Aon Hewitt Study Reveals Higher Salary Increases for 2011, Companies Anticipate Continued Growth
HR and business leaders are becoming increasingly concerned about talent retention as the Asian economy strengthens, despite uncertainty in the West
HONG KONG, – With the recovery of the Hong Kong economy continuing, employers in Hong Kong show a strong positive sentiment going in to 2011. This optimism is seen in the area of compensation and rewards as well, says Aon Hewitt, the global human capital consulting and outsourcing business of Aon Corporation (NYSE: AON).
According to Aon Hewitt’s latest Salary Increase Survey, the average annual rate of salary increase in Hong Kong for 2010 was 3.2%, and the salary increase projected for 2011 is even higher at 3.6%. In 2009, the salary increase was as low as 1.4%.
A sector comparison reveals that the Insurance (4.3%) and Pharmaceuticals (4.1%) sectors are projecting the highest increases of over 4% for 2011, while the Hi-Tech sector follows at 3.7%. The lowest increase is projected by the Electronics sector, at 2.9%.
Organizational focus is now on growing the top line as opposed to merely maintaining business stability and controlling costs. Only a handful of companies (4.6%) froze employees’ salaries this year, and even fewer (2.2%) plan to do so in 2011. On the other hand, salary freezes were very prevalent last year, when as many as 63% of the companies in Hong Kong reported using them as a measure of cost control.
With economic activities picking up pace again, the labor market has begun to see increased employee turnover. The average voluntary turnover rate has risen from 7.8% in 2009 to 11.6% this year, with the retail and services industries taking the biggest hit. The primary reason for voluntary attrition, cited by 84% of the respondents, remains “Better External Opportunities.” Retention is beginning to re-emerge as a burning concern for employers. The most popular retention measures reported by companies were the introduction of accelerated career development opportunities, timely and meaningful feedback from managers, and improved work-life balance.
Tzeitel Fernandes, Head of Aon Hewitt’s Broad Based Rewards and Executive Compensation Consulting practice in Hong Kong adds a word of caution: “Economic indicators from the U.S. point to some softening of demand. If this trend continues, the impact might be felt in Asia as well. The challenge for employers will be to find the compensation ‘sweet spot,’ which provides an increase large enough to be attractive to employees, without inflating compensation costs so much that the business becomes unviable.”
Gary Chin, Senior Consultant at Aon Hewitt, remarked that salary increase budgets are highly influenced by labor market dynamics: “In Asia, we see organizations make primary reference to market salary increase figures as they determine their own salary adjustment decisions. Unlike in the West, the correlation between macro-economic indicators, such as GDP and inflation forecasts, and salary increases in Asia is in fact not strong. According to our observation, market demand and supply of talent is the key driver for salary increases.”
In terms of variable pay, the majority of the respondents (85.0%) indicated that there will not be any changes in the bonus plan design this year, and these employers have no intention to reduce their bonus payout or delay the payment. Projected bonus payout levels have returned more or less to the pre-crisis period, supported by reviving business performance. Factors that differentiate the eligible amount continue to lie in the employee level and subsequent performance outcome.
“One of the key take-aways by HR leaders from the financial downturn is the importance of timely and informative communication to employees. Even when the business prospects look bright, companies are consistently devoting management time and resources to communicate rewards strategies and policies to their employees. This ultimately helps maintain or improve employee satisfaction with companies’ pay programs and offerings,” said Tzeitel Fernandes.
About Aon Hewitt’s Salary Increase Survey
Aon Hewitt’s annual Salary Increase Survey for 2010-11 was conducted from July to August 2010. It covered 3,055 companies in the Asia-Pacific region, including Australia, Bahrain, China, Egypt, Hong Kong, India, Indonesia, Japan, Korea, Kuwait, Macau, Malaysia, New Zealand, Philippines, Qatar, Saudi Arabia, Singapore, Sri Lanka, Taiwan, Thailand, United Arab Emirates and Vietnam.
About Aon Hewitt
Aon Hewitt is the global leader in human capital consulting and outsourcing 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.
Aon Corporation (NYSE:AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital solutions and outsourcing. Through its more than 59,000 colleagues worldwide, Aon unites to deliver distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon’s industry-leading global resources and technical expertise are delivered locally in over 120 countries. Named the world’s best broker by Euromoney magazine’s 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance’s listing of the world’s insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary 2007-2010, best reinsurance intermediary 2006-2010, best captives manager 2009-2010, and best employee benefits consulting firm 2007-2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon’s global partnership and shirt sponsorship with Manchester United.
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