Hong Kong, 29 October 2015 – Today Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), shared the latest trends in compensation and total rewards at its Aon Hewitt Annual Rewards Conference – 2015 Hong Kong.
While the global economy has seen modest growth so far in 2015, global growth is projected to be slightly lower for the remaining of the year. Advanced economies have seen a small pick-up with the US in a generally good condition, but are experiencing temporary weakness. Europe enjoyed slightly improving growth despite turmoil in Greece, and Japan had a first quarter pickup but weaker underlying momentum in real wages and consumption. Meanwhile, emerging markets and developing economies have experienced a slowdown compared to recent years of turbo growth, due to lower commodity prices and tighter external financial conditions in Latin America and oil exporters, structural shifts combined with financial turmoil in China, and economic impact of geopolitical and economic factors such as in Russia. Overall though, 2015 is looking like it may usher a very slightly stronger growth in 2016.[1]
In Hong Kong, despite political instability earlier in the year and an economy relatively affected by the slowdown in world trade, the unemployment rate remains stably low with a seasonally adjusted unemployment rate at 3.3% in July-September 2015 for the third consecutive period, and a slightly reduced voluntary employee attrition of 12.6% in July 2014-June 2015 vs. 14% a year earlier. Wages increased at a stable momentum by 4.6% in June 2015 over a year earlier (i.e. basic wages, other regular and guaranteed allowances and bonuses).[2]
A closer look at Compensation Trends across industries and levels brings the following insights:
- Driven by high growth in infrastructure planning and development (such as the Ten Major Infrastructure Projects), the Construction and Engineering sector enjoys the highest salary increases in 2015 (4.9% in 2015 and 5.1% projected in 2016)
- Life Science (including pharmaceutical industry and medical devices) are unaffected by the global economic cycles, remain among the industries that delivered the highest average salary increases in Hong Kong in 2015 at 4.9%.
- Although hit by reduced sales volumes, particularly in the luxury sector hit by decline in Mainland tourism and consumption, salaries in the Retail sector see a 4.9% increase in 2015. Although the situation is predicted to further deteriorate, employers maintained competitive compensation in an effort to hold on to their existing sales force and talent.
- The Hospitality and Travel sector, also impacted by lower inbound tourist arrivals, and the Transportation and Logistics industry, affected by decreasing world trade, see the lowest salary increases at respectively 4.1 and 3.9%.
[To note that Hong Kong new Competition Ordinance to come into effect on 14 December 2014, will impact how industry bodies, employers and HR collect and peruse salary data intelligence going forward*.]
Gary Chin, Aon Hewitt Rewards Practice Lead in Hong Kong said: “With wages and increases remaining stable since 2011 (average increase of 4.5% over the past 5 years) denoting employers’ cautious approach to budgeting salaries, voluntary turnover is also slightly trending down this year at 12% from 14% in 2014 reflecting the ‘wait & see’ attitude of employees who hesitate a bit more before jumping ship”.
*See Aon Hewitt’s press release and analysis on Competing in Hong Kong, dated 29 Oct 2015.
When observing salary budget allocations and bonuses, overall salary increase is projected to remain relatively aligned across employee levels, while variable payouts (as a proportion of fixed pay) dropped slightly in 2015 over 2014, reflecting the relative lower business performance in 2015.
The biggest salary differential (+64%) exists between Senior Management and Directors reflecting the importance placed by companies in strategic roles. The difference with the rest of the workforce further increases when including bonuses as allocated more, proportionally, to Directors.
Gary Chin said: “Overall, variable pay has slightly gone down, due largely to weakened business performance. Given finite budgets, employers are still attempting to differentiate merit increases and bonuses by performance level, although the variance in terms of the amounts received by top performers and their average performing counterparts have narrowed. This poses motivational and retention challenges to employers “
With the ssalary increase differential based on performance narrowing and the variable pay differential following the same pattern:
What can employers do to ensure they attract the right talent and nurture their workforces to stay and strive on the job?
Aon Hewitt TCM Survey Hong Kong further shows that there exists in 2015 more and more alignment between turnover reasons and retention measures, the first three being: Accelerated career development opportunities, Pay above market and Attractive benefit packages, while key measures taken to attract employees reveal that employers consider all aspects of Total Rewards in combination.
Kelvin Lam, Managing Director of Aon Hewitt in Hong Kong said: “The Aon Hewitt’s approach to Total Rewards advocates a combined attention given to all “4 Quadrants” namely: a competitive Compensation package, meaningful or flexible Benefits, a Work Environment conducive to higher engagement, and Learning & Development programs that facilitate career progression, all in synergy. While we are seeing more and more employers acquiring the sense that they can’t compete without those, not all organisations and HR functions have yet the maturity to translate this into actions. Aon Hewitt research suggests that the best performing organisations(3) in that regard, do not have a higher HR budget, but a better use of it”.
In these cautious times, where employers in Hong Kong need to revisit data and budgeting almost month to month as the economy outlook fluctuates fast, a total rewards approach, and not only a monetary one, is what differentiate employers’ attractiveness and ultimately their business performance.
ENDS
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3 Source: Aon Best Employers 2015 study in Hong Kong and Asia Pacific
About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.
About Aon Hewitt
Aon Hewitt empowers organisations 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 organisational 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 in Asia Pacific, please visit www.aonhewitt.com/apac.
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Nicole Lai, Hong Kong | Tel: +852.2917.7952 | Email: Nicole.lai@aonhewitt.com
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[1] Source: IMF World Economic Outlook, October 2015
[2] Source: Hong Kong census and Statistics Department and Aon Hewitt 2013-2015 Salary Increases Survey in Hong Kong
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