IT salary increases have been relatively modest over the past year, despite growing skills shortages, according to a new survey.

The 2005 Hays Information Technology Salary Survey, which covers 64 roles in 7 locations across Australia and New Zealand, found 50% of employers increased salaries by up to 3% and 42% increased by 3-6%. Some 8% of employers raised salaries by 6-10%.

However the specialist recruiter’s survey shows that salary increases over the past 12 months have been restrained considering the level of skills shortages prevalent.

Peter Noblet, general manager of Hays Information Technology, says: “Our survey clearly shows the scarcity of labour has yet to have a significant impact on salaries.  Certainly employers are, for the most part, becoming more realistic about the skills shortages, however their focus up to this point has been on benefits or career progression to attract and retain the right person rather than dramatic salary increases.”

While the market overall was restrained, there were individual exceptions. The big winners in terms of salary increases over the past financial year were:
 Certain LAN support and WAN roles
 Perth’s MS.NET/J2EE professionals
 Analyst Programmers in Sydney, Melbourne, Brisbane and Adelaide.

The following key trends were noted in the Salary Survey:

47% of Information Technology employers increased permanent staff levels over the past 12 months, while 42% expect to increase permanent staff levels over the coming 12 months.  18% use temporary/contract staff on a regular ongoing basis and 53% employ temporary/contract staff for special projects or at times of high workloads.

Optimism is once again permeating the IT employment market. So long in the doldrums, the market experienced strong and steady growth over the past 12 months in both the contract and permanent areas and vacancy activity for IT professionals is now strong.

In general terms, the previously static salaries have started to rise nationally for both contract and permanent roles, however they are still short of the highs reached between the 1999 and 2001 dot-com boom.  Employers have also been slow to offer the level of benefits seen during this period with bonuses and non-financial incentives remaining relatively unchanged.

There are few areas currently in IT that enjoy an over-abundance of candidates, however those in strongest demand are Project Managers with solid experience and understanding of methodologies, MS.Net and Java architects and developers, technically strong network engineers and Business Development staff.

The Salary Survey reveals 42% of Information Technology employers intend to increase salaries in their next review by up to 3% and 50% by 3 to 6%.  “We can only caution that pressure on salaries is still likely to occur, but with a longer lead time and possibly to a more restrained extent than in previous cycles,” said Noblet. “As with all markets, demand is the driving force and as we are under much broader global influence than ever before, the extent of increases will depend on factors outside our region as well as events closer to home.”

Noblet warns the current market calls for modifications in recruitment processes. “The pressure is now increasingly on employers and recruiters alike to adjust their approach to potential candidates and be more proactive in their recruitment efforts,” he said. “This includes retaining a certain level of flexibility when it comes to a candidate’s experience.  In light of skills shortages, employers should consider a candidate’s potential, not just their experience.  A candidate with less experience than an employer’s initial prerequisite can, after training, thoroughly perform the role’s requirements and are a viable option to consider.  Employers could also be more open-minded about industry-specific experience.  If a candidate has the skills required, proven through previous employment, but lacks experience in a certain industry, they are still capable of filling the vacancy. This flexibility is a critical feature in successful employment in the current market.

“As employers increase their efforts to recruit staff, they will also increase their attempts to retain staff,” said Noblet. “We would not be surprised to see an increase in counter offers in the next twelve months, despite the fact that the success of this strategy is rare!”

The Hays Salary Survey shows that for 35% of employers who counter-offered staff, the staff member left anyway. In 26% of cases the employee stayed less than 12 months.