Salaries in the property industry – where to from here?
Many organisations will be holding their remuneration reviews in the coming months, and here at Avdiev Report we have received an influx of enquiries about the industry’s position on pay rates.
As the economy recovers from its first recession in 30 years, there are still considerable uncertainties.
In this context, understanding the remuneration environment will be key to ensuring you retain valued and experienced staff. Amid signs of economic recovery, it’s likely employees will be coming to negotiations expecting a pay rise.
Our 2021 Avdiev Property Industry Remuneration Report provides a comprehensive and objective view of more than 350 roles across all property sectors, including investment, development, building and construction, agency, advisory, consultants and retail.
-Our surveys found that 71% of property companies will be offering a pay rise in 2021, however 29% said salaries will remain on hold again this year.
-We’ve also identified that employees are increasingly favouring non-monetary compensation, such as wellness programs and flexible working arrangements.
First, let’s take a look at the economic context
Global economic growth is projected to rise to 6% in 2021, easing to 4.4% in 2022, powered by the gradual vaccine rollout and government spending programs. However, there is still a strong degree of uncertainty around these projections.
With the virus largely under control in Australia, growth is rebounding more strongly than expected. The RBA is expecting GDP growth of 4.75% in 2021 and 3.5% in 2022 – rates only slightly lower than predicted prior to the pandemic. The unemployment rate has fallen to 5.5%, suggesting there has been little impact from ending JobKeeper.
The retail and office sector remains in a state of flux and upheaval, but interest in commercial properties is strong. Approvals for detached dwellings and alterations and additions soared to record highs last quarter.
The recent federal budget also has implications for property. The lowering of the cutoff age for the downsizer superannuation contribution from 65 to 60 could generate billions in additional sales. And the expansion of the First Home Super Saver Scheme to allow first home buyers to withdraw $50,000 from their voluntary contributions will give first-home buyers a helping hand.
Following soon after, the Victorian government’s budget, which contained a raft of measures aimed at the sector including an increase in land tax, was strongly criticised as discouraging investment and activity in the state.
What does this mean for remuneration in the property sector?
As we enter review season, given there are so many uncertainties in the economic environment, it is more important than ever that businesses understand the remuneration landscape.
Our March 2021 survey found that 71% of property companies will be offering a pay rise this year, thanks to improved market conditions, the steady fall in unemployment and restricted access to overseas specialists.
-This year, 21% of companies say they’ll be offering staff their full remuneration increases, while 43% say they’ll be offering a small increase.
–Another 7% will be giving a pay increase plus a catch up component to make up for the 2020 pay increase deferrals.
However, 29% of businesses surveyed said salaries will remain on hold in 2021. Companies preparing for pay reviews will also be looking at indicators such as the consumer price index and the wages price index, as well as the Avdiev Report March Pulse Survey Results.
The CPI is currently at 1.1%, but is tipped to increase to 1.5% in 2021 and reach 2% by mid 2023. The Wage Price Index is currently at 1.5% and is expected to be 1.25% for 2021 and 2.25% by mid 2023.
– Avdiev Report’s past research suggests remuneration in the property and construction sectors regularly trends slightly higher than the general workforce.
– The median pay rise in the property sector in 2020 was 2%, according to last year’s Avdiev Report’s survey.
-Looking ahead to the 2021 remuneration review, our March Pulse Survey reported that businesses were taking a cautiously optimistic approach and would be guided by improving margins and confidence in the broader economy.
-Our contributors’ forecast this year is for average rises of between 1.5% to 2.3%, depending on the sector.
Another issue employers will be considering this year is the increase in the employer superannuation contribution, which will rise to 10% this July and then increase by 0.5% each July until it reaches 12% in 2025.
The statutory super rate was last increased back in 2014, and the results of Avdiev Report’s recent Pulse Survey indicates most companies will treat this rise the same way they treated the last one – they will be absorbing the increase into base remuneration.
-In 2014, 61% of companies told Avdiev Report the super increase would be absorbed into remuneration. In 2021, 67% told us they would take that approach.
-In 2014, 34% told us they would add the 0.5% increase to total fixed remuneration, while 33% told us they would take that approach in 2021.
How companies make this decision is usually determined by company policies or contractual arrangements with employees. It will be interesting to see how this pattern will be influenced by consecutive 0.5% annual increases over the next five years.
We trust this newsletter has been helpful in your remuneration deliberations. Please contact me if you have any questions or would like any information on our Avdiev Report remuneration products or tailored reviews.
