HK Employers Keep 2017 Average Salary Increase at 3.8 Percent Amid Economic Slowdown

Hong Kong employers plan to provide modest salary increases of 3.8% on average across all industries in 2017, but their hiring intention remains positive as 30% of companies have expansion plans of their workforce this year, according to a new study released by Willis Towers Watson.

The 2017 Hong Kong Pay Review Survey reveals that two-thirds of the 249 surveyed companies which will conduct salary reviews after the survey period in January 2017, reported their anticipated salary increase for 2017 averaged 3.8%, excluding special cases for promotions and probationary increase, as well as individual market catch-up adjustments.

Compared to the average increase of 3.9% in 2016, the overall level is observed to be static over the last 12 months. However, for the other one-third which have already conducted salary reviews in January 2017, they reported the 2017 actual salary increase only as 3.4%, slightly below estimates reported by their peers.

“Despite the slowing GDP growth from 2.4% in 2015 to 1.9% in 2016, some of the industries had a better year in 2016 compared to other industries or to prior years. Their salary adjustment, as a result, outperforms the average level at quite a significant rate,” says Frances Wang, Rewards practice leader at Willis Towers Watson in Hong Kong.

“Benefiting from rising property prices last year, the property development and management industry reported that their performance in 2016 was ahead of their results in 2015, and their actual salary increase in 2017 (4.0%) is the highest among all the companies that have already conducted salary reviews in January.”

“Employees from the hospitality sector, including hotel, consumer products, retail and food and beverage have been experiencing the lowest actual pay rise (2.5%-2.8%) in 2017, according to our survey results, reflecting a challenging business environment that the industry is facing due to falling inbound tourists and visitor numbers.”

Recruitment remains active

Up to 30% of surveyed companies plan for an expansion of their workforce that has a direct impact on revenue. Only 7% of surveyed companies indicated a reduction in headcount for support functions in 2017.

Among all industries, the life insurance industry has the strongest hiring sentiment, where 73% of the surveyed companies indicated that they will increase headcount for positions with direct revenue impact.

Job seniority is key in salary budgeting

The survey also highlights the salary adjustment of employee by their level of seniority. Results show minimal difference by job seniority from a budget perspective, which means that employers are applying the same standard and flat increment of salary to everyone in their workforce, without taking their seniority into consideration.

“Most employers would look very carefully into salary level and adjustment to ensure they are able to attract and retain the right talent to help tackle current business and economic challenges, and to meet business objectives,” says Wang.

“We also encourage organizations to consider different factors when making pay decisions for their senior and junior staff. For junior staff, a salary increase should support faster pace of career progression for strong performers. Whereas for senior staff, compensation should gear towards more incentive-oriented pay elements, as long as the base pay is sufficiently competitive.

“According to Willis Towers Watson’s database, almost half of the C-suites did not receive a salary increase last year. Companies should definitely consider allocating much more of their salary budget to increase salaries for their more junior staff, compared to the top senior staff.”

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