As the economic recession continues and the debt crisis to be resolved in the Eurozone, China is showing signs of an economic slowdown on its exports front. Despite recent encouraging employment figures in the US, economic growth in Hong Kong is projected to decelerate compared to 2011. As concerns grow, employers in Asia Pacific are reticent about predicting any improvement on salary increments for 2013.
Salary increases hard to justify
Employers in Hong Kong have continued to exercise caution in budgeting salary increases for 2013, according to the latest Salary Increase Survey issued by Aon Hewitt, which reviewed salary projections from over 4,000 companies throughout APAC. The uncertainty faced by key global economies is making it difficult to justify large increases. The salary increase projected for 2013 in Hong Kong remains stable and cautiously optimistic at 4.8%. This keeps salary increments in the same league as in 2011 and 2012, but higher than back in 2010, when Hong Kong was coming out of the global financial crisis and the actual salary increase was lower across the board at 3.1%.
The cautious results indicate employers are beginning to realise that cash incentives can only be used as a base point and without a bigger budget they will need to look elsewhere to attract and retain the best. Tzeitel Fernandes, Principal, Aon Hewitt explained, “Firms across Asia Pacific are beginning to accept that they can no longer rely purely on pay to attract and retain key talent. Budgets will remain tight and those who are able to achieve more with less are the ones who will emerge victorious in the war for talent.”
Performance vs potential
Rick Payne, Talent & Rewards Practice Leader—Asia Pacific, Aon Hewitt suggested that organisations will now need to create a real shift in the way people are being paid. He cautioned, “If you follow the market, you will be behind. Organisations must be as creative as possible to hold onto their competitive advantage in the war for talent.” Payne also suggested that organisations should not just pay for performance, but find more innovative ways to reward potential and that the full value of these ‘creative rewards packages’ must be better communicated to employees. Furthermore, Payne warned that mission critical jobs must be secure even if this sacrifices turnover in other areas.
Salary increases unlikely
Just under 3% of organisations surveyed in 2012 have actually frozen salaries this year—more than the forecast of 2.1%, with 2.1% planning to freeze them in 2013. David Leung, Compensation Practice Lead, Aon Hewitt said, “Companies are cautious when it comes to budgeting pay rises. Economic uncertainties are still impacting their businesses, yet they are competing for talent and having to manage shortages in many job categories. The unemployment rate has been low in Hong Kong in the past 12 months, making this situation all the more challenging.” Economic uncertainty often results in greater competition for talent and Payne advised, when organisations are tightening their budgets, “With a finite salary- increase budget, they must define their priorities—in terms of talent profile—and shape their rewards practices to give greater emphasis to career development, performance and engagement. In that sense, they need to understand what makes their talent groups ‘tick’ and adapt their rewards strategy to precisely support those drivers.”
Employee voluntary turnover up
Although economic activities slowed down slightly in the first half of 2012, the labour market has seen a slight increase in employee voluntary turnover. The average voluntary turnover rate has increased from 12.9% in 2011 to over 14% in 2012, with the highest overall turnover in the healthcare industry, 25.2%; closely followed by the retail sector, 24.8%. The primary reason for voluntary attrition, as cited by over 83% of the respondents, continues to be ‘better external opportunities’ with half citing its correlated motive ‘limited [internal] growth opportunities’. In response to the reality of talent seeking career growth outside of their organisations, employers are realising that they need to offer concrete retention measures to their employees. The results demonstrate that the reasons employees join an organisation differ from the reasons they stay with an organisation, except when it comes to the all-important career development driver.
Expats going to wayside
Payne explained that the word ‘expatriate’ is going to the wayside. Expatriate packages do not need to be as lucrative as they once were, especially as the job market is not so good at home. Fernandes agreed, “Firms are not willing to pay expatriate packages. There is, however, still a skills shortage here in Asia Pacific—especially in senior positions. Hence, although there may be an increase in the localisation of expatriate packages, those in possession of specialised skills to fill senior positions will still experience mobility and favourable rewards packages throughout Asia Pacific.”
Best retention measures reported by companies
• Accelerated career development opportunities: 55%
• Pay above market, off-cycle market adjustments or merit increases: 49%
• Timely and meaningful feedback from managers: 40%
Best attraction factors for new hires
• Competitive fixed compensation: 69%
• Work environment—leadership, culture, flexible work arrangements: 65%
• Career development opportunities: 53%
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Paul Arkwright
Publisher
