An Australian finance expert says employers should be giving their workers a seven per cent pay rise due to inflation.
Founder and host of She’s on the Money, Victoria Devine discussed pay rises in a podcast on May 11, claiming businesses should increase their worker’s annual salaries in line with inflation.
The award-winning retired financial adviser discussed the week’s community dilemma, which was submitted by a listener who received a pay increase ‘not nearly anywhere close to inflation’.
The listener explained her employer was not open to negotiation and was told to be grateful for her pay increase despite the company achieving 170 per cent of its sales targets.
Ms Devine said an employee is actually getting a ‘pay cut’ if their increase does not rise with inflation.
Founder and host of She’s on the Money Victoria Devine (pictured) discussed pay rises in a podcast claiming businesses should increase their worker’s annual salary in line with inflation
‘If you’re not getting a seven per cent pay rise this year, you’re actually financially going backwards,’ Ms Devine said.
‘If your pay rise does not align with inflation, you are actually getting a pay cut, full stop, end of story.
‘Your lifestyle is going down while my back pocket is being lined. It’s about what’s fair and how the world works.’
Ms Devine said inflation happens every year in a healthy economy, and as a business owner, she factors inflation into pay rises automatically.
She added businesses facing hard times after struggling during the Covid-19 pandemic owe their employees a discussion if they cannot increase their wages in line with inflation.
‘From my perspective as a business owner, this is a cost of business. It’s a part of my mapping and planning. I know that inflation will come into it,’ Ms Devine said.
‘Did I know that inflation would be at 7.1 per cent this year? Absolutely I didn’t.
‘In my head, because inflation happens every single year in a healthy economy, I have always made sure to have the buffer to increase my employees’ salaries in line with inflation.
‘I do think it can be a struggle for some employers but for me that is a cost of doing business. That is a cost of keeping the bare minimum.’
Ms Devine said she believes in ‘walking the walk’ and invited her co-cost Jess to talk about her pay increase.
Ms Devine (left) said inflation happens every year in a healthy economy and as a business owner she factors inflation into pay rises automatically. She explained she gave her employee and co-host Jessica Ricci (right) a seven per cent pay rise to cover the cost of living
Jess explained she was given a seven per cent pay increase for the cost of living before her performance was discussed.
‘It wasn’t just seven per cent. You said that is for the cost of living now let’s talk about your performance,’ Jess said.
‘You said I worked really hard, and you want to reward me for that, and you don’t think increasing my salary by the cost of living, that seven per cent increase, is actually rewarding anything.
‘It’s just letting you buy bread for the same about you bought bread for last year.’
Ms Devine also said the idea businesses have that people are replaceable ‘blows her mind’ because staff are the reason their bottom line is increasing.
She explained it’s in a company’s best interest to keep good employees because they have valuable knowledge about how the business works.
The podcast host added a business is out of pocket about $35,000 to $45,000 every time they lose or gain an employee because of recruitment costs, months of lost productivity during onboarding and lost productivity with existing staff having to train the new worker.
Australian inflation remains high at seven per cent despite 11 consecutive interest rate rises from the Reserve Bank.
The Reserve Bank of Australia surprised experts and homeowners by raising interest rates by 0.25 percentage points on May 2, taking the cash rate to an 11-year high of 3.85 per cent.
The move flies in the face of the financial markets, which had almost unanimously predicted the RBA would leave rates on hold.
In a further shock to borrowers, the RBA has also left open the possibility of further rate increases, with Reserve Bank Governor Philip Lowe describing inflation as still too high.
The latest consumer price index data shows inflation stubbornly above the Reserve Bank of Australia’s 2 to 3 per cent target.
Australian inflation still remains high at seven per cent despite 11 consecutive interest rate rises from the Reserve Bank (pictured)
In the year to March, it rose by seven per cent, with food prices continuing to soar by double-digit figures.
March quarter inflation figures from the Australian Bureau of Statistics showed a 9.8 per cent annual surge in housing costs, which covers rents and building costs.
Recreation and culture costs increased by 8.6 per cent, compared with 6.5 per cent for insurance and financial services.
Annual food inflation eased to 8 per cent, down from 9.2 per cent but dairy product prices and bread/cereal prices were still up 14.9 per cent and 11.8 per cent respectively.