Employees in Hong Kong are forecast to receive salary increases of 4.5% in 2012, according to the latest Salary Trends Survey by ECA International. Although the forecast increases are better than this year's figure of 3.8%, inflation will continue to offset the impact of the increase in real terms.

"With the annual rate of inflation in Hong Kong also predicted to be 4.5% for 2012, any effect on the purchasing power of Hong Kong employees is likely to be wiped out – in real terms, wages here will stay flat," says Lee Quane, Regional Director for ECA International, Asia. "On the plus side, this is better than the real wage decrease of 1.7% that we saw this year."

This contrasts with the situation in China, where companies are forecasting 8.5% increases, up from this year's 8%, and last year's 6.5%. With inflation currently forecast to be 3.3% next year, employees in China are set to experience real wage increases of 5.2% in 2012 – the largest in the region.

"China's position as the fastest-growing major economy in the world, combined with the difficulty of finding employees with the right skills means that companies there have to pay higher salaries to those they are able to find," says Quane.

"While employees in China receive lower salaries than their Hong Kong counterparts, their salary increases in recent years has caused the gap to narrow, and the data from our survey suggests that is likely to continue to narrow."

Impact of Inflation
In the Asia Pacific region as whole, salaries rose by an average 5.9% in 2011 and are anticipated to rise 6.3% next year.

The region's developing economies continue to see the highest increases in the region, where salaries are under pressure to keep pace with inflation and attract the talent that their rapidly growing economies require.

Companies in India and Vietnam are both forecasting salary increases of 12% next year, followed by Indonesia (9.6%). China's figure of 8.5% puts it fourth in the list. Employees in Japan are again set to see the lowest increases in the region. Companies there are predicting 2.3% increases in 2012.

However, once inflation is taken into account, a different picture emerges.