Over the past 18 months, some businesses have appeased their loyal employees by offering 10% blanket increases whilst presenting additional benefits. But with research showing that 93% of Australian businesses have upped their premium to entice new talent, could it be possible that your new co-workers are earning more than you?
What do we know?
According to the Financial Review, new employees are enhancing their annual salaries by up to 20%, as law firms and other businesses compete in the post-pandemic labour shortage. With 46% of managers surveyed by RMIT, reporting that new hires got overpaid this year, is being loyal costing you?
The answer is… Probably!
Economic research demonstrates that those of us who change employers tend to receive higher salary increases in comparison to our colleagues that remain loyal to their firms. For example, HILDA data demonstrated that annual increases for someone changing employer was nearly 6%, which is nearly 3% higher than those who remain loyal to their firm. Whilst data from the ATO suggests, workers who changed employers typically experienced pay increases of between 8% and 10%.
Over the last 12 months we have seen law firms offer employees: 10% blanket increases, out-of-cycle or additional salary reviews, increasing bonus pools and in some instances, ‘thank you’ bonuses to retain talent – but how do you really fare against your firms’ new hires?
At EG Consulting, our legal market research shows that lawyers who changed employers in the last 12 months received on average a 29.7% increase in salary. The average increase for lawyers between 1 and 3 PQE being 24.3%, for those between 4 and 8 PQE a strong 26.2% and a staggering 38% increase for those 8+PQE. This is just base salary increases, not including sign-on bonus offers. When you consider many lawyers are receiving sign-on bonuses of up to $20,000, it is easy to see why many lawyers are making the move.
The same is also true in legal support, where the average increase in salary is 11% for a lateral move vs internal reviews which are closer to 3% (some firms have given no increases over the past few years!). There are also instances of sign-on bonus offers of up to $5,000.
What can you do about it?
Reach out today to one of our knowledgeable consultants! We can provide you with honest advice on how to avoid the dreaded “loyalty tax”. We are here to inform you of the current market rates and assist you in taking the necessary steps to reach your maximum potential.