November 7, 2012 –HONG KONG – With the economic recession still on and the debt crisis yet to be resolved in the Euro zone, China showing signs of an economic slowdown on its exports front, and despite recent encouraging employment figures in the US, economic growth in Hong Kong is projected to decelerate compared to 2011.  While the inflation rate is slightly easing after the 10-year high experienced in 2011, domestic consumption displayed some strength and contributed to the overall moderate growth.*

According to the  latest Salary Increase Survey issued by Aon Hewitt, the global human resource solutions business of Aon plc (NYSE:AON), employers in Hong Kong continued to exercise caution in budgeting salary increases for 2013, the uncertainty faced by key global economies making it difficult to justify large increases. The salary increase projected for 2013 in Hong Kong remains stable and cautiously optimistic at 4.8%. This keeps increases in the same league as in 2011 and 2012, but higher than back in 2010, when Hong Kong was coming out of the global financial crisis and the actual salary increase was lower across the board at 3.1%. 

Tzeitel Fernandes, Head of Aon Hewitt’s Broad Based Rewards and Executive Compensation Consulting practice in Hong Kong commented: “Firms across Asia-Pacific are beginning to accept that they can no longer rely purely on pay to attract and retain key talent. Budgets will remain tight and those who are able to achieve more with less are the ones who will emerge victorious in the war for talent."

A sector comparison in the survey reveals that the Insurance sector is projecting the highest increase for 2013 at 6.1%, followed by Consumer Products, Health Care & Medical Services and Life Science, all at 5.2%.  The lowest increases are anticipated by the Fund Management and High Tech sectors, respectively at 4% and 4.6%.

One expression of the overall cautiousness exercised by organizations surveyed in 2012 is that 2.9% of them actually froze salaries this year (more than the forecast of 2.1%) and 2.1% are also planning to freeze them in 2013,

David Leung, Compensation Practice Lead with Aon Hewitt, remarked: “Companies are cautious when it comes to budgeting pay rises.  Economic uncertainties are still impacting their businesses, yet they are competing for talent and having to manage shortages in many job categories.  The unemployment rate has been low in Hong Kong in the past 12 months, making this situation all the more challenging.”

According to the Aon Hewitt survey, although economic activities are slowing down slightly in the first half of 2012, the labor market has seen a slight increase in employee voluntary turnover. The average voluntary turnover rate has elevated from 12.9% in 2011 to 14,4% in 2012, with the highest overall turnover in the Health Care industry (25.2%) closely followed by the Retail sector (24.8%). The primary reason for voluntary attrition, cited by 83.3% of the respondents, remains  “Better external opportunities” followed by its correlated motive “Limited [internal] growth opportunities” (50%).  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” (55.4%), followed by “Pay above market” (off cycle market adjustments or merit increases) (49.4%) and “Timely and meaningful feedback from managers” (39.8%).

The Aon Hewitt survey this year also measured Key Attraction factors for new joiners. Unsurprisingly, a “Competitive fixed compensation” came first with 68.5%, followed by “Work environment (e.g. leadership, culture, flexible work arrangements)” at 65.2% and “Career development opportunities” at 53.3%, demonstrating if need be that the reasons employees join an organization differ from the reasons they stay with an organization, except when it comes to the all-important career development driver.

On the variable pay and incentive front, the vast majority of the respondents indicated that there will be no significant changes in bonus plan design this year. In an environment of stiff competition for talent, organizations are more than ever linking pay and performance to ensure alignment between their rewards policy and business development strategy. In 2012 like in 2011, their primary focuses remained regular communication/training on the plans and enhancing the linkage to individual performance.

With the adequacy between pay and performance still at the top of the rewards agenda and philosophy for companies in Hong Kong, the main takeaways of the 2012-2013 Total Compensation Measurement SurveyTM lies in the importance for employers to maximize their rewards policies to cater to the various demographics that constitute their workforces – top performers and high potentials, genders, age groups - thus fostering high performance and enhancing engagement and productivity.

Rick Payne, Aon Hewitt’s Practice Leader for Talent & Rewards in Asia Pacific concluded: “In times of economic uncertainty where there is greater competition for the best talent, organizations must be innovative in the way they package their rewards programs.  With a finite salary increase budget, they must define their priorities in terms of talent profile, and shape their rewards practices to give greater emphasis to career development, performance and engagement.  In that sense, they need to understand what makes their talent groups “tick”, and adapt their rewards strategy to precisely support those drivers."

End

*Source: The Economist Intelligence Unit, 2013

About Aon Hewitt’s Salary Increase Survey
Aon Hewitt’s annual Salary Increase Survey for 2012-13 was conducted from July to August 2012. It covered 4,238 companies in the Asia-Pacific region, including Australia, China, Hong Kong (371 companies), India, Indonesia, Japan, Korea, Macau, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.

About Aon Hewitt
Aon Hewitt is the global leader in human resources solutions.  The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance.  Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.  With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.  For more information on Aon Hewitt, please visit www.aonhewitt.com/apac.  

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 61,000 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 http://www.aon.com for more information on Aon and http://www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.

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