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Modest increases on the way

Published on Friday, 31 Dec 2010
Employees expecting bumper pay increases and a handsome bonus are likely to be disappointed unless they are deemed to have excelled at their work during the past year.
Photo: AFP

After two years of cost cuts and austerity, better economic times mean that Hong Kong employers can loosen the purse strings a little, as they finalise salary adjustments for this year. Several surveys confirm that companies plan to reward staff for their efforts and forbearance during the recession, but anyone looking for bumper pay rises should temper those expectations.

"Employees need to share in their companies' success in good times as much as they need to exercise restraint in bad times," says Y.K. Pang, vice-chairman of the Employers' Federation of Hong Kong. "While each sector of the economy and each company will be performing differently, we strongly suggest that [employers] recognise their success in reward strategies in 2011."

That said, though, the federation expresses only cautious optimism about general economic prospects for the next 12 months. Concerns remain, primarily related to the state of trade with major markets in Europe and North America.

Overall salary increases for next year are expected to average 2.5 to 3.5 per cent, with variations depending on the sector and employer. The federation advises companies to link awards and bonuses to corporate targets and individual performance, rather than across-the-board increases. The Hong Kong Institute of Human Resource Management (HKIHRM) echoes these projections and recommendations. In its own survey, the institute said feedback from 45 companies in different sectors representing 30,600 employees indicated an average salary increase of 3.3 per cent. The data, collected in October, was based on adjustments already budgeted for the coming year.

The institute's observation is that pay strategy should continue to focus on rewarding employees who deliver outstanding performance. Companies are moving away from guaranteed bonuses and restructuring packages to ensure that incentives have to be earned.

"A flexible and sustainable remuneration structure based on the pay-for-performance principle [makes most sense] in a business environment that remains turbulent," says Lawrence Hung Yu-yun, co-chairman of the HKIHRM's remuneration committee.

Aon Hewitt's annual salary survey sought comments from almost 3,000 companies around Asia and concluded that average increases in Hong Kong would be 3.5 per cent in the new year. Some industries were at the higher end of the scale, including insurance at 4.7 per cent, pharmaceuticals at 4.1 per cent, and hi-tech at 3.7 per cent.

"Talent retention is now becoming one of the biggest issues for HR and business leaders," says Gary Chin, senior consultant with Aon Hewitt. "Staff turnover is increasing; the primary reason is better external opportunities, so employers need to allocate resources very wisely to retain top talent and people in critical positions."

He notes the bonus for a leading performer, expressed as a percentage of annual base salary, could easily be twice that of someone of a similar grade assessed as merely satisfactory.

"It helps to have a competitive and robust incentive plan in place," Chin says. "But in terms of bonuses, we should not expect companies to be back to pre-crisis levels." 


Fact box

  • Salary increases on the way for 2011, but corporate sentiment is still cautious
  • Strong move towards performance-related pay to reward and retain outstanding staff
  • Managers should explain performance targets in one-on-one talks with employees


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