Higher pay no keeper

TWO recent studies into salary packages have shown healthy increases over the past year. However, despite this, it has done nothing to stop employees from moving on to greener pastures.

The Australian Institute of Management’s benchmark Salary Survey 2003 shows that WA’s salary earners enjoyed a 4.3 per cent increase in the past year.

The national average increase was 4.2 per cent, up from the 1.5 per cent rise in the previous year.

These findings were supported by a report into executive salaries commissioned by the New South Wales Labor Council.

Compiled by academics focused on work and organisational studies at the universities of Sydney, Canberra and NSW, the report The bucks stop here: private sector executive remuneration in Australia found executive remuneration grew by around 400 per cent over the past decade.

This is about 10 times the average growth of average salaries during the period.

Yet if the aim of paying increasingly attractive salaries is to retain staff then company directors and business owners may be misguided.

The AIM report found that despite the average pay rises being more than the previous year, staff turnover had actually jumped from 11.4 per cent to 14.6 per cent.

AIM executive director Patrick Cullen said he believed companies needed to do more to address the “revolving door” and increasing remuneration might not be the answer.

He said the cost of losing a staff member and replacing them could be far greater than increasing the salary.

“If they feel undervalued even the best employee will walk, costing their employer thousands in lost skills, payouts and recruitment fees,” Mr Cullen said.

According to the AIM survey this may cost up to $50,000 – money that might be better spent on retaining an employee.

More than 38 per cent of the 515 companies that responded to the survey estimated the cost to be around $20,000 per employee, while 28.4 per cent believe it is as high as $50,000.

“A comprehensive retention strategy should include training and education, quality leadership and open channels of communication between staff and management,” Mr Cullen said.

“If employees don’t feel they are developing, being heard by management and enjoying their job, money’s not enough to keep them there,” he said.

As a flipside, the NSW Labor Council’s report into executive pay at Australia’s top 100 companies found a link between high executive pay and company performance did not exist. Instead the opposite holds true.

“This research shows that executive pay is not just a moral issue, it is a shareholder issue and it is a job security issue,” NSW Labor Council secretary John Robertson said.

“For workers it shows that an excessively paid CEO is likely to preside over a weaker company, meaning their jobs are less secure.”