China and Vietnam set for highest real pay rises in APAC
Recent figures from global professional services company Towers Watson indicate a good number of employees in Asia-Pacific can look forward to bigger pay cheques in 2015, especially in the financial services, hi-tech and pharmaceutical sectors.
The APAC Salary Budget Planning Report analysed 2,900 sets of responses from 20 countries in the region and found that employees can expect pay raises equal to or higher than last year. with China and Vietnam leading the way.
However, once inflation is factored into the equation, 13 of the 20 countries surveyed are forecast to experience lower real increases compared with 2014.
Sambhav Rakyan, Towers Watson’s data services practice leader for Asia-Pacific, says this inflationary pressure is the result of Asia’s resurgent economic growth and declining unemployment.
Nevertheless, over the past 10 years, there has been a correlation between the overall actual salary increase and the actual inflation rate. “Since 2004, the actual salary increase has been within 2 per cent of the actual inflation rate,” Rakyan says. “In general, the actual salary increase is higher than inflation, with the exception of 2011.”
In addition, in developed markets such as Hong Kong where wages are already high, pay tends to increase much closer to the inflation rate, especially over the long term.
In Hong Kong, the engineering consulting sector has flourishing over the past few years. In 2014, the salary adjustment was, for the fourth consecutive year, highest among all local industries, at 5.7 per cent. This is set to continue, with the sector leading the way in salary increases for next year (5.4 per cent), with property, electrical and mechanical engineering also anticipating salary jumps in 2015.
Rakyan puts this engineering boom down to the numerous mega infrastructure projects underway in the city, which has resulted in a shortage of skilled workers in engineering-related sectors.
Regionally and in Hong Kong, IT is a leading sector, with forecast regional average raises of 6.6 per cent – up from 6.3 per cent this year.
“Critical roles in risk management, IT, financial services compliance, regulatory affairs, clinical strategy and project management are all in high demand,” Rakyan says. “So too are qualified researchers in the pharmaceutical sector, as well as new-age technology roles such as mobile app development. These roles will attract a much higher salary increase than the sector as a whole owing to the demand for the critical skill sets needed to perform these roles.”
Rakyan adds that compensation in financial institutions is being more closely regulated since the financial crisis, especially for those bankers whose daily job tasks include risk-taking, which can have a significant financial impact on the bank.
With inflationary pressure mounting, Rakyan says the main challenge is for companies to keep employees engaged and turnover down, while not getting caught up in a pay-inflation spiral. “As the salary-increase budgets stabilise in the region, companies need to carefully evaluate where to spend their limited funds,” he explains. “Differentiating between your crucial skill talent, high potentials and average performers is becoming more essential than ever to ensure best use of your budget.”
At the end of the day, it boils down to affordability for individual companies. While Towers Watson does not anticipate much change for salary increases in 2016 (staying in the range of 2 to 3 per cent and below 3 per cent of the country’s inflation rate), it still makes sense for high-growth companies to be more aggressive with salary increases especially if they are growing much faster than costs, Rakyan says.