Salaries across Asia Pacific are set to rise an average 7% in 2014, with China and Vietnam leading the way in East Asia in terms of increases after allowing for inflation and Japan seeing the smallest raises, according to a survey conducted by professional services company Towers Watson.
Salaries in China are forecast to rise 8.5% and in Vietnam 11.5% in 2014, before inflation is taken into account – after inflation is built in, both countries are set for 4.9% increases on average. Elsewhere in the region, Hong Kong and Singapore salaries are set to rise 4.5%, India 11% and Japan 2.3%.
The findings support the view that companies in Asia Pacific are finding it harder to both find and retain suitably skilled staff. One outcome of this is that more than 80% of the companies surveyed say a larger portion of their salary budget increase allocation would go to high performers in 2014. Less than 1% of the companies anticipate a pay freeze, compared to nearly 4% in 2013.
“Overall, the data for 2013 and 2014 looks very similar, so companies should be budgeting for salary increases much the same as last year. However, at the end of the day, it depends on the affordability for the company. If the company is growing at a fast rate and revenue exceeds the cost by a huge margin, it is easier to be aggressive on salary budgets than low growth companies,” says Sambhav Rakyan, Global Data Services practice leader, Asia Pacific at Towers Watson.
“People may say, 'it's not about the money,' but the reality is that base pay is the number one driver for attraction and retention globally based on the Towers Watson 2012 Global Workforce Study. However, we also believe that a well-defined employee value proposition plays a very important part too,” adds Rakyan, referring to the need for companies to have a robust EVP – one that articulates how an employer is unique, offers a great workplace, and why the company attracts and retains great people – to support hiring, retaining and getting the most out of staff.
Asia‟s emerging economies, such as Indonesia, Sri Lanka and parts of Indochina, are the standard bearers for high pay increases, and tend to have the highest economic growth rates (6%-8.5%). But they also have the strongest inflationary pressures (5%-7%, except Cambodia at 4.2%) which take up much of those pay rises.
Raises reflect turnaround in financial services
The Towers Watson‟s survey looks at salary increases in various individual industry sectors, including chemical, energy, financial services, FMCG, technology, media and pharmaceutical, and a range of job levels within organisations.
While the pharmaceutical sector is expected to see the biggest pay rises at 7.3% on average in 2014 for the region, retail and media sector will see raises of 5.4%-5.7%, down a touch from 2013.
However, the anticipated salary rises in financial services are of particular interest because they point to a sector coming out of several years in the doldrums. Those working in the financial services sector can look forward to increases region-wide averaging 6.2%, compared to 5.7% in 2013.
The biggest raises are anticipated in China (8.8%), India (10%) and Indonesia (9%). The region's major financial centres of Singapore, Hong Kong and Japan will see more modest raises in 2014 – respectively 4%, 4.5% and 2.3%.
“Salaries increases continue to remain strong in the region due to several factors such as increased in demand for compliance staff to meet with the increased regulations and regional expansions by local players beyond their domestic shores,” said Jeffrey Tang, Director of Towers Watson's Talent and Rewards practice in Hong Kong.
Commenting on the survey findings, Rakyan said: “The survey reveals pressure points in the labour force around the region and the difficulty to find and retain skilled staff. Having structures in place to help companies win the battle for talented staff is critical, particularly in places like India and China, there the scale of operations can be vast and proximity to market is so important.”