Salaries across the Asia-Pacific region are set to rise an average 7% in 2014, with China and Vietnam leading the way in East Asia, after allowing for inflation and Japan seeing the smallest raises, according to an American global professional service firm, Towers Watson.
According to the survey, salaries in China are forecast to rise 8.5% and in Vietnam 11.5%, before inflation is taken into account, the global risk management and human resource consulting firm said.
It added that taking inflation into consideration both countries are set for 4.9% increase on an average. Meanwhile, the figure stands at 4.5% for Hong Kong and Singapore, 11% for India and only 2.3% for Japan.
What could be further interpreted from the findings is that many companies in the Asia-Pacific region are finding it harder to find and retain suitably skilled staff, as more than 80% of the companies surveyed say a larger portion of their salary budget increase allocation would go to high performers in 2014. Moreover, less than 1% of the companies anticipate a pay freeze, compared to nearly 4% in 2013.
Sambhav Rakyan, Global Data Services practice leader, Asia-Pacific at Towers Watson said that overall the data for 2013 and 2014 shows great similarity, which is assumable that companies should be budgeting for salary increases much in the same manner as last year.
However, he indicated that it depends on the affordability for the company. If the company is growing at a fast rate and revenue exceeds the cost by a huge margin, it is easier to be aggressive on salary budgets than low growth companies. He also noted that Employee Value Proposition (EVP) is strongly significant.
“People may say ‘it’s not about the money’, but the reality is that base pay is the number one drive for attraction and retention globally based on the Tower Watson 2012 Global Workforce Study. However, we also believe that a well-defined employee value proposition plays a very important part too”, said Rakyan.
Among the many areas that the survey looked into, the pharmaceutical sector is expected to see the biggest pay rises at 7.3% on average in 2014 for the region. While retail and media sectors are expected to see about 5.4% - 5.7% rise, down a touch from 2013.
Meanwhile, the anticipated salary rises in financial services are considered to be in an area of particular interest, given the sector has just come out of several years in the doldrums. The survey suggested that those working in the financial services sector could look forward to increases region-wide averaging 6.2%, compared to 5.7% in 2013.
The biggest raises are anticipated in China (8.8%), India (10%) and Indonesia (9%). Whereas, the major regional financial centers; Singapore, Hong Kong and Japan will see more modest raises – respectively 4%, 4.5% and 2.3%.
It is also important to note that Asia’s emerging economies, such as Indonesia, Sri Lanka and parts of Indochina, are the standard bearers for high pay increases, as these countries tend to have the highest economic growth rates of around 6%-8.5%. However, they also have the strongest inflationary pressures which take up much of those pay rises.
According to Jeffrey Tang, director of Towers Watson’s Talent and Rewards practice in Hong Kong, there are several factors that drive behind the increase of salaries throughout the region. The major ones are such as the great increase in demand for compliance staff to meet with the increased regulations and also the regional expansions by local players that seek to go beyond their domestic shores.