There are many industry sectors in Australia where we are seeing wage growth slowing or ceasing altogether, and this is not just in the high-profile mining industry. Much has been written about what is causing this slow down, if it is likely to continue and whether government intervention will force a new round of increases.
However, one area where we have seen continued growth and government investment is in the Care and Social Services Sectors (CASS). As a result, there has been an influx of commercial organisations to the sector, competing alongside established providers for consumers and talent.
While we would of course expect this influx to put pressure on the not-for-profit organisations who are traditionally operating in this space, our research actually suggests that it might be the commercial players that will need to change. The not-for-profit organisations operating in this industry are setting a high benchmark for other organisations to follow suit.
Our most recent survey results from the Non-Government Organisations Remuneration Report (Australia) show that at not-for-profits, salary increases are in the range of 3.5%, with some organisations recording much higher budgets for increases. In comparison, the latest Aon Hewitt General Industry Remuneration Report recorded salary increase budgets of 2.6% ‒ with the same forecasted over the next twelve months.
It’s not just differences in salary budgets that are being noted. In fact, the CASS tend to use the remuneration budget differently as well. Our general industry data shows a tendency for organisations to make much lower overall increases, with half the population receiving an increase of more than 2.5%, while the CASS shows two-thirds of incumbents receiving an increase of more than 2.5%.
So what does this all mean? The significance is that the overall spend in this sector is higher, and organisations are using this increased spend to lift the salaries of more of their people. Therefore, not only is the CASS sector closing the gap by spending more, but more people in this sector are receiving increases above the general market median.
The other way the CASS sector is bucking the trend is in how it rewards internal talent. At Aon Hewitt, we have seen a marked tendency in recent years across the commercial sector for new hires to be paid demonstrably more than their recently promoted peers, but the CASS sector has not followed suit. The relative market position for new hires and promoted employees has not changed between 2013 and 2017. New hires have always been paid slightly higher to market than promoted employees, however, while the gap between the two has widened in the general market, it has actually remained unchanged for CASS employees. What has changed is the overall market position, which has improved by 5% (measured as position to market) for both promoted employees and new hires.
In the past, this sector has been dominated by not-for-profit organisations dedicated to providing support and services to the less fortunate, and it seems this strong ethos continues to resonate in the way organisations treat their employees.
CASS organisations are more likely to give larger salary increases to more of their employees, have been using their budget to improve the overall market position for more of their employees, and treat their high-potential and internal hires with greater equity than the commercial sector. Quite simply, they are setting a strong benchmark for organisations across industries.
We will be interested to see if the commercial organisations moving into this sector will adapt their reward programs to be more closely aligned to the established culture of this important sector in the future.
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