As 2013 moves towards its close, the hiring intentions of Hong Kong employers remain positive, at the same time as staff turnover in the city has hit a 10-year high.

A recent survey of 103 companies by the Hong Kong Institute of Human Resource Management (HKIHRM) looked at hiring intentions and employee turnover in Q3 2013 as a barometer for the rest of the year. Companies across a number of different business sectors indicated an intention to increase hiring compared with Q2 2013.

The sectors in which the percentage of companies reporting an intention to increase hiring levels was highest were restaurants and catering (75 per cent), telecommunications (50 per cent), and transport and storage (40 per cent). Meanwhile, the construction, property and real estate sector recorded the highest employee-turnover rate (10.6 per cent), followed by retail (8.7 per cent) and restaurants and catering (7.9 per cent).

Francis Mok, president of HKIHRM, says that the high staff-turnover rates reflect Hong Kong’s vibrant labour market, which has seen a sustained period of low unemployment.

“While a labour shortage is the order of the day in Hong Kong, labour-intensive sectors could be facing even greater pressure regarding staff attraction and retention,” Mok says.

He adds that rising employee turnover could be related to rapid economic development, which leads to high demand for skilled talent. “The imbalance between supply and demand could result in companies fighting for limited supplies of talent within specific trades,” he says.

While a certain amount of employee turnover is healthy, as it leads to new blood and ideas, Mok believes that a high turnover rate can also result in a loss of expertise, put a strain on team spirit and contribute to a lack of sustainability for business continuation. Factors that lead to high employee turnover, he says, include a lack of clear talent-development plans and a mismatch between employee and corporate values. He advises reviewing talent-development plans and improving communications with an aim to gaining employee alignment.

According to the HKIHRM survey, sectors that indicated lower hiring intentions in the second quarter – such as manufacturing, wholesale, import, export, trading, distribution and retail – reported a more positive hiring sentiment in the third quarter.

“All in all, hiring intentions hinge on business conditions and the global economic environment,” Mak says. He added that the direction of US monetary policy is still a global concern, the effects of which can drastically change the economic climate and cause significant challenges for employers and HR professionals.

Christina Sue-Chan, associate head of the City University of Hong Kong’s Department of Management, says that while hiring and career development are topics often talked about as priorities for Hong Kong companies, there is often a mismatch between intentions and delivery.

She adds that disparities between recruitment selection and employee value propositions are particularly noticeable in local SMEs. She explains that research by academics and recruitment consultants indicates that many employee-turnover issues are related to hiring criteria and selection processes.

“A lot of the time it seems that hiring is conducted around people skills, but not for an alignment with the mission and direction of the company,” she says. “If the fit isn’t there, and the employee doesn’t believe in what the company is doing, research shows us they will leave at the first opportunity.”

Sue-Chan adds that from the research available, Hong Kong organisations seem to fall short when both identifying skills and values and bringing appropriate staff onboard. “It seems that many companies view recruitment as a separate function that is isolated from the organisations’ activities and objectives,” she says.

Companies also underestimate the effect that misaligned recruitment and selection processes can have on a company’s future. “The effects of recruitment and selection practices cascade throughout an entire company,” Sue-Chan says.

To help address hiring issues, Sue-Chan recommends that companies adopt a more systematic and scientific approach to recruitment, and look closely at their return on talent investment. She adds that clear communication of career-development opportunities at the hiring stage and maintaining career-development commitments can help to underpin employee engagement and loyalty.