Hudson’s Salary and Employment Insights 2012 series of reports said almost half of hiring managers reported their preferred candidates looked for packages which exceeded their budget.

About 43% increased their budget to secure the best candidate, while the remaining employers settled for their second choice.

It said about six out of ten employees felt they deserved a pay rise in 2012.

Two-thirds of employers say they are worried about losing their existing high performers while nearly seven out of 10 employees are considering moving jobs this year.

The reports also warned a cost-driven approach and corner-cutting could lead to mistakes, with poor hires causing untold damage in company morale, productivity and profits.

“Employers are under pressure to simultaneously improve the quality of their hires and control the cost of these hires – they need valuable employees to take the business forward, but not at any cost,” Hudson New Zealand executive general manager Roman Rogers said.

“Facing the tension of trying to do more with less is especially difficult when salary is the top driver for 36% of employees, with many believing that it will be ‘easy’ or ‘very easy’ to find a similar job with comparable pay and conditions.”

Across the board, nearly 28% of employers intend to increase permanent staff levels.

Candidates with business acumen, a cross-functional knowledge and an ability to contribute to the organisation’s overall strategic direction are highly sought-after across all sectors.

“Salaries are increasing, particularly for talented mid to senior hires,” Rogers added.

“In challenging times, businesses can’t afford to compromise on investing in their people, but at the same time they face a dilemma with corporate growth rates lagging employees’ heightened salary expectations. We suggest they fine-tune their recruitment strategies to find and retain high performers who can make the biggest difference to the bottom line.”

The skills shortage is intensifying competition for the most talented candidates, and 46% of employers said it was harder to secure the right candidates in 2011, particularly for senior strategic and managerial roles.

“In order for managers to cope with the increasing salary pressure being placed on them, they need to understand the difference between ‘cost’ and ‘value’ when choosing their teams and allocating their salaries,” Rogers said.

To help organisations address the gap between rising salaries and slowing profit growth, Hudson recommends companies adjust their approach to recruiting to ensure they get the best performers.

Hudson said organisations needed to identify high achievers by broadening their approach from technical qualifications and experience to measuring candidates’ motivational and behavioural attributes.