From enforcing lockdowns to suspending travel corridors, Australia and New Zealand are again showing the world how to put the health and safety of their communities first. For one, fears of COVID-19 are prompting organisations to return to hybrid and remote working.
Because of restrictions on business activity, some workforce decisions can have a direct impact on the talent economy.
In this special report, we take a closer look at how the crisis impacts the supply and demand for talent – and how these affect the compensation decisions of leaders who must manage workers' salary expectations fairly.
As chaos persists, the job market suffers
The call for fair pay is magnified all the more by the economic hardship brought on by the pandemic. Add to that the fact that business sentiment has been falling, according to ANZ's latest survey. Yet recent reports also suggest a number of employers – in New Zealand, for example – are using this period of turmoil to underpay employees. Small businesses are purportedly reluctant to pay staff amid financial distress from the crisis.
In such adverse circumstances, the government is stepping up and holding employers accountable. Meanwhile, for those who strive to weather the crisis without shortchanging employees, the government is extending financial relief.
The wage subsidy in Australia, for instance, is given to businesses that are making sure to pay their staff at least 80% of their usual rate despite facing hardship from the lockdown. But how far these subsidies will ease the impact of the crisis remains unknown.
The lockdown is starting to strain the job market. In the Greater Sydney area, payroll jobs have fallen nearly 9% since restrictions were again introduced in late June. Construction jobs have been particularly hit with a slump of more than 22% across New South Wales.
SEEK’s July Employment report also shows job ad figures in Australia shrinking to 4.1% on a month-on-month basis. Economists believe these conditions in Greater Sydney and NSW are almost as bad as they were in 2020.
Desperate for top talent, employers review salary budgets
While parts of the service sector are again reeling from the effects of COVID-19 restrictions, skilled professionals are gaining the upper hand and commanding good salaries despite the slump.
Nick Deligiannis, Managing Director of Hays in Australia & New Zealand, sees this advantage as a by-product of the skills gap in the region.
"The biggest challenge is skills shortages," Deligiannis said.
While there are positive hiring intentions, acquiring top talent with the right skills is a challenge. Some skilled professionals are electing to remain shielded in existing jobs during lockdowns, while border closures are adding to the skills shortage.
"With hiring activity increasing, the supply and demand imbalance has definitely tipped firmly in favour of skilled professionals," he said.
Hays research shows that, while employers have so far managed the shortage, they are slowly reaching a turning point. In the next 12 months – according to almost two-thirds of employers – the skills shortage will soon affect their operations. This impasse is forcing employers to review their salary budgets. In fact, almost seven in 10 intend to increase salaries this financial year, compared to the 50% who kept salaries steady last financial year.
"But while more people will receive a pay rise this year, budgets are tight and so the value of these salary increases will be low, creating a gap between what employers will offer and employees expect," Deligiannis added.
Going beyond salary, workers crave benefits
"Although not a legal entitlement, many employees expect a certain level of allowances on top of their salary or wages," Globalization Partners writes.
Amid the pandemic, the demand for additional workplace benefits became even more apparent. Non-financial perks, especially those that promoted wellness and work/life balance, proved potent in motivating employees to stay on.
Today, there is a greater need to focus on wellbeing; expand healthcare coverage; and curate more relevant and more personalised benefits for employees and even their dependents.
How can employers leverage benefits as part of their compensation package?
Deligiannis suggests: "Firstly, look at what benefits you can offer to existing and potential staff, such as continuing flexible work, mental health and wellness programs, professional memberships or additional annual leave."
Additionally, investing in employees' career progression, and training and development will attract and retain better talent. For employees focused on financial benefits, Deligiannis advises: "Salary transparency can help overcome the salary expectation divide."
Being transparent about how pay levels and pay rises are set can build trust in employees that they are being paid fairly – especially when times are tough.
Transparency also serves to close the gender pay gap and eliminate unconscious or conscious bias in salary decisions. With extensive benefits and a culture of transparency, employers can abate the negative impact of the pandemic and its consequent economic downturn.
To win the talent war in the long run, however, leaders have to revisit how they compensate employees – especially amid the scarcity of skilled talent.