Your salary should be increasing approximately 2% each year to cover the cost of living
Average full-time earners could pocket an extra $90 per month with one simple conversation
Asking for a pay increase can be an awkward conversation for even the most seasoned negotiator. New research from comparison site Mozo has found that as a minimum you should be asking for approximately $1000 to keep up with the cost of living. An Australian full-time worker on the national average wage of $63,000 needs nearly $1100 extra per year to keep up with the Consumer Price Index (CPI).
The CPI measures changes to retail prices of a basket of goods and services representative of typical consumption by Australian households. If the price of milk, eggs and bread is going up, not to mention your rent, transportation and utilities, your pay packet should be compensated to meet those higher costs, otherwise you’re essentially taking a pay cut.
“Negotiating your salary can be nail biting for any employee, but regardless of stellar performance, KPIs met or bonuses promised, there is one thing that every employee should absolutely be pursuing, and that’s a pay increase based on the CPI,” says Kirsty Lamont, Mozo Director.
“Wage growth in Australia has been relatively stagnant for a number of years and it’s undeniable that the cost of living continues to soar. A browse through your local supermarket all but confirms that. If your wage fails to grow year on year, you’re the one who is swallowing the rising costs of food, transport, housing and other every day costs.”
Mozo calculated the average wage for full time employees across every age group, and found on average, CPI could result in an extra $90 in your pay packet every month, or a 2.1% salary increase. While it may seem minor, over the course of a year it can certainly add up. According to the Australian Bureau of Statistics, Australian wages only grew by 2.1% in the last year, meaning many Australians are essentially treading water when it comes to their pay.
Looking across the scale, a full-time employee on $35,000 per annum would need $581 additionally to meet CPI increases, while someone on a salary of $120,000 per annum would require $1537 to keep up with the cost of living.
“Many companies have put a freeze on wage increases due to slow growth or low profit margins. Even if this is the case, you should be pushing for a CPI salary increase, otherwise you should expect less extra cash to play with each year,” says Lamont.
“If you’re feeling uncertain about how to approach pay negotiations with your employee, consider dividing your pay request into two categories – performance based, and CPI.
The Australian CPI changes every three months but a quick web search of the Australian Bureau of Statistics or the Reserve Bank of Australia can tell you where the annual Australian CPI currently sits. Apply this percentage to your after-tax salary and this will give you an indication of how much you should be asking for.
Research information: Australian full-time after-tax salaries sourced from 6306.0 – Employee Earnings and Hours, Australia, May 2016. A calculation of 2.1% was applied to wages based on CPI movement in the past 12 months.
Mozo compares more than 1,800 products from over 200 banking, insurance and energy providers to help thousands of Australians find a better deal each month via its award-winning comparison tools and calculators. As one of the most visited comparison sites in Australia, our team of experts routinely provides financial commentary and advice for major news outlets in Australia.