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Philippines found still competitive in wage terms vs China, some peers

Posted on April 27, 2016

PROFESSIONALS in the Philippines receive salaries lower than counterparts in China and some Southeast Asian peers, a finding that serves a double-edged sword for the country, according to a global professional services firm.

In its 2015/2016 Global 50 Remuneration Planning Report released yesterday, Willis Towers Watson noted that base salaries in the Philippines, Vietnam, Malaysia and Thailand are about half those of China.

Professionals, senior management and top management earn 5% to 44% more in China than in Indonesia, the most expensive labor market among emerging economies in the Association of Southeast Asian Nations (ASEAN), whose most advanced member, Singapore, is classified by the report as a developed economy.

On average, entry-level professionals in China receive an annual base salary of about $21,000, compared to $16,000 paid to their counterparts in Indonesia.

The Philippines and Vietnam recorded the lowest average base salaries for professional and middle management positions in ASEAN, paying 1.9 to 2.2 times lower than China.

“The lower salaries in these ASEAN countries give them a competitive edge,” Sambhav Rakyan, Data Services Practice leader of Willis Towers Watson for Asia and the Pacific, said in a statement. [“T]here’s evidence that it is leading companies to reconsider where they locate operations once based in China, where an aging population and shrinking work force suggest salaries will remain higher.”

For the Philippines, the lower base salaries of professionals present both positive and negative consequences, noted Vangie Daquilanea, global data services practice head of Willis Towers Watson for the Philippines.

“The study highlights that the Philippine labor cost is very competitive compared to its neighboring countries which works to our advantage, since more investors will start to consider setting up their operations expansion in the Philippines to leverage on this,” she said in the same statement.

But lower remuneration, at the same time, may drive professionals, who comprise about 40% of the Filipino work force, to leave the country for greener pastures.

In fact, the Philippines is losing its engineers, software developers, nurses and other professionals to overseas jobs “since other ASEAN companies can easily attract them with higher salaries,” Willis Towers Watson noted in its statement.

Latest available data from the Philippine Statistics Authority show that about 2.4 million Filipinos worked abroad at any given time between April and September 2015.

In a report published in November 2015, the Organization for Economic Cooperation and Development ranked the Philippines second among the countries with the most educated migrants. The Philippines has 1.55 million educated migrants, next only to India’s 2.24 million, according to the report titled “Connecting with Emigrants: A Global Profile of Diasporas 2015.”

Base salaries in China will likely remain high to attract talent, Mr. Rakyan noted, given the Asian giant’s push toward quality and sustainability of its products and services and integrating its financial markets globally.

Remuneration in China, however, remains 28% to 52% less than what Singapore pays senior and top management. Furthermore, professionals in Singapore receive twice as much.

“Singapore has always been a leading economy in the region. As it continues to enhance its competitiveness in the international arena, it wants to bring in top talent with knowledge of best practices from all over the world, so offering globally competitive salaries is an important part of the process,” Mr. Rakyan said.

At the top management level, Taiwan offers the lowest base salaries within the Greater China region. It pays just 62% and 47% of those in China and Hong Kong.

Taiwan also lags behind emerging ASEAN countries, particularly Indonesia and Thailand, according to the report designed to help companies establish a consistent global compensation strategy and ensure compliance with local laws and practices.

“Taiwan has an adequate supply of qualified managers for senior and top management, whereas the availability of such managers is relatively low in ASEAN’s emerging countries and that’s why salaries in these markets are higher than in Taiwan,” Mr. Rakyan said.

“In addition, despite the lower base pay, performance-based variable bonuses tend to be higher in Taiwan compared to the other markets.” -- Keith Richard D. Mariano

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