Salary expectations are a growing source of tension between employers and employees, according to a new report, with two-thirds of employees believing they deserve a pay rise.

The Hudson report, titled Salary and Employment Insights 2012, is based on a survey of 5,563 employers and 5,748 employees across Australia and New Zealand on their salary expectations and some of the employment issues they face.

The report reveals nearly seven out of 10 employees are considering moving jobs in 2012, while two-thirds of employers are worried about losing their existing high performers.

“Existing employees are… willing to test the market unless their salary expectations are met,” the report said.

“About two-thirds believe they deserve a pay rise and are considering changing jobs this year, while a salary increase was cited as the biggest factor (36%) that would convince them to stay.”

Mark Steyn, chief executive for Hudson Asia Pacific, says salaries are definitely increasing.

“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,” he says.

Steyn says employers need to “fine-tune” their recruitment strategies to find and retain high performers who can “make the biggest different to the bottom line”.

However, the skills shortage is intensifying competition for the most talented candidates. Almost half said it was harder to secure the right candidates in 2011.

The report reveals employers are increasing looking for value as salaries continue to rise and competition for talent intensifies, but fail to understand the difference between “value” and cost”.

“Hiring managers… are shifting their focus away from a purely cost-driven approach in favour of ‘value’; they’re now asking candidates to prove their worth,” Hudson said in its report.

“At the same time, employers are learning that cheaper hires can be more costly – about 44% of employees were described as ‘not good’ in 2011.”

“More than half (55%) of hiring managers now say they are under pressure to both improve the quality of new hires and manage their budgets.”

In order to achieve this balance, Hudson says employers are now asking candidates to prove their ability to make an impact on the bottom line.

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

According to Hudson, organisations need to prioritise their resources for hard-to-find strategic roles that take the organisation forward.

“Hudson recommends allocating fewer resources to critical and core roles that are easier to fill, even though they may have a higher turnover,” the report said.