Salaries in Hong Kong SAR continue to rise in 2023 but companies are cautiously optimistic: Mercer survey
Hong Kong SAR, 16 November 2022
- Overall median salary increments still below pre-pandemic levels, but projected to hit 3.8% next year, up from 3.6% this year
- Talent attraction and retention biggest challenge for companies as voluntary turnover for 2022 could potentially double pre-pandemic levels
Employees in Hong Kong SAR can look forward to a median 3.8% increase in their salaries next year, according to Mercer’s annual Total Remuneration Survey (TRS) 2022. The TRS polled 544 organizations across 13 industries in Hong Kong between April and June this year.
While salary increments have been steadily rising from the low 3% seen during the peak of the pandemic in 2021, it has yet to reach the pre-pandemic level of 4% seen in 2019. Hong Kong SAR’s median salary increment is below the Asia Pacific average[1] of 4.4%. Across Asia Pacific, the overall average salary increases reflect a divergence in pay progression between emerging and developed economies, with estimates as high as 7.1% in Vietnam to 2.2% in Japan, the lowest in the region.
Gary Chin, Mercer’s Head of Rewards for Hong Kong SAR, said, “Hong Kong SAR’s gradual re-opening of its borders and strong resolve to ramp up its economic activities have contributed to a more positive outlook for businesses. But at the same time, the economy has also been affected by soaring global interest rates and reduced trade with Mainland China due to closed borders, which has dampened the growth forecast for 2023. As such, employers in Hong Kong SAR remain cautiously optimistic about next year’s performance, as seen in their salary projections.”
Salary increments rise across most industries
The Banking and Financial Services industry is expected to see the highest salary increase at 4.5%, compared to other industries. It is also seeing the biggest upturn from 4% in 2022, similar to both the Energy and Services (non-financial) sectors’ improvement of 3.5% this year to a projected 4% in 2023. Other key industries like High Tech (4%), Life Sciences (4%), Logistics (3.6%), and Consumer Goods (3.8%) are maintaining or seeing slight increments.
On industry salary trends, Mr Chin said, “The Banking and Financial Services industry is recovering well due to Hong Kong SAR’s strong standing as a financial hub for the region, and efforts by the Government to encourage enterprises to set up operations in the city and to invest in their businesses. High Tech and Life Sciences industries, for example, have maintained their momentum and are benefiting from a strong business environment and market demand since the pandemic struck. On the other hand, industries like Consumer Goods and Logistics were impacted significantly the past couple of years and need a little more time to recover.”
Attraction and retention of talent remain companies’ biggest challenge
Talent attraction and retention continues to be a top priority for companies in Hong Kong as they grapple with higher than usual voluntary turnover this year. The average turnover rate is already at 10.5% as of mid-2022. In comparison, the full year voluntary turnover rate for companies in Hong Kong was 14.6% in 2019. The high turnover is due primarily to prevailing pandemic restrictions and a more challenging business environment which has resulted in a talent outflow. According to Hong Kong SAR’s Census and Statistics Department[2], the city saw an outflow of 113,200 residents between mid-2021 and mid-2022, which resulted in a 1.6% decrease in overall population. This is also the biggest drop in population on record.
The challenge is more pronounced in certain industries like Hospitality and Retail as they are still affected by the lack of tourists from Mainland China. Moreover, the nature of the work in these industries does not align with many employees’ present expectations of having more flexible work arrangements.
One of the ways companies are attracting and retaining talent is by offering higher variable incentives. Bonus payouts, as a percentage of the annual base salary, have increased and exceeded pre-pandemic levels across the board for senior executives (24%), management (25% for sales and 16.9% for non-sales) and sales professionals (28%). Payouts have remained largely the same for non-sales professionals (10%) and para-professionals (10%).
With regards to hiring, companies in Hong Kong remain cautious in their approach and are maintaining status quo. More than half intend to keep headcount the same in 2023, with 15.5% intending to add headcount in 2023. Only 1.5% intend to reduce headcount. Businesses are largely focusing their efforts on optimizing and equipping their existing workforce, and recruitments are for key talents or to replace those who have left.
Vicki Fan, Mercer’s CEO for Hong Kong, said, “It’s encouraging that the Government is ramping up efforts to attract global talent into the city. At the same time, employers have an active part to play in retaining and engaging their talent. They should remain agile and competitive in compensation and benefits strategies. And beyond salaries, they should strive to enhance employees’ broader experience to meet both professional and personal needs, such as physical and mental wellbeing, training and development, flexible work arrangements, and career and growth opportunities.”
1 The Asia Pacific average excludes India as its data is unavailable as of 15 Nov 2022.
2 https://www.censtatd.gov.hk/en/press_release_detail.html?id=5078
About Mercer’s Total Remuneration Survey
The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.
For more data and insights from Mercer’s Hong Kong SAR Total Remuneration Survey 2022, please see here.