The latest Salary Budget Planning Survey Report (Q3) by Willis Towers Watson predicts salary increases in Asia Pacific to remain stable at an average of 5.6 percent this year, slightly lower than the projected increase of 5.9 percent last year. However, when it comes to planning for the salary budget for the next year, only nine out of 20 markets surveyed plan to have a higher salary budget in 2020.
Early projections indicate that salary movements will remain unchanged for the markets including Australia, Hong Kong, Indonesia, Macau, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea and Taiwan.
With the unstable political and economic outlook and the slowdown in global demand resulting in weaker export performance in Asia Pacific, companies have more challenges to prepare for now. Most of the companies seem to be conservative in setting their salary increase budgets for 2020. Further, with the cautious business outlook, recruitment efforts are expected to slow down over the next 12 to 24 months.
The changing employment trend
The survey shows that only 22 percent of the companies in Asia Pacific plan to add new headcount compared to 27 percent last year. On the other hand, organizations planning to maintain their current headcount increased from 66 percent in 2018 to 72 percent in 2019 and only 7 percent of the employers plan to reduce their headcount.
Edward Hsu, Business Leader, Data Services and Compensation Software, Asia Pacific, Willis Towers Watson shared, “We are seeing a change in employment trends which indicates that more organizations are beginning to optimize work through upskilling, automation and outsourcing.”
The consulting firm WTW has over the years identified a drop in voluntary attrition rates across the region, from 14.3 percent in 2017 to 10.4 percent last year. Hsu feels its most likely due to the global economic uncertainty. However, an increase in involuntary attrition has also been on the rise, increasing from 3.6 percent in 2017 to 4 percent in 2018.
In terms of sectors, 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,” added Hsu.
Increased salary budget for Fintech, High Tech, Pharmaceutical and Health Sciences
As per the survey, the 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). Further, the High Tech industry in Asia Pacific is also projecting one of the highest salary increases next year (5.8% in 2020 versus 5.7% in 2019).
In addition, the Pharmaceutical and Health Sciences industry also shows strong growth with 42 percent of the companies expecting a better outlook in business performance next year.
This is perhaps because 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. However, as the market has been more challenging for the Banking industry, it has the lowest salary budget expectations and increase in pay is expected to remain stable at 4.7 percent next year.
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 and the industry is also expected to add more headcount next year, a trend that is similar to the High Tech and Pharmaceutical and Health Sciences industries.
It is true that the elements like the unstable economic and political outlook, changing demands and rapid technological disruption have made it more challenging for businesses to grow and manage costs at the same time. However, it is times like these when the employers need the best of the talent. Hence, attracting and retaining key digital talent would be among the top priorities for organizations around the world. Business and HR leaders have to work together to take a different and innovative approach and create a more robust compensation and rewards strategy, keeping these recent trends in mind.