Salary increases & hiring intentions signal increased caution

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Salary increases & hiring intentions signal increased caution amongst MNCs in APAC - Mercer's Total Remuneration Survey

  • 12 December 2016
  • Hong Kong, Hong Kong
  • Salary increases forecasted in 2017 higher than 2016 for most countries in APAC
  • Life sciences and chemical sectors project highest salary increases across the region
  • Declining workforce participation and rising voluntary turnover a reason for  worry
  • Sales jobs most difficult to recruit and retain

Hong Kong, 12 December 2016

According to the latest issue of the annual research by Mercer, a global consulting leader, a majority of the Asia Pacific’s emerging economies are forecasting higher salary increase percentages for 2017 than 2016 with projected rises particularly bullish in countries such as India and Vietnam.  

Mercer unveiled the results of the ‘Compensation Planning for 2017’ for the region including predictions for hiring intentions and pay increases across Asia, Middle East and Africa. Figures and forecasts are based on Mercer’s Annual Total Remuneration Survey (TRS), and its bi-annual Market Pulse Surveys.

In 2017, the highest salary increases are forecasted for India (10.8%) and Vietnam (9.2%) while financial hubs Hong Kong and Singapore are forecast to see a 4.2% and 4.1% increase, respectively. Japan is forecasted to receive the lowest increase of 2.2%, followed by New Zealand (2.8%) and Australia (2.9%). Notably though, real wage growth (salary increase minus inflation rate) has also been steadily rising in the region, often reaching double digits in emerging markets despite inflation at its lowest for most countries. And, while forecasts vary quite widely across specific industries, the strongest push is likely to come from the life science and chemical sectors. (Figure 1 and 2 in notes).  

A closer look at pay parity (in terms of annual total cash) reveals that there are now several ‘tiers’ of countries across the region. For example, in Australia, Japan and Korea, starting salaries begin at US$30k p.a., and rise steeply as employees reach senior levels, often reaching US$250–350k. Starting salaries are much lower (often just US$5k) in low-cost manufacturing bases, but again increase significantly at top management levels. In some countries – China, most notably – the highest-ranking executives out-earn their peers in the US and UK, Although it is important to note that this picture changes once long-term incentives (LTIs) and European social security benefits are factored in. Talent scarcity plays a major role here, and there are extremely high premiums to be gained by those people with the right skills, in addition to local language expertise.

Connie Leung, Head of Talent Information Solutions at Mercer Hong Kong said, “Hiring, retaining and engaging skilled talent will continue to be a top priority, especially for consumption-driven and technical-based industries such as life sciences and engineering, which have been offering relatively high salary increase in the last few years. Changing business models and restructuring in some industries   has meant that the sectors may not be hiring at rates seen in the last three years, but we continue to see highest level of pay increases as retaining high-performing talent has become even more critical.””

Results show that companies in Asia Pacific are focusing more on benefits for their employees, developing differentiated employee value propositions to appeal to the different employee segments, such as an increased focus on long-term incentives coupled with retirement benefits in Japan and Korea where the average age of employees is 45. There is also an increased focus on flexibility in benefits and more learning and development opportunities for the younger workforce in markets like India, Indonesia and the Philippines.

Amidst increasing volatility and uncertainty in the economy, the Asia Pacific region stands out as an outlier to the developed world. Emerging markets continue to lead world growth, driven by domestic demand: Asian GDP in 2017 is forecast to be an average of 4.2%, with some markets as high as 7-8%, while African GDP projections are similarly bullish at 3.9%, compared with 2.8% globally.

While growth in China is likely to fall in 2017, India is forecast to see the highest growth rate in the whole region next year with 7.8%, while the Philippines, Malaysia, Thailand and Indonesia are all expected to see their economies double by 2020. Prevalent inflation rates are projected to be just over 3% in 2017, marginally ahead of the global average.

Similar to last year, continued worrying news for employers as research again reveals doubt-digit turnover rates in almost all Asia Pacific countries, with the exception of Japan and New Zealand. Voluntary turnover rates have continued to increase year-on-year. The rising numbers represent a challenge in terms of replacement costs in the form of higher salaries for new joiners, recruitment costs and lost production, all of which adversely impacts overall cost of operations and margins that are already under close scrutiny. 48% companies in Asia report having difficulty filling-in vacant positions, as compared with 38% of the companies globally struggling to find the right talent to fuel their business expansion.

“Amidst growing concerns regarding growth in global trade, strengthening US dollars, and the weakening Chinese economy, companies remain relatively conservative on the overall economic growth and the business environment in Hong Kong for the coming year. With the vast improvements in the employer brands and employee experience at some large local organizations in countries across Asia Pacific, multinationals are facing increased competition in finding and retaining the right talent,” Connie concluded.

-Ends-

Notes to Editors:

Figure 1: Forecasted GDP, inflation and salary increase; Source: Total Remuneration Surveys

Figure 2: Projected Salary forecast for 2017 and increase for 2016 (x), by industry; Source: Asia Pacific Pulse Survey Q3 2016; Some forecasts in the press release have been revised based on latest data

Figure 3: Hiring intentions and Voluntary attrition compared by industry; Source – Total Remuneration Surveys

Figure 4: Rewards 2020, what is changing?

About Mercer

Mercer is a global consulting leader in health, wealth and careers. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerAMEA

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