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With Australia’s inflation rate at 3.6%, following a point where is was recently at a 32 year high sitting at 7.8% – workers across the country are feeling the financial strain of increasing cost of living. Understandably, the impact of inflation on employees has seen many workers exploring how to keep their costs down and lift their salary up to accommodate the economic pressures they are faced with.

In this blog we will cover the frequently asked questions Robert Half receives about the impact of inflation on employee salaries and provide tips on how to discuss this with your employer.

How does inflation affect wages for employees?

Inflation directly correlates to the value of your salary. High inflation, and the accompanying higher costs of goods and services, can weaken the purchasing power of your salary.

Put simply, if inflation reaches 10% but your salary remains the same as it did when it was at 6%, then you are earning 4% less in real wages. Every extra dollar you spend to cover the increased cost of purchases is a dollar that cannot be put aside for savings or discretionary goods – making it important for workers that their salary keeps pace with inflation. In some cases, this is putting households in a position where they are actively struggling to cover the cost of non-discretionary items as well.


Does my salary automatically lift with inflation?

No - an employer is not obligated to adjust their salaries to keep pace with the rate of inflation. While this can pose a problem when inflation increases – as it has recently – this can also be a protective buffer for workers when the rate of inflation drops, as it did at the onset of COVID.

In fact, inflation can make it harder for companies to offer salary increases at all. Just as rising inflation leads to higher costs for a consumer or worker, it also means increased costs for a business. This can have a negative impact on bottom line results – whether due to a drop in revenue or an increase in expenses - and therefore may have less money to put towards salary budgets for the year ahead.

That being said, a Robert Half survey conducted in November 2023 of 500 Australian employers found 96% plan on giving salary increases to their staff in 2024. Of these, 14% said they will raise salaries in line with inflation. Similarly, some companies will incorporate cost-of-living increases into their salary budget calculations automatically as part of their retention strategy.

‘As the cost of living goes up, Australia’s skills short labour market is a source of protection for workers. Businesses are in a fierce battle for talent so need to invest in attracting and retaining skilled professionals, and salary is a key point of differentiation. Businesses are aware that if they do not find ways to support their workers and alleviate some of the financial pressures they face, staff are well positioned to secure work elsewhere,’ says Andrew Brushfield, Director at Robert Half.

Nicole Gorton, workplace expert and Director at Robert Half based in Sydney continues by saying “2023 was a turbulent year for employment in Australia - business confidence dropped, which led to companies restructuring en masse. At the same time, 2023 saw the highest annual increase in wages since 2009. This optimism is set to continue in 2024 with the majority of employers willing to offer salary increases, driven by annual inflation being more than twice the average of the previous decade and companies’ focus on retaining their talent,”

Related: Discover more career advice here

Can I use inflation to secure a pay rise?

Rising inflation is a national issue, and as Australian businesses grapple with this alongside a challenging skills short market, employers are considering how inflation affects wages for their employees and the remuneration and financial support strategies they can offer to help employees with the rising cost of living.

Nicole says “Pay-related decisions have become a balancing act. Businesses still need to ensure they are keeping pace with market rates for both new recruits and existing staff, while considering the potential impact of pay increases on their operations or company financials. Yet, it’s not without its challenges. Reevaluating and regularly benchmarking their remuneration policy against market changes without cutting too deep into the bottom line is essential to remain competitive and successfully meet the demands of the current job market.”

This means that in many cases, your employer may already be exploring salary adjustments or an inflation bonus for employees to keep pace with inflation. If they have not explicitly raised their plans already, it is important to engage in a conversation with your manager about both the company's plans and your own salary expectations for the year ahead.

How can I talk to my boss about inflation?


Understand how your company calculates their salary budget

If the cost of living is on your mind and you are wondering how inflation affects wages , it is important to understand whether this will factor into your company's remuneration plan for the year ahead. If inflation is not automatically included, then you may need to consider negotiating a salary increase.

  • During a one-on-one meeting: ‘What factors do you take into consideration when determining salary, and will this include the cost of inflation alongside my performance?’
  • As part of a team discussion: ‘Inflation is putting pressure on myself and members of the team. Can we discuss what options the company is exploring to provide financial support this year?’

Find your number

Before entering any salary conversations, it is useful to come prepared with a realistic salary range based on both what your role is worth and your financial needs.

  • Use the Robert Half Salary Guide to research the current market rate for your position, industry, and location as a benchmark for where your current salary sits.
  • Calculate how much your current salary will need to increase to account for the current inflation rate.

Prepare your case

The cornerstone of any salary conversation should be your professional achievements and why you deserve an increase. This may help you secure a raise that exceeds, rather than matches, the rate of inflation.

