Meanwhile, AHRI’s latest Quarterly Work Outlook shows pay increase expectations have risen to 3.3 per cent. 

Amid ongoing cost-of-living pressures, it’s unsurprising that slowing salary growth is pushing some talent to look elsewhere.

However, according to Dr Maresa Seabrook FCPHR, AHRI’s Victorian State President, the narrative that unmet pay expectations are the sole reason for increasing turnover might be overly simplistic.

“There’s definitely some truth to it,” she says. “But it’s actually probably a bit more multifaceted.”

For example, she notes that many employees who took up new roles in 2022 as Australia emerged from pandemic lockdowns are now reaching the two- to three-year mark, which is often a natural point for employees to reevaluate their career path – research estimates the average time an Australian worker stays in a job is around three years and four months.

“People make decisions based on a variety of different factors – pay being one of them, but not the sole factor,” she says. “It’s often about things like, ‘Does this company align with my values?’  Am I contributing to something bigger or making an impact? And am I in the right spot for where I am in my life?’”

This means pay increases are not the only lever available to employers. Even in financially constrained environments, strategies focused on engagement and purpose can have just as much impact on an organisation’s ability to weather a potential ‘quitting season’.

Equipping managers to respond early and effectively

Navigating pay dissatisfaction can be uncomfortable for line managers, especially if they are operating within tight budget constraints and have little control over remuneration decisions.

However, their ability to respond with empathy and confidence is critical to preventing disengagement and decreasing the risk of resignations.

To detect potential flight risks before it’s too late, HR leaders should coach managers to pay close attention to subtle behavioural shifts, says Dr Seabrook.

“It’s every line manager’s role to listen to their people. And non-verbal cues are as important as verbal feedback,” she says.

“For example, if high-performing employees suddenly stop asking for feedback or asking about their next career progression opportunity, or they’re not taking on new projects or challenging themselves, it’s a pretty strong sign they’re not engaged.”

Recognising those cues is the first step. But what’s often more challenging for managers is knowing how to respond when an employee raises concerns about unmet pay expectations. 

“Transparent communication starts from the very top. It’s important that companies don’t just leave it up to the line manager to navigate these difficult conversations.” – Dr Maresa Seabrook FCPHR, AHRI’s Victorian State President

Rather than avoiding it, managers should be supported to lean in with empathy and clarity. 

Shutting the conversation down too quickly with vague reasoning can leave employees feeling dismissed and undervalued. Even if no immediate action is possible, taking the time to listen and acknowledge the concern can make a difference. 

Where appropriate, managers could also make it clear they will raise the issue internally, even if an increase is unlikely in the short term.

If a request is declined, it’s important to explain why. That could mean pointing to broader financial constraints or using market data from salary guides to show how the employee’s compensation compares to industry benchmarks.

Read HRM’s article on how to turn down a pay rise request.

HR can consider equipping managers with specific language that acknowledges the concern, maintains trust and keeps the door open for ongoing dialogue.

For instance, managers  should avoid responses like:

• “It’s not pay review time.”
• “There’s nothing I can do.”
• “Everyone’s in the same boat.”
• “This came from above – it’s out of my hands.”

Instead, try:

• “Thanks for raising this. I’d like to understand more about what’s behind your request.”
• “Here’s what I can share about how these decisions are being made at the moment.”
• “This isn’t something I can approve directly, but I will advocate on your behalf and give you a clear answer.”
• “Let’s talk about what else might help you feel supported right now.”

For these conversations to be effective, managers need to be backed up by clear top-down messaging, says Dr Seabrook.

“Transparent communication starts from the very top. It’s important that companies don’t just leave it up to the line manager to navigate these difficult conversations,” she says.

“If that message is cascaded from the top down, then you can coach line managers to show empathy, reiterate the company’s position and then shift the conversation to what they can do to support that employee.”

Adapting retention strategies for tough economic times

When pay rises aren’t feasible for employers, the conversation needs to shift to what is possible, says Dr Seabrook. 

“Every person, depending on where they are in their life and in their career, has different key motivators,” she says.

“If they want to nail this down, businesses really need to talk to and listen to their staff members, and empower managers to tailor the employee value proposition towards [a particular] staff member or cohort.”

Generic perks are unlikely to land among employees who are struggling with cost-of-living pressures. Instead, what will resonate is meaningful and practical offerings that are tailored to the employee’s specific life stage.

What matters most is that the response feels personalised and grounded in a genuine desire to support the individual, says Dr Seabrook.

“This is not a copy-and-paste. The key is to listen to your people and understand what’s important to them, and then work together to find ways to support them and keep them motivated.”

Particularly for larger organisations, grouping employees by broad personas will make it easier to tailor support and follow up with individual conversations where needed.

Download this handy template to help you create employee personas.

Employers can also consider holistic measures to improve employees’ sense of financial health. This is a critical concern for employers, as recent research shows just 20 per cent of employees in Australia say they have a solid sense of financial wellbeing, down from a peak of 30 per cent in 2022. This decline is closely linked to both lower engagement and reduced intent to stay.

Safeguarding financial wellbeing can be as simple as reassuring employees of their job security; according to 2020 research by AMP, employees with a high sense of job security tend to report significantly less financial stress than those who feel their job is not secure.

Increased flexibility and remote work options can also help improve financial health. Studies estimate the average Australian spends about $5000 per year on commuting alone, so remote arrangements can go a long way to relieve cost-of-living pressure without increasing salaries.

Read HRM’s article on strategic ways to support employees’ financial wellbeing.

The role of HR

As conversations about pay grow more sensitive, HR practitioners are once again in the difficult position of having to lead with clarity, even when certainty is in short supply.

“You can’t control everything. But you can control how you communicate and show empathy, and you can control what guidance you give your line managers when they have those tough conversations,” says Dr Seabrook. 

“So focus on the things you can control, and try and make small changes to help individuals cope with the fact that they didn’t get a pay increase.”

Small changes might include running a short training session to help managers build confidence in navigating pay conversations, refining internal FAQs to ensure consistent messaging or adding a few extra sentences to pay review emails that explain the business rationale.

Particularly for HR practitioners in smaller organisations or standalone roles, Dr Seabrook emphasises the importance of peer connection as both a support mechanism and a practical tool for solving shared challenges like this.

“There is a community out there, and if you feel overwhelmed with this or any other HR issue that you’re facing, talk to other HR professionals that probably have experienced or are currently experiencing the exact same thing,” she says.

“Just knowing that you can discuss it with someone and listen to other people’s thoughts puts you in a better position to help your workforce and your company.”

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