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Aon Hewitt Compensation Study Reveals Cautious Optimism and Stable Salary Increases in Asia in 2013 while Indicators Are Looking Up for Next Year
HR and business leaders faced with maximizing total rewards value to keep workforce stable

November 5, 2013 – HONG KONG – While the global economy remains on track for a mild recovery in the final months of 2013 and looking up to 2014, the upturn is slower than expected.  China seems to be keeping a strong grip on its debt policies and particularly property prices, while India and Indonesia, fuelled these past few years by strong growth and domestic consumption, have been hit by high inflation and accounts deficits this year.  Overall though, 2014 is looking like it may usher a stronger growth in 2015.*

According to the latest Salary Increase Survey issued by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), employers in Hong Kong continued to exercise caution in budgeting salary increases for 2014. The salary increase projected for 2014 in Hong Kong is slightly trending up at 4.8% versus 4.6% actual in 2013. This keeps increases in the same league as in the three previous years but higher than back in 2010, when Hong Kong was coming out of the global financial crisis.  Adding to this renewed stability Hong Kong, with its status of financial center, its strong operating environment and rule of law, sees for the third year in a row a salary increase trend that is above its GDP and CPI rates (respectively 2.6% and 4.1% ytd in 2013), and squarely projected to be 10 percentage points above those two indexes (GDP 3.8% and CPI 3.8%) in 2014 (see figure below). 

According to Aon Hewitt 2013 Salary Increases Survey in Asia Pacific, Organization Performance continues to drive salary budgets (91% of surveyed HR practitioners cite this as the top consideration in driving their budget recommendations). However many markets also strongly consider external factors such as competitive positioning in their industry and markets (84%) as well as inflationary pressures (64%)”. Tzeitel Fernandes, Head of Aon Hewitt’s Broad Based Rewards and Executive Compensation Consulting practice in Hong Kong, commented: “Asia continues to be the tale of many countries, with trends varying significantly by countries. Most countries are slightly more optimistic about 2014 than they were about 2013, with Asian economies continuing to grow, and firms cautiously optimistic and willing to invest.  Performance differentiation however continues to be the key, with high performers receiving higher variable pay as well as higher increases in base pay.”

A sector comparison in Hong Kong reveals that the Chemical sector is projecting the highest increase in salaries for 2013 at 5.2 %, reflecting a global trend in this sector, followed by Health Care & Medical Services at 5.3%, Construction and Engineering at 5.2% mirroring the ever-changing urban landscape of Hong Kong, and the Retail sector (5%) responding to a high demand for sales staff in particular and traditional high staff turnover. The lowest increases are  anticipated in the Transportation and Logistics sector, impacted by China’s slightly slowing export industries, and the High Tech sector, reflecting the moving away of technology hubs to less expensive locations to avoid escalating property prices.

One expression of the remaining cautiousness exercised by organizations surveyed in 2013 is that 1.2% of them actually froze salaries this year. This is to be compared with 2.9% in 2012, denoting an easing trend in that regard, and the willingness to keep workforces as stable as possible by offering equitable salary increases across the board.

David Leung, Compensation Practice Lead with Aon Hewitt, remarked: “Organizations are striving to be equitable when it comes to budgeting pay rises.  Companies are competing hard for talent that is as scarce as ever. With a labor shortage being acutely felt and reported in Hong Kong, companies are having to manage shortages in many job categories. The unemployment rate continued to be low in Hong Kong in the past 12 months (3.3%), making this situation all the more challenging.”

According to the Aon Hewitt survey, the Hong Kong labor market has seen a slight increase in employee voluntary turnover for general staff (from 11.8% in 2012 to 12% in 2013) while the manual workforce turnover doubled in the past year (5.9% to 10.2%), and the rest of the workforce turnover declined in 2013, from junior management and professional staff (11.1% to 9.1%) to middle management (8.1% to 4.7%) and senior management (3% to 2.7%) The primary reason for voluntary attrition remains “Better external opportunities” followed by “External equity of compensation” and “Limited [internal] growth opportunities. In response to the reality of talent seeking career growth outside of their organizations, employers are realizing that they need to offer concrete retention measures to their employees. The most popular retention measures reported by companies include “Accelerated career development opportunities”, followed by “Pay above market” (off cycle market adjustments or merit increases) and “Timely and meaningful feedback from managers” reflecting alignment between turnover reasons and retention measures.

However, the engagement drivers ranking highlight the importance for employers to develop targeted pay and benefits packages as well as tailored total rewards options for different employee segments.  Key attraction measures don’t always align with employees’ needs and expectations. Pay and Benefits, for example , come in different ranking positions for Generation Y and Women in the workforce, (respectively 4th and 13th drivers) behind other non-monetary drivers such as Managing Performance, Work Processes, Innovation, etc. underlining the fact that a disconnect exist between measures used to attract employees and what employees are looking for. “Companies are not extracting full value from the wealth of compensation and benefits data in their hands, sometimes hindering their competitiveness in attracting, retaining and engaging talent. HR can use the extraordinary rich data at their fingertips to transform and optimize its talent management approaches, said Jeremy Andrulis, Managing Director for Aon Hewitt in Hong Kong and Taiwan.

Rick Payne, Aon Hewitt’s Practice Leader for Performance, Rewards & Talent in Asia Pacific, concluded: “The Asia-Pacific talent landscape is becoming increasingly complex and competitive with the emergence of new technologies and the convergence of industries. These rapidly shifting dynamics impact HR competitiveness across Asia-Pacific. When there is greater competition for the best talent, organizations must be innovative in the way they offer, package and deliver their rewards programs. In that sense, they need to understand what makes their talent groups stay, strive and deliver their best results, and they must adapt their rewards strategy and employer value proposition to precisely support those drivers.”

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About Aon Hewitt

Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com

  About Aon

Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United

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Romy Serfaty
Aon Hewitt
+852.2917 7952 / 9459 0100
romy.serfaty@aonhewitt.com

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