Despite continuous pressure on businesses in the region to keep costs down amid slowing economic growth, salary increases in Asia Pacific remain stable at an average of 5.6 percent this year, according to the latest Salary Budget Planning Survey Report (Q3) by Willis Towers Watson. This is slightly lower than the projected increase of 5.9 percent last year.
Figure 1: Asia Pacific salary increase trends over the past five years (2014-2020)
Source: Willis Towers Watson Salary Planning Survey Report 2014-2019 Q3 – Asia Pacific
Average of 17 markets. Includes salary freeze (0 percent adjustment).
Sixty-six percent of the surveyed organisations expect their company performance in 2019 to be in line with last year while only 25 percent of companies see better business results this year, a drop of 10 percent from 2018. Companies are experiencing more risks in their business environment as the unstable political and economic outlook declined, as well as the slowdown in global demand resulting in weaker export performance in Asia Pacific.
Organisations in most markets remain conservative in setting their salary increase budgets for 2020. Only nine out of 20 markets surveyed plan to have a higher salary budget next year with an increase of at least 0.1 percent in 2020. These include Bangladesh, Cambodia, China, India, Japan, Pakistan, Sri Lanka, Thailand and Vietnam.
Early projections indicate that salary movements will remain unchanged for the rest of the markets, including Australia, Hong Kong, Indonesia, Macau, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea and Taiwan.
Figure 2: Salary increase by market – Asia Pacific
Source: Willis Towers Watson Salary Budget Planning Survey Q3 Report – Asia Pacific.
Includes merit and promotional increase, and salary freeze (0 percent adjustment), median.
With the cautious business outlook, recruitment efforts are expected to slow down over the next 12 to 24 months. The Survey shows that only 22 percent of Asia Pacific organisations plan to add new headcount compared to 27 percent last year. Organisations planning to maintain their current headcount increased from 66 percent in 2018 to 72 percent in 2019. As with the previous year, only 7 percent of organisations plan to reduce their headcount.
“We are seeing a change in employment trends which indicates that more organisations are beginning to optimise work through upskilling, automation and outsourcing. Over the years, our report also found a drop in voluntary attrition rates across the region, from 14.3 percent in 2017 to 10.4 percent last year, likely due to the global economic uncertainty. On the contrary, we are seeing an increase in involuntary attrition, rising from 3.6 percent in 2017 to 4.0 percent in 2018, said Edward Hsu, Business Leader, Data Services and Compensation Software, Asia Pacific, Willis Towers Watson.
“Companies in the Manufacturing, Energy and Natural Resources, and Pharmaceuticals and Health Sciences industries have the highest involuntary attrition rate in the region. The expansion of workplace automation in these industries has changed the mix of talent pools being used as employers tend to add more non-employee talent to their workforces, reducing their reliance on full-time employees. Nevertheless, companies need to ensure the optimal combination of humans and automation as they reinvent their jobs”
Fintech, High Tech, Pharmaceutical and Health Sciences stay ahead while Banking continues to lag behind
The Survey also found that employers in the Fintech industry in China, Hong Kong and Singapore are planning to increase their salary budget by up to 2.1 percent next year on average, the highest jump among all industries (6.2 percent in 2020 versus 4.1 percent in 2019). The High Tech industry in Asia Pacific is also projecting one of the highest salary increases next year (5.8 percent in 2020 versus 5.7 percent in 2019).
In addition, the Pharmaceutical and Health Sciences industry continues to show strong growth with 42 percent of the companies expecting a better outlook in business performance next year. The industry is bolstered by the increasing health conscious consumers in Asia Pacific and expansion of the healthcare and medical consumable markets as a result of the increasing healthcare demand from the ageing population in many of the countries. This is helping to keep the sector’s salary increases ahead in most markets. Employers in this industry are projecting a salary budget increase of 5.9 percent for next year, a 0.2 percent increase from 2019.
Salary increase budgets in the Banking industry are the lowest and expected to remain stable at 4.7 percent next year. The sector has been facing headwinds due to the volatile economic environment, decline in business outlook and the continuously evolving business landscape, especially the intensifying competition from Fintech developments. Financial institutions are now even more cautious with their overall spending. Despite these, the Banking industry still draws the highest variable pay among all industries in the region. Employers in the banks are projected to pay a variable incentive of about three months (24.9 percent) of base salary to employees in 2020.
On the other hand, salaries in the Insurance industry will see an increase from 5.1 percent this year to 5.3 percent in 2020. Variable pay in the Insurance industry is also among the highest at more than two months (17.7 percent) of base salary. The industry is also expected to add more headcount next year, a trend that is similar with the High Tech and Pharmaceutical and Health Sciences industries.
While most companies are keeping their salary budgets steady, it is also found that close to two-thirds of the organisations surveyed expect their headcount growth rate in 2020 to be in line with this year’s expansion. One-fourth of the organisations (25 percent) expect their headcount growth to stay ahead next year.
“Jobs in sales, engineering and technical skilled trades are the top three functions that organisations are likely to recruit in the next 12 months. In particular, engineering jobs are in demand and this could be driven by the increase digitalisation and on-going transformation of business across industries. However, attracting and retaining key digital talent is among the top challenges for organisations around the world. Employers will need to take a different and innovative approach with their compensation and rewards strategy for digital roles and skills,” added Edward.