According to the survey, salaries overall for the manufacturing sector have fallen more than the average. Bell pointed out that while salaries growth in general has fallen from 4.2% to 3% on average over the past four years, the manufacturing sector has fallen from 4.62%, a little bit higher than the average, to 3.07%, which is almost in line with the average salary increase.
“Next year, those in the manufacturing industry expect salary increases to remain fairly flat at 3%, unlike other sectors who are predicting further falls.”
The findings show that Australian living standards are now under more pressure than ever before with wage growth falling in line with the rate of inflation, a statistic rarely seen in Australia over the past three decades.
Across the manufacturing industry, AIM measures the Food, Beverage and Tobacco; Chemical and petroleum, Metal and Automotive, and Other Manufacturing sectors. “When broken down for example, Mechanical Engineering Managers have seen an increase of about 5%, while employees in the Chemical and Engineering have remained flat at around 4%,” Bell said.
However, the survey shows workers in the automotive sector have seen a decline to 2.7% growth, dragging the overall figure down. In general employment terms, Bell says he is seeing a significant increase in consultants and temporary workers, rather than full time permanent employees.
“There is strong trend of companies bringing in people for a specific project and a specific time period rather than a full time employee.” When it comes to working conditions, Bell said a company’s workplace culture is very important for employees, followed by learning and development and flexible working conditions at number two and three respectively. “A work life balance is very important for employees.”
The survey found 66.8% of Australian employees left a current job to start a similar role at another organisation, and revealed that businesses are worried workplace culture is to blame for this shift, with 63.7% citing this as the human resource issue they are most concerned about.