Employers facing ‘salary squeeze’ as workers demand higher pay

With the cost of living and inflation continuing to cause issues for Aussie workers, many are going to their bosses demanding an increase in their remuneration.

According to research by Robert Half, a salary war is brewing between employees, candidates, and employers – as growing demands continue to increase. The Robert Half 2025 Salary Guide revealed that close to half (49 per cent) of employers state that candidates are more demanding when it comes to salary compared to the previous year.

On top of that, employees claim that negotiating for a pay rise is far more strenuous this year than the previous year (72 per cent), whereas only 5 per cent of workers report it is now less challenging.

“Our 2025 Salary Guide paints a picture of the complex salary dynamics that will shape the job market this year,” Nicole Gorton, director at Robert Half, said.

“The current work environment faces a salary dilemma. Employers continue to face budget constraints and focus on cost management, while the demand for higher pay has become louder from employees who haven’t had a significant pay rise during a turbulent few years despite their hard work and their need to feel financially stable.”

The report listed the top reasons why employees believed a pay rise was warranted:

• “I have consistently exceeded my performance goals” (36 per cent)
• “The cost of living has increased and my salary needs to keep pace” (32 per cent)
• “I have taken on new projects or a larger workload” (32 per cent)
• “I have gained new skills or qualifications that are valuable to my role” (29 per cent)
• “I am seeking a promotion to a higher-paying position” (27 per cent)
• “I have not received a salary increase in a long time” (15 per cent)
• “I am not being compensated fairly for my work” (9 per cent)
• “I expect a raise every year” (9 per cent)

“Employees are becoming more vocal about their contributions and compensation expectations the more inflation affects their hip pocket,” Gorton said.

For the employees who do not receive their desired pay rise, they listed their next steps as:

• “Be patient and maintain good work ethic” (40 per cent)
• “Focus on professional development” (38 per cent)
• “Ask to revisit the salary conversation in a few months” (36 per cent)
• “Look for a new job” (36 per cent)
• “Ask for more benefits (such as additional paid time off, remote work options, flexible schedules)” (36 per cent)
• “Work harder (such as work longer hours, take on extra responsibilities)” (27 per cent)
• “Quit my job straight away” (1 per cent)
• “I’ll do nothing” (2 per cent)

“Failing to recognise and reward top performers is a costly oversight. While salary increases aren’t always feasible, open communication, robust benefits packages and professional development opportunities are necessary for maintaining morale, engagement and loyalty,” Gorton said.

“After all, competitive compensation and comprehensive rewards are essential for attracting and retaining top talent as well as remaining an employer of choice.”