Wage growth slows as increases become unsustainable for Irish employers, according to recruiters Morgan McKinley.
Salaries in Ireland expected are tipped to rise 5% in 2023 as more than 50% of professionals consider a move this year.
Despite this, Irish employers are expected to be more cautious around salary increases in Ireland this year.
“In order to maintain profitability in a highly inflationary environment, businesses need to keep their costs down and a key way of doing this is by limiting salary increases”
There will be exceptions for the most niche and in demand positions where salary increases of between 10-15% could be in prospect.
2023 in recruitment in Ireland
The Morgan McKinley 2023 Irish Salary Guide found that:
- More than half of employers (54%) think they will lose staff in the first half of 2023 due to higher earning potential elsewhere
- 63% of employers plan to hire permanent, contract or temporary employees in the first half of the year
- 5 in 10 professionals/employees (53%) plan on looking for a new job in the first half of 2023
- 68% of employers think salaries in their specific sector will rise in 2023
- 57% of professionals/ employees think they will receive a salary increase this year
“Businesses now seem to be rebalancing,” said Trayc Keevans, global FDI director with Morgan McKinley.
“Wages have rocketed in recent years by margins that appear unsustainable. In order to maintain profitability in a highly inflationary environment, businesses need to keep their costs down and a key way of doing this is by limiting salary increases.
“2022 provided a second consecutive year of significant growth in salaries. This came from a combination of cost-of-living pressures and competition for talent driving up offers, as companies sought to secure the much-desired top talent by outbidding their competitors. Companies had to take steps to hold onto their existing employees. Our survey reveals that 71% of employers had to increase salaries to retain staff. All of this meant that, overall, 60% of professionals in Ireland received a salary increase in 2022, with the biggest proportion (34%) at a 0-3% rise, but a further group (19%) received more sizeable increases in excess of 15%.
“While over half (57%) of professionals in Ireland are expecting to receive salary increases in 2023, it’s unlikely that we’ll see the widespread wage growth we have become accustomed to over the past two years. Across many industries, the significant increases in pay have become largely unsustainable. The exception will be for niche and in-demand roles or areas of great talent shortage, where paying inflated salaries can be justified in order to secure the right people, particularly for roles across Technology, Financial Services and Pharma.
“As our survey found, the cost-of-living crisis will increasingly impact employee turnover as people will look for higher-paying jobs to try and offset the higher costs they’re faced with. A significant proportion of employees (53%) in Ireland are looking to move jobs in the next six months to increase their earning potential. With so much uncertainty, financial resilience is more important than ever both for employees and the organisations they work for.
“Employers need to be mindful of these factors and ensure that what they are offering is aligned to employee expectations, encompassing both salaries and benefits. This is even more crucial considering the skills shortage that remains across many industries. Top talent will always be in demand, and 2023 will be no different in that regard.
“It will be important for employers to continually benchmark their compensation offerings – to ensure they remain both competitive and attractive, so as not to fall behind in the war for niche and in-demand talent, but equally so they are not over-paying for roles and creating imbalance in their salary bandings.
“We have yet to see the impact the cohort of talent in the Technology sector who became displaced towards the end of 2022 and beginning of 2023 will have on salaries. Early indications suggest that this talent is confident of securing their next job, but it is too early to foresee whether this trend will be for equal or lesser levels of total compensation than they have enjoyed in big Technology employers.
“The importance of flexibility and affording employees the right to work remotely cannot be underestimated. When looking for their next career move, flexibility is a primary consideration; only 8% of professionals surveyed outlined ‘5 days per week’ in the office as their preferred working pattern. In comparison, 45% selected ‘1 or 2 days per week’.
“Judging by the sentiments of hiring organisations and the professionals required to fill those vacancies, there will be sustained levels of movement for the first part of this year, at least. But it is unlikely to reach the significant levels that were seen in 2022,” Keevans said.