Asia-Pacific Salary Increase Forecasts Suggest Companies Are Rebalancing Pay

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The FINANCIAL — Overall salary increase forecast for Thailand across industries is 5%, with automotive sector (5.5%) projected to have the highest salary increases in the country, and projected to continue rising in 2019 to 5.5%. Australia is at 2.6% and New Zealand at 2.5%, and Japan has the lowest expected salary growth rate at 2%. New Zealand at 2.5%, and Japan has the lowest expected salary growth rate at 2%. 

Mercer has unveiled the results of its annual ‘2018 Thailand Total Remuneration Survey Post Survey Meeting’ study which identifies key remuneration trends and makes hiring and pay increase predictions for the coming year across Asia, Middle East and Africa. Figures and forecasts are based on the Total Remuneration Surveys – Mercer’s flagship annual compensation and benefits benchmarking study, with participation from over 560 companies in Thailand across various industries this year.

Against a backdrop of continued strong economic and real wage growth (salary increase minus inflation rate) in emerging markets, the highest salary increases in 2019 are forecasted for Bangladesh (10%), India (9.2%) and Vietnam (9.8%). At the other end of the spectrum, Australia is at 2.6% and New Zealand at 2.5%, and Japan has the lowest expected salary growth rate at 2%.

A closer look at pay parity (in terms of annual total cash) reveals that there are now several ‘tiers’ of countries across the region. For example, in Australia, Japan and Korea, starting salaries begin at US$30k p.a., and rise steeply as employees reach senior levels, often reaching US$250–350k.

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Starting salaries are much lower (often just US$5k) in low-cost manufacturing bases, but again increase significantly at top management levels.

In some countries – China, most notably – the highest-ranking executives out-earn their peers in the US and UK, although it is important to note that this picture changes once long-term incentives (LTIs) and European social security benefits are factored in. 26% of organizations in Asia reported a retention bonus provision for employees with specific digital skills.

Mercer’s study reveals that talent scarcity plays a major role in shaping remuneration trends. 48% of companies in Asia report having difficulty filling-in vacant positions, compared with the 38% of companies globally that are struggling to find the right talent to fuel their business expansion.

Subsequently, a significant premium is being paid for employees in specialist sales and engineering roles, in addition to local language expertise.

The rising numbers represent a challenge in terms of replacement costs in the form of higher salaries for new joiners, recruitment costs and lost production, which adversely impact the overall cost of operations and resulting margins.

“As the world’s engine of growth, Asia continues to see sustained demand for skilled talent, with digital skills continuing to draw a premium”, Puneet Swani, Partner and Career Business Leader for the International Region at Mercer said. Companies are offering generous incentives and retention bonuses. “We also find companies deleveraging pay in the wake of increased regulatory scrutiny of discretionary bonuses, reducing year-end pay-outs and increasing base pay in order to contain excessive risk-taking.”

“Companies in Asia Pacific are taking a more holistic view of their total rewards philosophy and employers are increasingly focusing on the experiential components of rewards – programs to deliver meaningful career experiences and flexible arrangements, as well as programs to help manage the physical, financial and emotional well-being of their employees beyond base pay,” Mr. Swani added.

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