WA salaries feel the squeeze

THE transition to the production phase of the mining cycle in Western Australia is driving a normalisation of mining salaries and worker demography in the state, according to the WA regional director of Hays.
WA salaries feel the squeeze WA salaries feel the squeeze WA salaries feel the squeeze WA salaries feel the squeeze WA salaries feel the squeeze


Jack McGinn

The 2015 Hays resources and mining salary guide was released last week and revealed 36% of employers across Australia and New Zealand didn’t intend to increase wages in their next employee review, while 51% intended to do so by less than 3%.

Over the past year, 37% of salaries remained the same while 42% were increased by less than 3%.

The figures may make for tough reading, particularly in WA, where dramatic and substantial decline in the iron ore price to as low as $US47 per tonne earlier in the year have caused significant job losses.

But Hays’ WA regional director Chris Kent told MiningNewsPremium that the focus in the state’s iron ore industry had shifted from salaries to job security as part of a natural movement in the cycle.

“I think everyone was aware that there was going to be a reduction in the iron ore price, but obviously you only have to look at the state government’s forecast of $123 per tonne to see that no one anticipated such a dramatic effect,” he said.

“It caught companies a little bit on the hop, and its left major miners who have the capacity to work on high volumes and low costs in a very strong market position.

“The rest were left trying to quickly establish whether they can become a low cost producer or sustain their mines.

“That’s what happened, and as a result it has probably meant job security has been affected across the board, because obviously all those mines on the cusp of profitability are questioning their long term security.”

Kent said while security would be a focus moving forward, the wider industry in WA is going through a period of normalisation following one of intense growth.

“In iron ore, if anything wages are being reduced in reflection of what has become a pretty volatile job market,” he said.

“We think as an overall picture for the industry wages will stay about the same, but there will be greater allowance for the market to come back to a more normalised salary base compared with other industries over the next couple of years.

“That will mean the mines will become more competitive on a global stage. Obviously they had to pay over the odds to fight for talent during the boom time, whereas now they can probably afford to rein that in a little.

“It doesn’t always involve cutting pay, but it can mean not increasing pay every year, like maybe they had to in the past.”

Shifting dynamics

As well as the influence on salaries, the nature and dynamic of the workforce is beginning to shift as options open up to employers looking to reduce costs and maximise productivity.

According to Hays, those willing to relocate and wanting to stay in the industry for the long term will be at an advantage securing and maintaining work moving forward.

“When you’re working in a remote location in trying conditions on difficult rosters, there should always be an element of upside to your revenue and salary,” Kent said.

“What’s happening now is that they don’t necessarily have to pay for that.

“If people are willing to go and live residentially in a developing town like Karratha or Hedland or Kalgoorlie then they’re obviously going to be looked at first before flying in someone from somewhere else on a roster and paying the associated costs.

“What it means is people who want to be in this industry long-term are likely to pick up the majority of the positions, and those in it for a short time to make a quick buck will probably find that it’s not the industry for them as we move into the production phase.”

Another workforce shift is already being seen in the nature of contracts offered to employees, particularly in iron ore, where the employer’s needs tend to vary dependent on the cost of production.

“The companies who have a long-term sustainable product can probably afford to convert a lot of their contractors and casual pool into permanent positions which in term saves them casual labour rates,” Kent said.

“The others above the line of profitability are still racing to make sure they have a long-term sustainable mine, in which case they’re probably better off keeping their casual workforce to save on redundancy payments should they not make it.”

While much of the state’s industry focus in recent times has centred on the Pilbara and iron, Kent said there were plenty of positives developing in the industry as well.

“It’s not all bad – this is just a different part of the cycle. It’s a necessary adjustment that had to happen in the sector,” he said.

“We’ve focused a lot on iron ore, but gold is actually going pretty well, and some of the other metals are doing alright.

“There are plenty of good things happening, and some of the emerging companies in WA are really starting to get a foothold as well.”