Salary increases in Asia Pacific saw a mild rebound this year for the first time since 2014. Averaging at 5.7 percent across 17 markets, salary increases are 0.1 percent higher than the 2017 average of 5.6 percent, according to the latest Salary Budget Planning Survey Report (Q3) by Willis Towers Watson, the leading global advisory, broking and solutions company.

This gentle upward trend is expected to continue through 2019 due to the region’s realistic outlook for business results this year. Sixty percent of surveyed organisations expect their company performance in 2018 to be in line with the prior year’s results.

On average, 16.8 percent of the salary increase budget is being allocated to top performers, which represent 12.8 percent of employees across the region. This implies that for each $1 allocated to an average or below-average performer, $1.44 is allocated to a top performer. The annual incentive for 2018 averaged at 1.5 months’ base salary, which amounts to 12 percent to 13 percent across the region. Incentives were slightly higher in China, Hong Kong, Malaysia, Singapore, Thailand and Vietnam at 1.7 months on average, while these averaged at 1.8 months for Taiwan.

Early projections for 2019 expect salary increases to be 0.1 percent to 0.5 percent higher compared to 2018, particularly in nine out of 17 markets including China, Indonesia, Japan, Malaysia, South Korea and Thailand. Salary movements will remain stable in Australia, Hong Kong, India, New Zealand, Philippines, Singapore, Taiwan and Vietnam.

Despite the stable business outlook, recruitment efforts could slow down over the next 12 to 24 months, as only 27 percent of Asia Pacific organisations plan to add new headcount, compared with 39 percent in the previous year. Nonetheless, organisations planning to maintain their current headcount increased from 54 percent to 66 percent. As with the previous year, only 7 percent will reduce their headcount. These trends suggest that more organisations are beginning to optimise work through automation, outsourcing and upskilling. Additionally, voluntary attrition has gone down to 13.2 percent from a high of 15 percent on average, reflecting improvements in how employers are redistributing and developing their existing talent pools.

Pharmaceutical and Health Sciences remain ahead while Financial Services lags behind

The strong growth of Pharmaceutical and Health Sciences industry in the region is helping to keep the sector’s salary increases ahead in most markets. The sector is bolstered by biotech developments and other digital innovations, as well as recent policy reforms in China and Japan. On average, 2018 median salary increases in the Pharmaceutical and Health Sciences industry is 0.2 percent higher compared to the general industry, with the larger differences seen in Indonesia (0.9 percent), China (0.5 percent) and India (0.3 percent).

On the other end, salary increases in the Financial Services industry still lag behind in most of the markets in the region. The sector has been facing headwinds in a continuously evolving business landscape, particularly due to intensifying competition from Fintech developments, thereby making firms in this sector to be even more cautious with their overall spending. On average, the 2018 median salary increase in Financial Services is 0.3 percent lower than the general industry.

Greater focus needed on pay equity, transparency and flexibility

 Willis Towers Watson’s recent study into current compensation practices found that, about half of employers in Asia Pacific are effectively using their base pay programmes to differentiate pay and to drive higher individual performance. However, 61 percent say that their pay strategies are limited by how much they can afford. In today’s tight labour market, the most critical and in-demand skills could receive a market premium of 10 percent to 25 percent above average and a bonus of up to 1.5 times their monthly salary.

Organisations can respond to this challenge by aligning their compensation strategy with urgent employee expectations around pay transparency and pay equity. Shai Ganu, Managing Director of Talent & Rewards in South Asia and Rewards Business Leader for Asia Pacific, emphasised that employers need to first prioritise making fairness an integral part of the compensation programme before embarking on a journey to transparency. At present, only 22 percent of organisations in the Asia Pacific region have a formal programme that focuses on diversity and inclusion. “Implementing successful fair-pay programmes needs two catalysts for change: (a) Strong, irrefutable fact base; (b) Personal sponsorship and commitment from top management,” says Shai.

Sambhav Rakyan, Willis Towers Watson’s Data Services Practice Leader for Asia Pacific, pointed out that it is likewise crucial to move away from the traditional ‘one size fits all’ compensation model, which benchmarks an employee’s pay on the present range and on the valuation of the job that they’re placed in. Sambhav added that employers need to think creatively about their rewards strategy and also to consider flexibility in managing and delivering rewards.

“Future businesses will demand greater agility and responsiveness in organisations where people frequently change roles or move across organisations and boundaries, and work in multi-disciplinary teams to acquire and apply new learned skills and expertise,” continues Sambhav.

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