4.5% Base Pay Rise Forecast in Hong Kong for 2015

Hong Kong employers continued to be prudent in their pay strategies for 2015 considering some possible economic impact globally, according to the HKIHRM 2014 Pay Trend Survey conducted by the Hong Kong Institute of Human Resource Management (HKIHRM).

Some sectors, which still face talent shortage, will need to have flexibility in pay adjustment. All in all, pay adjustment forecast for 2015 does not show a great difference from the overall average actual adjustment in 2014.

Eighty-six companies (having a total of 119,400 employees and making base pay adjustment between January and September 2014) out of the 101 participating companies confirmed their pay adjustment during the survey period (January to September) and provided relevant base pay adjustment data for analysis.

The overall average base pay adjustment pay recorded for these 86 companies was 4.3 % (weighted average), 0.1 percentage point lower

than the figure recorded for same period last last year (4.4%). The figure was very close to a forecast of 4.4% announced by the HKIHRM in October 2013.

Eighty-four out of these 86 companies (97.7%) offered an overall base pay increase as compared to 98.7% in the same period of 2013.

Two surveyed companies recorded an overall zero base pay adjustment while no surveyed company recorded an overall negative base pay

adjustment.

Sectors which offered higher overall base pay increase are: construction (5.9%), NGO (5.7%), other businesses (5.6 %) and financial services (5%).

Of the 119,400 employees concerned, 88.1 % received a positive adjustment in base pay, 11.8% zero adjustment and 0.1% a negative adjustment.

Bonus payment for 2014

All the 101 companies provided data on bonus payment. Among them, 47 companies reported that they had a guaranteed-bonus policy.

Among all the surveyed employees, 39% of them were eligible for a guaranteed bonus. Among those employees being awarded a bonus, the overall average bonus size was 1.01 months of base pay. The figure is same as that recorded in 2013.

A total of 71 companies with a non-guaranteed bonus policy confirmed their bonus payment during the survey period.

Of their eligible employees, 68% were awarded a non-guaranteed bonus, with the average bonus size being 1.62 months of base pay. This compared with 71.8% of eligible employees actually awarded a bonus of 1.58 months of base pay on average in the same period last year.

The top three sectors which offered the highest non-guaranteed bonus are: financial services, (6.3 months of base pay), retail (4.72 months of base

pay) and banking (2.4 months of base pay).

"Non-guaranteed bonus has been adopted to provide employees with an incentive to enhance performance. To ensure its effectiveness, employers have to adopt a fair, transparent and sustainable mechanism which can guarantee trust-worthy assessment results," remarked Mok.

2015 base pay adjustment forecast

Fifty-two participating companies, which will have base pay adjustment in the period from January to April 2015, confirmed their budgeted adjustment and provided data. Among these 52 companies, 96.2% (50 companies) indicated that they would have an overall budgeted pay increase while 3.8% (two companies) forecasted no pay adjustment.

No company projected a pay reducation. For these 52 companies which have budgeted pay adjustment, the overall forecast adjustment is 4.5% (weighted average).

When tracking the factors which surveyed companies found most important in their pay adjustment decision, the top five are company performance, individual performance, business unit performance, market pay adjustments and inflation. Inflation was regarded as a factor more relevant to general-level staff, rather than all staff.

"An open economy like Hong Kong is more likely to be affected by external global factors," says Mok. "Yet, the labor market faces its own challenges including labor and talent shortages, weaker employee engagement and higher turnover, thus making employee training, the building of talent pipeline and succession planning more difficult."

Mok notes that remuneration package has always been regarded as the primary measure to address these issues.

"At a time when labour shortage prevails, pay strategies alone may not be effective enough. Other HR practices including a clear development path, more innovative  and tailored employee benefits and employee retention measures are becoming more important on the work list of HR professionals," concluded Mok.

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