Asia Pacific firms expect salary budgets to grow slightly faster next year

The survey was carried out in August and September. It was conducted online among companies in 13 markets across Asia and the Pacific. Altogether, more than 500 sets of responses were received from companies in a wide range of industries, including financial services, pharmaceuticals, automotive, chemicals, fast-moving consumer goods, high technology, energy and retail.

More than 90 per cent of the survey respondents also plan to hire new employees in the next 12 months, a strong testament to the positive hiring outlook in the region. 

The survey shows that salary growth rates in the Asia-Pacific region are expected to range from 2.3 to 12.0 per cent next year, representing a slight increase of 0.1-0.5 percentage point from 2012. For all 13 markets covered in the survey, salary growth rates are expected to outpace projected inflation rates for the respective markets for 2013. 

Rachelle Arcebal, global data services practice leader, Asia-Pacific, for Towers Watson, said that with a better macroeconomic outlook, business confidence had improved significantly over the past few months, and nearly two-thirds of the companies in the region were now more positive about their business performance. 

More than 90 per cent of them also intend to hire in the next 12 months. However, the survey shows that the companies in the region are only projecting a slightly faster salary increase. This indicates that employers are generally still in a cautious mood. 

Nonetheless, Towers Watson sees many of them doing their best to offer competitive and comprehensive compensation packages in their recruitment efforts, taking into consideration inflationary pressures that are weighing on their employees.

Respondents in both Vietnam and India are budgeting a double-digit salary increase of 12.0 per cent next year, the highest in the region. These two countries are also most affected by inflation, with India being expected to post the region’s highest inflation rate of 7.6 per cent in 2013, followed by Vietnam with 6.9 per cent. 

Salaries in India are expected to increase at the fastest pace in the region, with a rate of increase that is 0.5 percentage point higher than in 2012. 

In Singapore, the respondents are budgeting an average salary increase of 4.5 per cent, higher than the 4.3 per cent for 2012. As the unemployment rate continues to remain flat at a low 2.0 per cent, the job market in Singapore is expected to remain tight, which will continue to lend strong support to domestic wage growth.

Arcebal added that given the unique nature of Singapore’s economy and its capacity constraints, the city-state has always been faced with a tight labour market, especially in certain sectors that require specific skill sets and expertise. 

The recent tightening of regulations on companies’ ability to hire foreign workers and rising employee medical costs may accelerate wage inflation in Singapore. It is imperative that companies here look for new ways to improve workforce planning, invest in technology to enhance productivity, and put a greater focus on better managing and communicating employee benefits and rewards, Towers Watson said.

The survey shows that the business outlook in the region has improved significantly over the past six months. Almost two-thirds (65 per cent) of the respondents have a favourable outlook for their business and expect their business performance to improve by the end of this year. This represents a significant increase from just 10 per cent in the previous survey conducted half a year ago. 

The proportion of companies with a negative outlook has also shrunk from 28 per cent in the previous survey to just 10 per cent; 25 per cent of companies have a neutral outlook and expect flat growth. 

In line with the improved business outlook, 91 per cent of respondents say they plan to hire new employees in the next 12 months, with a strong focus on sales, engineering and marketing jobs. 

In terms of staff turnover rates, Thailand, China, India, Japan and Singapore are expected to register slightly higher voluntary staff turnover next year, while Indonesia, Malaysia, Taiwan and Vietnam are projected to have lower voluntary staff turnover. 

The top three reasons cited by employees when they leave their companies are better career opportunities (43.6 per cent), higher pay (38.8 per cent) and greater flexibility in work arrangement (12.9 per cent).