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Companies in Asia Pacific compete for talent by dangling bigger pay raise

Posted on December 14, 2016

LOCAL FIRMS are looking at a bigger pay raise in the coming year, as competition in hiring continues to tighten while multinationals take more caution in Asia and the Pacific, according to Mercer.

The global consultancy expects salaries in the Philippines to move up 6.5% on average, compared with the 6% actual increase recorded this year, based on its annual Total Remuneration Survey and bi-annual Market Pulse surveys.

Companies in the fast-moving consumer goods and energy sectors charted a more aggressive salary increase of 7% for next year, according to the survey results consolidated in the Compensation Planning for 2017 report released late Monday.

“The Philippines has very young demographics -- with an average age of 23, we have become exporters of talent particularly in the Asia-Pacific region,” Floriza I. Molon, business leader for Mercer’s Talent Information Solutions in the Philippines, said in a statement.

“As a result, organizations in the Philippines compete for talent regardless of industry and location. Sales and finance are the two most difficult roles to recruit and retain. The sales role cuts across different industries; hence, it has become an in-demand job, and the influx of shared services operation in the Philippines has opened up a lot of opportunities for the finance roles.”

The tightening competition in finding and retaining talents reverberates across the Asia-Pacific region, according to Mercer, with the life science and chemical sectors yielding the strongest forecasts.

“With the vast improvements in the employer brands and employee experience at large local organizations in countries across Asia Pacific, multinationals are facing increased competition in finding and retaining the right talent,” Puneet Swani, partner and growth markets talent leader at Mercer, noted in the statement.

In this light, companies in majority of emerging Asia-Pacific economies plan to implement bigger salary increases next year, with India and Vietnam likely registering the highest salary upgrades of 10% and 9.2%, respectively.

In financial hubs Hong Kong and Singapore, meanwhile, salaries are projected to rise 4.2% and 4.1% next year.

The bigger economies in the region -- Japan, New Zealand and Australia -- may record the smallest raise of 2.2%, 2.8% and 2.9%.

Taking into account inflation, salary increases have steadily climbed in the region.

Real wage growth even reached double digits in emerging markets despite the benign inflation environment in most countries, Mercer noted.

The consultancy observed several “tiers” of countries in Asia-Pacific in terms of pay levels. In Australia, Japan and South Korea, for instance, annual salaries begin at $30,000 for rank-and-file employees and rise steeply to as much as $350,000 for senior positions.

Salaries begin much lower at $5,000 annually in low-cost manufacturing bases before increasing significantly at top-level management.

In some countries -- China, in particular -- the highest-ranking executives earn more than peers in the United States and the United Kingdom, although the picture changes upon factoring in long-term incentives and European social security benefits.

“Talent scarcity plays a major role here, and there are extremely high premiums to be gained by those people with the right skills, in addition to local language expertise,” Mercer noted in the statement.

While they remain keen on increasing wages, companies in Asia Pacific are increasingly focusing on providing benefits for their employees and developing differentiated employee value propositions to appeal to various worker segments.

In Japan and Korea, where the age of employees average at 45 years, companies consider long-term incentives along with retirement benefits.

For the younger workforce of India, Indonesia and the Philippines, employers look at flexibility in benefits and more learning and development opportunities.

“The diverse mix of employees in the Philippines have different needs and aspirations, thus a different approach to managing rewards is required,” Ms. Molon said.

“Based on my conversation with management and HR (human resource) heads, the top HR challenges faced by organizations in the Philippines are keeping employees engaged at work, developing and upgrading skills and a lack of talent pool. From local employees’ perspective, leadership style, career development opportunities, and work culture are the major considerations for them to join and stay in a company.”

Declining workforce participation and rising voluntary turnover continue to worry companies in Asia Pacific, with double-digit turnover rates posted except in Japan and New Zealand. Such a situation means bigger replacement costs, in the form of higher salaries for new employees; recruitment costs and lost production.

In its research, Mercer found 48% of companies in Asia having difficulty filling vacant positions necessary to fuel their expansion, as compared with the 38% global rate.

In a similar report released in early October, Willis Towers Watson projected the same 6.5% increase in salaries in the Philippines for next year. The firm, however, flagged the actual rate could turn out lower as employers across Asia and the Pacific keep costs down amid the prevailing economic slowdown.

The region’s emerging markets nevertheless continue to drive the global economy’s growth, with the gross domestic product of Asia forecast to grow 4.2% next year, according to Mercer, with the growth of India, the Philippines, Malaysia, Thailand and Indonesia likely offsetting the slowdown in China.

“While there may be growing concerns regarding growth in global trade, companies remain cautious yet resilient in the Asia Pacific region,” Mr. Swani said.

“Domestic consumption and investment for most emerging countries in the region has been on the rise. This has meant brighter growth prospects especially for both global multinationals when compared with say Europe or North America.” -- Keith Richard D. Mariano