More buoyant trading conditions and greater difficulty in finding qualified staff mean firms in the South Island are being more generous in the salaries they are offering than North Island businesses.
A survey conducted in the March quarter by accounting firm Grant Thornton found 21 percent of South Island employers expect to increase salaries by more than inflation this year but only 13 percent of employers in the North Island plan to do so.
Three-quarters of South Island businesses are expecting higher profits this year compared with 64 percent of firms in the North Island.
A partner at Grant Thornton, Paul Kane, said 21 percent of South Island businesses are very pessimistic about finding suitable staff compared with only 8 percent in the North Island.
Mr Kane said many agriculture and construction jobs were on offer in the South Island, and firms were having to pay more to get skilled workers.
Even so, many of the businesses were looking to be as profitable or more profitable this year.