Consider any metrics of success since your last salary review, whether positive performance reviews, project outcomes, skills developments or other accomplishments to demonstrate why your current salary is no longer reflective of your value in the market.

Opening the conversation

While engaging in salary conversations can make people uncomfortable, the rising inflation rate is a stark reality that every Australian is currently faced with. It is important to open any dialogue with a collaborative but clear attitude, using both your professional value and the wider market as negotiation tools.

  • In the lead up to a performance review: ‘As part of my upcoming performance review, I would like to take the time to discuss opportunities for professional growth, as well as how my remuneration package can grow to reflect both my value to the team and the increased cost of living.’
  • Following an accolade or commercial success: ‘Following [recent success], I would like to find a time to discuss my salary. With inflation growing to X%, I am eager to see my remuneration reflect both my value to the team and the increased cost of living.’

‘Some people would rather take on a new job than engage in a conversation with their boss they deem ‘confrontational’. However, with the impact of inflation on employees a top-of-mind issue, engaging in an open conversation with your current employer and giving them an opportunity to address your concerns is an important first step to take in securing your worth,’ adds Brushfield.

Related: Explore more tips on how to negotiate a higher salary this year

What are negotiation strategies to consider?

As we have explored, negotiating a raise, amidst inflation or not, requires a strategic approach that goes beyond simply just asking for more money. Here are strategies to consider when asking for a salary increase:

  • Timing is key - a good time to bring up how inflation affects your income is during your company's annual performance review period. This ensure your request is considered when budgets are being allocated, and you can use the positive feedback received in the review to build your case for a salary increase.
  • Focus on your value - quantifying your contributions helps highlight your accomplishments and how they impact the company's bottom line. Did you exceed sales targets? Improve efficiencies? Bring in new clients? Use concrete examples and numbers to outline your contributions.
  • Prepare for counteroffers - Understand the company's financial situation and be prepared for potential counteroffers. If a salary increase isn't immediately possible, explore other options like bonuses, profit sharing, additional paid time off, or flexible work arrangements that can offset the impact of inflation.

My company isn’t in a position to offer a pay rise. What should I do?

While a company may say no to a pay rise request, this is not the end of the conversation. Take the opportunity to discuss how inflation is affecting employees such as yourself, understand their reasoning and limitations, and use this to develop a strategy that meets both of your goals.

If the issue is a matter of timing, for instance a pay freeze, try saying:

‘While I appreciate that a pay rise is out of your hands currently, this is an important issue to me. When can we return to this conversation again?'

If a company is simply not in a position to extend more money, consider alternative ways that they can offset your total remuneration or reduce discretionary costs during the working week to offset the impact of inflation on employees. This could include:

  • Increasing the option to work from home more frequently to reduce travel costs.
  • Introducing a salary packaging scheme to direct pre-tax income to benefits such as cars, loan repayments or childcare costs.
  • Organising in-work meals to reduce week-day food expenditure.
  • Subsidising team exercise or complementary health services such as flu shots, eye, skin and dental check to reduce health and wellbeing costs.

Related: What is salary packaging?

Our experienced team of talent specialists are here to help you get the most out of your career. If you are ready for a new role, contact us today.





Frequently Asked Questions (FAQs)


How much has inflation outpaced wage growth in Australia?

From data available as of June 2024, the CPI, a common measure of inflation, rose 3.6% in the 12 months to March 2024 quarter. The WPI, which measures changes in wage rates, increased by 4.1% over the same period. At first glance, it might seem like wages outpaced inflation slightly. However, there are some important nuances to consider like real wages, the uneven impact on sectors and income levels, and lagging effects. 

What are the daily life implications of inflation on my wages?

  • Reduced purchasing power as your money doesn't go as far as it used to (as the price of food, fuel and travel increase).
  • Increased financial stress as a result of feeling behind.
  • Difficulty saving as you are spending more money day to day.
  • Lifestyle changes such as eating out less and indulging in entertainment and travel.

How can I negotiate a raise to keep up with inflation?

  • Gather data on inflation rate, current salary benchmarks for your role (consult the Robert Half Salary Guide) and your performance review scores.
  • Prepare your speaking points on how you bring value to the company, how inflation is impacting your expenses and share your findings on salary benchmarks for similar roles.
  • Schedule a meeting with your manager to discuss compensation.
  • Be flexible during negotiations. You may not get exactly what you are after but it could open up conversations about extra benefits or one-off financial bonuses.

What are my options if my employer won't adjust my salary for inflation?

  • Revisit the salary negotiation in the future
  • Seek alternative benefits
  • Explore internal opportunities
  • Look for a new job