The times of steep growth in wages could be over in WA, with employers getting creative to lure workers.
West Australia's soaring salary increases will plateau this year as employers look to more creative options to please staff, according to an annual survey of the country's largest companies.
Unsurprisingly, WA workers were again paid the highest average salary increases of all the states during 2010-11, at 4.7 per cent, according to the Australian Institute of Marketing Salaries Survey 2011. The national average was 4.0 per cent.
The booming state is expected to continue to dominate the salary stakes during 2011-12, although at a declining rate.
Surveyed WA businesses predicted they would be paying staff 4.5 per cent more in the coming 12 months, which was still significantly higher than the 3.8 per cent predicted nationally. But this would be the lowest rate for WA in at least seven years.
The pay rise is still well below the annual salary increases recorded prior to the global financial crisis. Between 2005-2009 WA salaries rose on average between 4.8 per cent and 6.8 per cent each year, before retracting to 4.6 per cent last year.
Across the country, more than 500 businesses worth more than $10 million each who responded to the survey indicated that attracting and retaining staff while containing employment costs would be a key challenge in the next 12 months. Amid poorer economic outlooks, companies were looking to satisfy staff with non-financial offers.
AIM WA deputy executive director Shaun Ridley said employees were gaining the upper hand on employers.
"A tightening labour market, skills shortages and the likelihood of a rate rise all point to a wages blow-out if employers can't find ways to keep good people without big wage hikes," he said.
"For the past two years, it has really been an employer's market but that is changing. Many staff who stayed put during the downturn are now on the hunt for new opportunities and bigger pay packets. And yes, many employers will have big cost pressures, so savvier employers are seeking creative ways to motivate people, without offering big salary hikes."
The WA Chamber of Commerce and Industry said the survey confirmed long-standing warnings that unsustainable wages growth in WA was "out of control" and employers were desperately trying alternatives.
"CCI is becoming increasingly concerned the continuing upward trend in above average pay increases in WA has become a sign of the times and urgent action is needed to address chronic labour shortages," chief executive James Pearson said.
"Some employers are being forced to offer a range of non-cash incentives to attract and retain staff in the face of stiff competition from the higher wage offerings.
"CCI has previously warned this will not only add to the cost of doing business, but could discourage new firms from investing in the state."
Unions WA secretary Simone McGurk said job security, particularly for those on contracts, flexibility in the workplace and improved rostering were some of the suggestions being increasingly negotiated into new workplace agreements.
"We're seeing an increase in workers with caring obligations for children and for aging parents and employees are increasingly looking for working arrangements that enable them to balance their work while looking after small children or elderly family members." she said.
The wage blow-out has mostly been caused by a worsening skills crisis. Half of all companies - up from 37 per cent last year - reported difficulties in recruiting staff due to a lack of skills. The issue was paramount in the construction and engineering, sales and marketing, manufacturing and trade industries, according to the survey.
More companies also said they were turning their recruitment to overseas, with two-thirds now considering hiring staff from overseas to overcome the shortfall (compared to 62.2 per cent last year).
The constricted market also has led more employees to risk changing employers, with the average rate of voluntary staff turnover increasing from 10.3 per cent to 12.6 per cent.
Difficulties in finding suitably qualified staff has met with a renewed effort to train and develop existing employees.
More large companies (63.2 per cent compared to 58.2 per cent) have implemented formal training programs, with 42.9 per cent of these companies forecasting they would spend more on training this year.
An increasing number also have created formal succession planning policies, up 11 percentage points in two years.