China to See the Highest Salary Increase in Asia-Pacific Region

Salaries across Asia Pacific are set to rise by an average 7% in 2015 as per the Towers Watson 2014-15 Asia-Pacific Salary Budget Planning Report which included 2,900 sets of responses received from over 300 different companies across a range of industry sectors and job grades from 20 countries.

Pakistan, Bangladesh and Vietnam are set to lead the way with over 11% overall salary increases while India is placed at #4 with an increase of 10.8%. However, a corresponding rise in inflation in the region implies that pay increases in ‘real terms’ will be eroded in the coming year.

Interestingly, China rises to the top with a real salary increase of 5.2% after allowing for inflation, trailed by Pakistan (4.5%), Bangladesh (4.3%), Vietnam (4.1%) and Sri Lanka (3.8%). India drops down by two places to #6 with a corresponding real increase of 3.5%.

In what is a clear indication of a positive economic sentiment, all 20 surveyed countries will witness an increase in ‘regular salary reviews’ in 2015 with a noteworthy reduction in the number of companies that opted for a ‘salary freeze’ or ‘postponement’ in the previous year.

Timed to coincide with companies’ budget planning process for 2015, the reports helps one understand the salary movements across various sectors and markets and provide companies with guidelines for their annual salary forecasting process.

“We foresee an increased economic growth in Asia Pacific in 2015 in light of a declining unemployment rate and rising GDP in the region. This, in turn, will lead to inflationary pressures that affect real salary increases. Indians will only see an effective salary increase that is one-third of the overall salary increase due to such pressures,” said Sambhav Rakyan, Data Services practice leader, Asia Pacific at Towers Watson.

China (5.2%) and Vietnam (4.1%) will lead the way in East Asia for salary increases in 2015 after taking into account inflation, while Japan (0.6%) will see the smallest raises.

Across the region, employees will have pay raises equal to or higher than last year in percentage terms, with the exception of Taiwan, where the rate of increase will drop from 2.8% to 1.7% after inflation. In real terms, however, increases will be lower for 12 out of the 20 Asia Pacific countries covered in the survey.

Hong Kong and Singapore are both set for an overall increase of 4.5% in 2015, unchanged from 2014, but after accounting for inflation, Singaporean employees will see a higher increase of 2.2% as compared to 0.9% in Hong Kong.

The Towers Watson survey illustrates the challenge faced by businesses in the region as they seek to balance the effect of growing inflationary pressures and managing costs, while continuing to offer salaries sufficient to attract and retain skilled staff.

“Our research demonstrates that salary continues to be the number one factor for attracting and retaining talent. As a result, a majority of employers across Asia Pacific plan to allocate a larger portion of salary budget increase to high performers,” added Rakyan.