Taking inflation into account, China to see the highest salary increase in the region
In what is a clear indication of a positive economic sentiment, all 20 surveyed countries will witness an increase in 'regular salary reviews' in 2015 with a noteworthy reduction in the number of companies that opted for a 'salary freeze' or 'postponement' in the previous year. Timed to coincide with companies' budget planning process for 2015, the reports helps one understand the salary movements across various sectors and markets and provide companies with guidelines for their annual salary forecasting process. "We foresee an increased economic growth in Asia Pacific in 2015 in light of a declining unemployment rate and rising GDP in the region. This, in turn, will lead to inflationary pressures that affect real salary increases. Indians will only see an effective salary increase that is one-third of the overall salary increase due to such pressures," said Sambhav Rakyan, Data Services practice leader, Asia Pacific at Towers Watson.
China (5.2%) and Vietnam (4.1%) will lead the way in East Asia for salary increases in 2015 after taking into account inflation, while Japan (0.6%) will see the smallest raises. Across the region, employees will have pay raises equal to or higher than last year in percentage terms, with the exception of Taiwan, where the rate of increase will drop from 2.8% to 1.7% after inflation. In real terms, however, increases will be lower for 12 out of the 20 Asia Pacific countries covered in the survey. Hong Kong and Singapore are both set for an overall increase of 4.5% in 2015, unchanged from 2014, but after accounting for inflation, Singaporean employees will see a higher increase of 2.2% as compared to 0.9% in Hong Kong.
The Towers Watson survey illustrates the challenge faced by businesses in the region as they seek to balance the effect of growing inflationary pressures and managing costs, while continuing to offer salaries sufficient to attract and retain skilled staff. "Our research demonstrates that salary continues to be the number one factor for attracting and retaining talent. As a result, a majority of employers across Asia Pacific plan to allocate a larger portion of salary budget increase to high performers," added Sambhav Rakyan.
Sector trends in India
Analyzing the findings by employee groups in India reveals that all employees – from production workers to executive directors – are set to have higher pay raises than last year.
The pharmaceutical sector across the region, including in India, will continue to have amongst the highest salary increases. Vietnam (12%), India (11.5%) and China (8.9%) will see the highest pay increases in this sector. "Patent expiries, increasing demand and encouragement for genetics have continued to put pressure on companies to attract and retain talent, particularly for jobs such as in regulatory affairs, clinical strategy, project management and qualified researchers," said Sambhav Rakyan.
The financial services sector in India has traditionally seen higher comparative pay increases, but at a modest 10%, the projected salary increase for 2015 is the same as the previous year and not as high as other sectors. "Compensation at financial institutions has become a major concern for governments and the general public as a consequence of the recent global financial crises," said Sambhav Rakyan. "Discussions have been raised to regulate bankers' compensation, especially for those whose daily job tasks include risk taking that can have a significant financial impact on the bank."
The region's high-tech sector is expected to see raises on average of 6.6%, up from 6.3% in 2014. Across all job levels, salaries are expected to rise. In India, the sector is set to see an increase of 10.7% in 2015, up from 10.5% the previous year. Interestingly, Indian employees at both ends of the hierarchy - top management and blue collar staff – are likely to see the highest comparative pay increase in 2015. "It's an indication that the high-tech sector is emerging from the cost pressures of the past with new-age technology companies wooing the top talent with high salaries, flexible and "cool" work environments.
Providing a regional perspective on the high-tech sector, Sambhav Rakyan added "Noteworthy here is that only in China will pay increases in this sector be lower in 2015 (8%) from this year (8.3%), suggesting an oversupply of talent in this sector or that the sharp increases we've seen in recent years are beginning to slow down. It also reflects the efforts of companies to move manufacturing and R&D deeper into China's hinterland, such as Chengdu, Zhengzhou and other such cities, where salaries lag those of the eastern seaboard."
Commenting on the overall findings, Raghav Datta, Rewards Leader, India at Towers Watson said: "As the salary-increase budgets stabilize, companies need to carefully evaluate where to spend their limited funds. Differentiating between your crucial skill talent, high potentials and average performers is becoming more essential than ever to ensure best use of your budget. We believe that a well-defined employee value proposition (EVP) is increasingly important as cost pressures and the talent shortage become more acute. This EVP should articulate how an employer is unique, offers a great workplace, and why the company attracts and retains great people."
Top Management Salaries in India
In 8 out of the 10 sectors surveyed, the pay raises for Executive Directors and Senior Management in India are expected to be higher than or equal to 2014 with the Professional Services sector particularly standing out at 4.5%.
