The basic mean pay increase is expected to be 3.7 per cent in the 12 months to January 2025, AHRI data finds. Plus, the research reveals employers’ recruitment and redundancy intentions for the current quarter.

AHRI’s most recent Quarterly Australian Work Outlook report, which measures sentiment from 600+ senior HR professionals and business decision-makers across private, public and not-for-profit sectors, reveals that net employment intentions have fallen from +41 in the December 2023 quarter to +33 in the March 2024 quarter. 

While concerns about future economic conditions may be behind this drop, it was interesting to see that these concerns have not resulted in increased intentions to cut jobs. Redundancy intentions fell from 31 per cent in the previous quarter to 22 per cent for the March quarter. 

Recruitment and pay insights

Nearly 4 in 10 (36 per cent) employers are planning to increase staff levels in the March 2024 quarter, which is a slight decrease from the previous quarter (45 per cent), suggesting that the employment market has somewhat softened.

At the same time, recruitment intentions have remained unchanged (71 per cent) over the same period, suggesting that recruitment activity is more about replacing staff than adding to the workforce.

Our research reveals a reduction in the number of organisations grappling with recruitment challenges in the current quarter, with 38 per cent of employers experiencing recruitment difficulties, down from 48 per cent in the previous quarter.

However, it’s important to acknowledge that despite this positive shift, which may be due to lower recruitment activity, recruitment continues to pose significant issues for many organisations. 

There has also been an increase in mean basic pay, which is expected to increase 3.7 per cent in the 12 months to January 2025. In the previous quarter, respondents told us that they anticipated a 2.6 per cent increase in the 12 months to October 2024. 

This suggests that employees could be in line for sustained real wage growth this year as the Reserve Bank predicts interest rates will drop to 3.3 per cent by June 2024. (At the time of writing, rates sat at 4.35 per cent).

At the same time, many organisations are still finding it challenging to access the talent and skills they need. A lack of quality in the labour supply and the high training and recruitment costs associated with replacing staff may still be putting upward pressure on wages in some workplaces.

Retention methods

The average turnover rate in an Australian organisation remained consistent with the previous quarter (14 per cent) and is higher in the public sector (18 per cent) versus private (14 per cent).

At the same time, a quarter of organisations are still reporting turnover rates above 20 per cent. For comparison, some people suggest that a ‘healthy’ turnover rate would sit below 10 per cent, but it would be highly dependent on the industry and organisation.

To manage their recruitment challenges and ease skills shortages, employers are focusing on upskilling and internal mobility, with 36 per cent creating further learning and development opportunities in a bid to retain key talent.

Unsurprisingly, flexible work arrangements were cited as the main lever in a retention strategy (37 per cent), but improved employee wellbeing (35 per cent) and coaching and mentoring opportunities (33 per cent) were also common responses.

It was also encouraging to see that nearly a quarter of respondents (23 per cent) are planning to invest in uplifting leadership and management capabilities. 

Research suggests that this could have significant positive impacts on organisations’ productivity levels, as the World Management Survey – which has data spanning 20,000 interviews across 35 countries over nearly two decades – indicates that poor leadership can be attributed to around one third of global productivity gaps.

 Perceived effectiveness of retention strategies

Alternatives to redundancies

Only three per cent of organisations are planning to reduce the size of their workforce in the March 2024 quarter while redundancy intentions have decreased to 22 per cent.

Lower redundancy levels doesn’t necessarily mean that organisations aren’t facing cost pressures with seventy per cent of respondents telling us they were introducing strategic measures to avoid or reduce redundancies. These include:

• Raising prices of products and services (27 per cent)
• Optimising costs for non-staff operation costs (23 per cent)
• Reducing use of non-permanent staff (21 per cent)
• Recruitment freezes (21 per cent) 
• Reducing pay rises/ introducing pay cuts (17 per cent)
• Reducing bonuses (16 per cent)

Recruitment biases

Key to building a workforce of capable, skilled and engaged employees is drawing talent from a broad and diverse talent pool. 

Our research revealed that 6 in 10 employers would exclude people with certain characteristics from their recruitment processes: 

• 33 per cent would exclude someone with a criminal history
• 29 per cent would exclude someone with a drug or alcohol problem
• 19 per cent would exclude someone with long-term sickness or history of mental health challenges
• 16 per cent would exclude someone with a history long-term unemployment
• 11 per cent would exclude someone who identified as neurodiverse

Employers often cite a lack of available talent as their main barrier to growth and success, therefore organisations may be limiting their potential output by not casting their recruitment net wider.

However, we also found a sizable portion of respondents who were willing to source talent from marginalised groups. A quarter said they would hire people with few or new qualifications or someone aged 55+, 24 per cent would hire Aboriginal or Torres Strait Islander people and 18 per cent would hire someone living with disability.

The value of cultivating diverse workforces is well known by HR professionals. Diverse perspectives, experiences and backgrounds within teams can foster innovation, enhance problem-solving capabilities and drive sustained business success. 

Other quick insights 

The use of AI 

HR professionals are leaning on AI technology to streamline their recruitment processes. The majority (56 per cent) are using it to create online application forms, 54 per cent are using it to review resumes and 53 per cent are using it to help source candidates.

This is encouraging compared to data we collected in the September 2023 quarter report, which showed that only 20 per cent of organisations were actively investing in the use of AI, but 26 per cent said it was a near-term priority. It seems as though that’s coming to fruition.

Resources: 

• Learn how KPMG is using AI to cut down its time to hire by 20 per cent.
• AHRI members have access to an on-demand webinar on using generative AI in the workplace. Log into your member portal to access.
• Learn 3 tips to build an AI-positive culture in your workplace

Recruitment processes

Employers are slightly favouring competency-based interviews (32 per cent) over strengths-based (29 per cent) or values-based interviews (28 per cent). Fifteen per cent of respondents told us they are accepting video applications from candidates and one in five hold informal meetings with prospective hires to help them select the right candidate.

Resources: 

• Gain helpful interviewing and selection skills with AHRI’s short course.
• 9 interview questions that could save you from hirer’s remorse.

Young people and skills

We asked respondents to share what skills they are looking for when they bring younger employees into the workforce. It seems that attitudes and aptitude are more important to employers than the right technical skills, with the top three skills cited as: communication, team work ability and strong work ethic.

Resources:

• How to make your communication more persuasive 
• Strengthen team cohesion by building a culture of teamship

Sarah McCann-Bartlett MAHRI is the CEO of the Australian HR Institute.

If you’d like to uncover further insights into the current Australian labour market, you can download the full report here, or visit AHRI’s research page for further insights.