Hong Kong, 8 January 2014 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON) recently released in China its annual Human Capital Intelligence Report for 2013, revealing a directional indicator for Chinese employees’ salaries and development trends in human resources.. According to the Aon Hewitt survey, the 2013 increases are 8.5% average salary growth and 14.3% annual turnover.   

The survey covers more than 4,000 companies in forty major industries, including high-tech, real estate, finance, medicine and medical equipment, automotive, consumer products, retail, chemicals, logistics, and manufacturing. Participating companies are located in Guangzhou and Shenzhen and their environs to the north, as well as major second and third-tier cities. Participation rates of state-owned enterprises (SOE) and private-owned enterprises (POE) went up significantly since last year’s survey (by 19% and 8%, respectively), confirming domestic companies’ confidence and determination to raise the effectiveness of their human capital and to compete more actively for talents in the labor market.

The national average salary growth and turnover rates slow down; a new trend in performance-based salary emerges

China’s economy maintains steady growth. For the first time though, the state government set its 2013 target GDP growth rate to around 7%, the lowest in 20 years. This has also been accompanied by a slowdown in the growth of average salary and turnover rates in 2013. 

Previously, both indicators experienced rapid growth over six consecutive years. Interestingly, there are 8.5% and 10.9% increments, respectively, in the salaries of foreign and domestic companies in China for 2013. The different increments reflect the fact that foreign companies suffered greater impact from the global economy turmoil. 2013 saw the global headquarters of foreign companies becoming more stringent in their efforts to control salaries. Their increased rigidity contrasts with domestic companies, which put great efforts into enhancing their salary competitiveness and focus on the Chinese market. Consequently, the salary gap between foreign and domestic companies is gradually reducing. ⁽¹⁾  

Aon Hewitt’s data on turnover rates shows that employees in retail, high-tech, and consumer products, which have the highest turnover rates historically, are acting more cautiously in pursuit of their own career development, leading to flat growth or a reduction in turnover rates for this year. The turnover rates in 2013 for these three sectors are 30.3%, 23.2%, and 19%, respectively.

Peter Zhang, Vice-President and Partner, Head of Compensation Practice for Aon Hewitt in China said, “Although the 2013 average salary growth in China is lower than last year, it is still the highest within the Asia-Pacific region. Pressures resulting from the expansion of human capital costs forced companies to make the most out of limited funds to create a high-performance corporate culture and pay-for-performance practices. The Best Employers study by Aon Hewitt concludes that companies characterized as high-performance cultures tend to reward their outstanding employees with incentives that are more closely linked to their performance. This linkage, in turn, drives employees to achieve corporate goals and visions. This trend can be seen in the highly competitive consumer goods industry, where the competition to get the best talent is as fierce as the battle to grow market share. To enhance morale among their frontline sales staff, we saw ambitious companies in the domestic consumer-product sector reward outstanding performers two and a half times over their average-performance employees’ salaries. We believe that pay structures more closely linked to performance and a greater focus on compensation will be more widely adopted by all industries.

Acquire a “Best Employer’s” reputation, enhance total awareness on compensation, and establish more customized human resources management

The Aon Hewitt 2013 Trends in Asia-Pacific Employees’ Engagement Report shows that employees in Chinese enterprises score 62% in terms of engagement (compared to 75% engagement score of China Best Employers) ⁽²⁾  Failure to improve employees’ engagement levels creates headwinds for future development. Furthermore, Aon Hewitt’s 2013 Human Capital Intelligence Report finds that even if companies increase their long-term incentives for their employees in key positions and functions, they actually tend to decrease their investment in benefits and short-term incentives. For example, in 2013, there was a 35.7% decline over last year among the companies surveyed that have plans to increase the benefit proportion of their budget.  

Additionally, Aon Hewitt’s Total Compensation Measurement survey across the Asia-Pacific region in 2013 discovered that 87% of employees in participating companies only care about the figures on their pay cheque and lack overall awareness of their benefits. To confront this dilemma, organizations should be more concerned about increasing long-term incentives and flexible benefits to effectuate a more individualized approach. A paramount aspect of this involves more effective communication of these benefits to employees, thus enhancing employees’ awareness, understanding, and appreciation of their total rewards. Zhang suggests, “Under the current market conditions, companies must explore new ways to raise labor efficiency, create opportunities to maximize staff awareness of their total remuneration, and consider more long-term incentive plans. Employers can improve their reputation by striking a balance between the corporate vision and the needs of employees, developing incentive plans that are attractive to employees of various sectors/age groups, and by offering enticing retention and engagement practices.” 

New challenges in human capital management wrought by cross-sector operations

The decline in China's demographic dividend prompts firms to pay increasing attention to productivity. Cross-sector operations offer firms the opportunity to develop inspiring ideas and a platform to facilitate growth. The rise of e-commerce has led to this boom in cross-industry businesses. The average salary growth in all e-enterprises for 2013 is 9.8%, while turnover is 29.6%. This industry faces intense competition for talent, especially for product managers, mobile application engineers, data miners and analysts, designers, and platform developers. Aon Hewitt’s study also shows that the e-commerce industry faces a dearth of personnel with five-to-eight years of experience.

This boom also leads to an increasing demand for workers who can multitask. Competition for current graduates today is particularly intense. According to the Ministry of Human Resources and Social Statistics, there are almost seven million college graduates in 2013, representing the largest number of graduates since the People’s Republic of China was founded. Current Aon Hewitt study statistics reveal there are significant differences between the salary levels of workers in major and minor cities. The intense need among corporates to train different levels of employees causes keen competition for fresh graduates; increased competition has now spread out to secondary cities, as well. The average salary for graduates from major cities is RMB 52,000 per annum, while those from tier-2 and tier-3 cities earn an average of RMB 42,000. This RMB 42,000 figure represents 9.3% growth compared to 2012, far exceeding the rate of growth in major cities. Enterprises need and want to attract outstanding graduates. Graduates of lesser educational institutions have been found to be lacking the skills necessary to meet today’s business needs head-on. As a result, they are facing rigorous employment challenges.

Zhang said, "The evolving need for more highly-qualified personnel, stemming from increases in cross-sector operations, raises the degree of difficulty companies encounter in their selection and development of workers. This reality is driving more firms to consider a corporate university model for training and developing employees who will thrive in their unique corporate culture, as well as meet their organization’s future human capital development needs.” At the same time, such industry transformation also impacts the rate of personnel turnover among these industries, especially in key positions for customer-oriented operations such as sales, marketing, and product management. Nowadays, firms need not only to face major competitors within their own industry, but also from those in cross-sectors.”  The intense competition among companies to win over newly-trained employees, believed to be better equipped to multitask and confront business challenges, makes it all the more urgent for employers to find innovative ways to retain and engage those promising junior employees their organization has already invested in and trained.

Added all together, the current economic climate, this year’s salary increase and turnover rates, HR development trends, and challenges today facing e-business and cross-sector enterprises, do indeed call for more innovative human capital practices to manage the transformation of today’s organization and talent assets.

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Notes:

1. See Aon Hewitt’s report Magnetic Appeal: Attracting Talent in China, Finding solutions in China’s competitive talent landscape
2. Aon Hewitt Recognizes China Employers who Empower Results

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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

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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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