Salary increases for employees in most markets across Asia Pacific (APAC) will be lower in real terms next year despite a rise in average salary budgets from 2015, owing to growing inflationary pressure, according to a recently-released research by professional services company Towers Watson.
Salary budgets in the region are set to rise 6.8% in 2016, but once inflation is factored in, average increases will be 3.4% next year. In 17 of the 22 Asia Pacific markets covered by the survey, employees will go home with less money next year. Average inflation in 2016 is forecast to grow at 3.4%, up from 2.5% in 2015.
According to a media statement, the Towers Watson 2015 Asia Pacific Salary Budget Planning Report looks at salary increases across job grades from factory shop floor to executive suite. It helps to understand the salary movements across various sectors and markets, and provide companies with guidelines for their annual salary forecasting process.
In East and Southeast Asia, the biggest overall increases for 2016 will be in Indonesia (9.4%), Vietnam (10.4%) and mainland China (8%) all higher than last year. However, once inflation is taken into account, real increases in these countries drop to 3.9%, 5.6% and 5.8% respectively. At the other end of the scale is Japan, where the overall increase is expected to be 2.4% or 0.9% in real terms.
The contrast between Hong Kong and Singapore is stark. It reflects the persistent inflationary pressures in Hong Kong. Inflation in Singapore next year (1.5%) is forecast to be far lower than in Hong Kong (2.7%) and that's reflected in the real increases. Overall salary budgets in these two locations are projected to be similar, with Singapore being 4.4% and Hong Kong being 4.5%.
"What we're seeing are companies adopting existing practices - such as the percentages of the previous year - as a benchmark for the coming year. Companies need to be smart about how they use limited salary budgets, because high volatility and talent crunches are causing frequent shifts to pay. Determining current pay rates for jobs in Asia Pacific's highly competitive talent market is akin to shooting at a moving target. What companies pay for a job today might be different tomorrow, and if managers don't keep an eye on the market, they could risk losing valuable talent to the competition," said Sambhav Rakyan, Data Services practice leader, Asia Pacific at Towers Watson.
"Facing the challenge of rising inflation and cost, employers are taking a more strategic approach to retaining talent such as by offering an employee value proposition that's more creative and flexible - for example, benefits options to which employees can more readily relate and appreciate. Sometimes it's simply recognising where employee mindsets are for percentage raises and accommodating them," he added.
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