Most employers (63 per cent) in Japan plan salary increases up to three per cent this year. In many cases, salary levels of high-skilled professionals in China, Hong Kong and Singapore exceed those in Japan.

Salary and benefit package (41%) is the key driver for candidates in China looking for a new employer, while in Japan the key driver is seeking new challenges (54%).

According to the recently released Hays Salary Guide, it reveals the majority of employers in Japan (63 per cent) plan increases of up to three per cent in the next review period.  By contrast, employers in China (60 per cent) expect an increase of more than six per cent, while the majority of companies in Hong Kong, Singapore and Malaysia expect an increase of three to six per cent.

Salaries for roles in Japan such as Project Managers (IT), Programmers or R&D Engineers (Automotive) are offered a higher salary range compared to China,” says Marc Burrage, Managing Director of Hays in Japan.

“But when it gets to a certain level where the role demands experience and skills, the situation flips, where you begin to see the salary range become much higher in China.”

In Japan career progression is the key to retention while in Malaysia it’s salary.

“In Japan, one of the key reasons for candidates to move to a new employer is to seek new challenges (54%) followed by lack of career progression in their current role (48%), so you can see that it’s not always about the money,” said Marc.

“The biggest challenge employers have been facing is the talent shortage caused by the significant gap between the skills they need and those available, but although wages have been increasing much quicker than we have historically seen, most employers can still keep salaries in check. To fill shortages, Japan’s employers should focus more on strategies to retain their best talent and provide opportunities for upskilling and new challenges.”

The Japanese recruitment market is opportunity-rich yet candidate-short with permanent salaries, rates for temporary staff and recruitment fees at a premium for junior, bilingual and qualified candidates.

See: Japan’s Top 10 Talent Trends for 2016

Candidates in greatest demand in the commercial sector include Financial Planning & Analysis (FP&A) professionals across all industries, but particularly within consumer and retail, IT and manufacturing.

Chief financial officers continue to focus on strengthening their FP&A functions and saving money by moving parts of their accounting processes to offshore shared service centres. In the financial services sector the greatest demand is for accounting & financial reporting candidates.

Candidate shortages are driving up salaries with the strongest candidates receiving multiple offers, competitive salaries and often sign-on bonuses. Japan remains one of the world’s most challenging locations to source top talent.

Employers will probably need to be more flexible in their approach to sourcing talent in 2016 by understanding the competitive salary market and also developing their ability to speed up the hiring process as soon as they identify the right candidate.

Finance technology salaries in Japan are expected to increase in 2016 with the greatest increases applying predictably to the roles in highest demand. A positive trend in the market has been a return of onshore development and support roles to Japan. Companies have tried an offshore model for cost savings, but came to realise that onshore models provide better results.

HR departments in Japan are gaining the confidence to reassess their needs and invest in a range of functions beyond just recruitment. This change is increasing the scope of roles as well as salary levels across different areas of HR. C&B operations and HR shared services are two new areas of focus.

For this traditionally operational and domestic space, there is a higher demand for bilingual HR professionals able to manage cross-border communications and overseas vendors. Companies that relied on a full outsourcing model are now finding an in-house expert essential to ensure efficiency and accuracy.

Sophisticated HR programs to engage, develop and retain employees are becoming essential in Japan as a response to the “fight for talent” caused by attrition. Bigger HR budgets will enable talent management and organizational development professionals to manage interesting projects.

Also read: Top 5 Jobs for Multi-Skilled Professionals in Japan in 2016