March 16, 2022

Wage Rises are Coming: How Should You Deal With Them?

Wage rises look inevitable in 2022, after years of stagnation. ABS data shows that in the final quarter of 2021, the Wage Price Index lifted 0.7% – its highest rate of growth in three years. Now, many economists are forecasting that wage growth will ‘accelerate strongly’ this year – largely the result of low unemployment, labour shortages and rising inflation.

For many employers, this may be alarming news, especially those who may not be earning any more or who haven’t put up their own prices in some time. With that in mind, here’s our guide to dealing with pay increases in 2022.

Keep on top of Awards, Agreements and Contracts

Australia’s minimum wage system is notoriously complex. Many Australian workers have their minimum terms and conditions set by Modern Awards or Enterprise Agreements. These usually also provide for minimum rates of pay, which the Fair Work Commission revises annually. If your organisation pays according to these, you need to keep up-to-date with any changes and implement them when they happen – usually 1 July.

You should also be across the National Minimum Wage (NMW), which the Fair Work Commission also sets. At the moment, the NMW is set at $20.33 per hour or $772.60 per week. This too will change on 1 July 2022.

On top of this, you should understand the pay clauses in individual contracts or enterprise agreements. These can often also provide for minimum increases based on CPI  or other factors. You should also be across any informal agreements or workplace practices because these too can form part of an employees’ contract of employment and could influence how much you need to pay.

Budget for increases but work out who gets them

From a practical perspective, one of the most important things you can do is to factor wage increases into your budgeting and planning. Any additional money you need to pay will have to come from somewhere. Will you need to increase prices, cut costs or even face the prospect of lower profits?

Even though wages look like rising, you still have some power to determine who receives them and how much their pay goes up – so long of course as you’re meeting your legal obligations. Most pay rises are tied to performance and experience, and there’s no reason to depart from that now.

Some things matter more than money

If you can’t afford to raise salaries by too much but still want to keep staff, it also pays to remember that some things matter more than a wage rise, at least to many employees. Most people want to do satisfying work, have a degree of autonomy over how they do it, and have the flexibility to do other things they enjoy.

By facilitating this, you could go a long way to making employees happy and retaining their loyalty and their service without significant pay rises.

For example, how much would it cost you do allow extra leave? Could you reduce working hours or offer flexible days without affecting productivity? Small things that promote a strong culture – like off sites, company get togethers and social events all count towards keeping employees happy too. By creating the kind of place people don’t want to leave, you may be able to retain employees without having to raise wages too much.

Tie wage rises to growth and productivity

One way to make wage rises work for everyone is to tie them to productivity. That way, you can make sure that increased pay is linked to increased profit. By involving your employees in the process and working with them to set targets and rewards, you should be able to create an incentive scheme that helps propel your business forward.

Remember, some level of turnover is healthy

Finally, while mass walkouts are no good for business, some level of turnover is actually healthy for any organisation. It allows you the opportunity to promote employees or bring in new ones. With that often comes new ideas, new energy and a new dynamic.

Don’t panic if you can’t retain everyone this year. The war for talent is heating up and you won’t win every battle. But, so long as you have good productive people in your organisation and you manage them well, you’re going to be ok.

Want more?

If you’d like to know more about preparing for this year’s wage rises, get in touchContact.

say hi to our author

Merilyn founded Catalina Consultants in 2012 on the belief that all organisations, regardless of size, should have access to top quality bespoke HR services. She enjoys working closely with her clients and believes that the best results are built on relationships of rapport, trust and authenticity. Growing up, Merilyn had her sight set on stardom and dreamed of becoming an actor. She also sang and played the piano, but ended up studying accounting and HR. Whilst she hasn’t won her Grammy just yet, she still loves a good karaoke night. Merilyn loves to travel with her family, with South Africa being one of her most memorable destinations.

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