In 2023, we saw several workplace trends gain prevalence in Australia and across the world, including a general reluctance to return to the office and the continued momentum of the four-day workweek movement. While the global pandemic was the catalyst for altering the collective mindset, over two years since the last lockdown in Australia, this shift in traditional employer-employee dynamics has upended the war for talent forever.
The Australian Bureau of Statistics (ABS) unveiled the latest Employee Earning and Hours data report in January, which showcased another key trend — the move away from collective agreements as the method of setting employee pay. Despite recent moves from the likes of Accenture Australia, Westpac and Commonwealth Bank to provide transparency around salary bands, individual negotiations are the most common method of agreeing upon compensation, with six of Australia’s eight states and territories favouring bespoke arrangements with their employers.
These numbers tell us that employees are firmly in the driver’s seat when it comes to contract negotiations. Amid an extremely tight labour market with low unemployment rates and high job vacancies, a recent report from G-P found 75% of Australian executives face difficulty in securing skilled talent from their existing talent pools and are exploring opportunities beyond borders to address the issue. But how can businesses stand out from the crowd? Strategic compensation strategies are a good place to start, but businesses can also bolster their offerings in the following ways.
1. Think beyond salaries
According to the same report, two-thirds (69%) of Australian employees are actively seeking new job opportunities or considering doing so in the next six months. Compensation is high on these individuals’ priority lists when conducting contract negotiations, with 28% of Australians ranking salary and benefits as the single most important factor when considering a job opportunity at a global company.
Amid this increasingly competitive landscape for recruiting and retaining talent, businesses must cultivate an attractive compensation strategy to differentiate themselves from competitors, even if this means making concessions elsewhere in the business.
Leaders should consider adding perks such as flexible benefits, bonuses and company culture offerings, or employee assistance and wellness programs in addition to a base salary.
2. Performance-based incentives
Beyond attracting and retaining the very best talent, a well-designed compensation model can be a powerful motivator for employees to hit business goals. In fact, a recent report by McKinsey found that rewarding employees for achieving goals tied to company transformation led to a five times increase in shareholder returns, compared to companies without similar compensation structures.
These benefits should sit separate from the employee’s negotiated salary and can include both financial and non-financial incentives, such as bonuses, stock options, opportunities for profit-sharing, additional paid time off or even travel programs.
When implementing performance-based incentives, it's important to strike the right balance as studies have also shown that linking benefits to performance can also cause increased levels of stress and competition among employees. Always make sure the goals set are realistic and measurable to ensure employees’ progress is tracked transparently and fairly.
3. Opportunities for professional development
Providing opportunities for upskilling is a win-win opportunity for employers and employees. Not only does it demonstrate a business’ commitment to employees’ success, but it allows businesses to tap into existing talent pools, rather than needing to hire new employees to address a skills gap. This can have a significant impact on ROI, with a recent study by PluralSight finding that around half of HR directors spend just $5,000 per tech employee per year on upskilling and reskilling. This compares to the $8,000 it costs to hire a new employee in Australia, according to the 2023 HR Industry Benchmark Report, making keeping existing employees happy a no-brainer.
Overall, the ABS data paints a clear picture: the Australian workplace is changing, and compensation is at the heart of the transformation. As employees take the reins, demanding individualised packages and prioritising competitive offers, businesses must adapt to have a fighting chance amid the war for talent. Embracing flexible models, performance-driven incentives and a diverse range of benefits is no longer a suggestion, but a necessity.
Charles Ferguson, APAC General Manager at G-P