What does it take to catch top talent?
A hiring forecast for 2013

The future looks bright for the Hong Kong economy—despite the challenging global market conditions of the past year, key industries saw modest growth, pointing to signs of recovery in 2013. With increased hiring predicted for the second half of the year, attracting and retaining top talent is now topping the priority list for employers. However, with a shrinking talent pool and zero salary increase set for 2013, how do employers plan to entice highly sought-after candidates and at what price are they willing to reel them in? HR Magazine caught up with Matthew Bennett, Managing Director for Greater China of Robert Walters and Caleb Baker, Managing Director, RPO & Managed Services Asia Pacific of Talent2, to find out what the future holds for hiring in Hong Kong.

Research points to recovery
With the latest research from Robert Walters and Talent2 suggesting optimistic outlooks and signs of increased economic activity in the coming months, it appears that the job market might be picking up throughout 2013. According to the Robert Walters Global Salary Survey 2013, numerous IT, infrastructure and construction projects implemented during 2012 led to job creation and the company’s research shows no sign of this slowing in the year ahead. The Survey predicts that export- and import-related hiring will rise this year, due to increased demand from the US and China, and this is likely to generate more demand for candidates from sales, merchandise and supply-chain, trade finance and accounting backgrounds. Meanwhile, retail and tourism will continue to grow in 2013 with a boost from visitors from mainland China, as a result of the 7% rise in minimum wage in Hong Kong, which will increase domestic consumer spending. Confidence among the region’s business leaders also appears to be on the rise, according to the Talent2 APAC Market Pulse 3 Study, with more than half of the respondents from Greater China—68%—forecasting economic growth in the next twelve months.

With all these positive signs in mind, it comes as no surprise that attracting and retaining staff is the key focus for companies in the year ahead. However, with already tight talent pools and no sign of salaries rising in the coming months, what lengths will organisations go to in order to catch the best talent and does this open a window of opportunity for candidates to demand over-market rates and more attractive C&B packages? Bennett shed some light on the issue, “There is no doubt about it, companies will continue to invest in talent in 2013 and attracting and retaining talent will be a key challenge for them in the coming months. However, when looking for new opportunities, talent will seek stability, a clear career path and a company with projected growth, therefore employers will also need to review their talent retention strategies, or offer competitive packages to keep their best talent.”

Supply and demand mis-match
Keeping employees happy is one thing, but how can organisations attract the best in the first place? Bennett explained that the increasing demand for top talent could put pressure on employers to pay over-market rate for a diminishing pool of candidates in specific areas of expertise, particularly those who are ‘seeking stability’ and reluctant to leave their existing organisations. He said, “In the current candidate-driven marketplace, companies may need to adhere to the increased salary demands of talent in order to persuade them to move from one organisation to another, as the cost of an empty seat will take on an even greater meaning to ‘putting all of your eggs into one basket. This may put upward pressure on salaries in the region and will certainly put upward pressure on an already tight candidate pool. Those candidates who are in the top 10% of what they do, for example, sit in a very small talent pool and therefore have the ability to ask for a 10 to 20% rise in salary when switching to a new organisation.”

Bennett also pointed out that the mismatch between supply and demand also meant that the only way for staff to gain salary increases from within existing organisations is to take on more responsibility in their roles. He said that with retention being such a crucial focus for firms in the current economic climate, HR is becoming more involved from a C&B point of view in terms of having these conversations with employees before they decide to resign. He explained, “To avoid the risk of failure, companies have mastered the delicate balance between cutting costs to survive in the short-term and investing to expand in the long-term. Businesses are streamlining themselves to retain and develop staff and this is where HR plays an important role.”

Tipping the scales
The mis-match between the growing demand for talent from an increasingly shrinking talent pool has also led many organisations within the region to turn to contract workers in order to tip the scales. According to the Talent2 APAC Market Pulse 3 Study, despite the positive outlook of businesses in Greater China regarding future economic growth, only 50% of these firms expect to increase their workforce to support this growth and 5% predict a decrease. This discrepancy has led organisations to rethink their talent and people strategies across the region and, according to Baker, as many as 39% of senior managers in Greater China plan on turning to contractors to help accommodate growth.

This option does not come without its challenges. Despite being perceived as offering several key benefits, such as overcoming the local skills shortage, increasing workforce flexibility and scalability to support economic conditions and making it easier for senior managers to gain approval for increased headcount, there is the matter of cost. Baker explained, “In addition to having no clear method for measuring performance, the cost of hiring a contractor is also often greater than taking on board a permanent worker on a like-for-like basis. Australia is a shining example of this, with contractors adding around 30% uplift on their salary to each secured contract. No such premium currently exists in Asia, however, so without financial benefits there is little incentive for contractors to enter the Hong Kong market.”

Baker revealed that without such incentives companies are having to think of new ways to encourage international talent into Asia. He observed, “The proposition to contractors will increasingly become more premium over permanent employment. Some companies are shifting their HR strategies to accommodate; using more contractors in Asia, building in more compensation and benefit packages in order to build a bigger talent pool of non-permanent staff. Financial services is leading the way with this trend in Hong Kong because knowledgeable workers are so highly sought-after.”

Whether they are hiring talent from other organisations or countries, and whether this is on a permanent or contract basis, it appears that companies in Hong Kong are using several methods to reel in the best catch and fill empty seats.