Higher pay rises forecast in 2017 for most APAC countries

Mercer’s “Compensation Planning for 2017” report includes predictions for hiring intentions and pay increases across Asia, the Middle East and Africa. 
“The salary-increase forecast for Thailand for 2017 is 0.1-0.8 [percentage point] higher than actual increases in 2016. The 2017 median forecast figure for all industries is 5.5 per cent, versus 5.1 per cent in 2016,” said Nichanant Dulsari, talent information solutions business leader for Mercer Thailand.
The highest salary increases in the region are forecast for India (10.8 per cent) and Vietnam (9.2 per cent), while financial hubs Hong Kong and Singapore are forecast to see a 4.2 per cent and 4.1 per cent increase respectively. 
Japan is forecast to see the lowest increase of 2.2 per cent, followed by New Zealand (2.8 per cent) and Australia (2.9 per cent). 
Real wage growth (salary increase minus inflation rate) has also been rising steadily in the region, often reaching double digits in emerging markets despite inflation at its lowest for most countries. And, while forecasts vary quite widely across specific industries, the strongest push is likely to come from the life-science and chemical sectors. 
A closer look at pay parity (in terms of annual total cash) reveals that there are now several “tiers” of countries across the region. For example, in Australia, Japan and South Korea, salaries start at $30,000 (Bt1.07 million) per annum, and rise steeply as employees reach senior levels, often reaching $250,000 to $350,000. 
Starting salaries are much lower (often just $5,000) in low-cost manufacturing bases, but again increase significantly at top management levels. In some countries – China, most notably – the highest-ranking executives out-earn their peers in the United States and the United Kingdom, although it is important to note that this picture changes once long-term incentives and European social-security benefits are factored in. 
Talent scarcity plays a major role here, and there are extremely high premiums to be gained by those people with the right skills, in addition to local-language expertise.
Puneet Swani, partner and growth markets talent leader at Mercer, said: “Hiring, retaining and engaging skilled talent will continue to be a top priority, especially for consumption-driven industries such as life sciences and consumer goods. 
“Changing business models and restructuring in the financial services [have] meant that the sector may not be hiring at rates seen in the last three years, but we continue to see [that the] highest level of pay increases as retaining high-performing talent has become even more critical. 
“We also find companies de-leveraging pay in the wake of increased regulatory scrutiny of bonus pay-outs, thereby reducing year-end bonuses and significantly increasing base pay instead to reduce excessive risk-taking and discretion.”
Nichanant agreed with Puneet on the top three priorities in the region. 
“Based on insights gathered from Mercer’s Thailand Pulse Survey, the priority focus areas for HR practitioners in 2016 and beyond are how to engage their employees, particularly in terms of understanding and optimising the findings from employee engagement surveys, followed by career development and building internal capability, and finally enhancing leadership capabilities,” she said.
“Regarding compensation, we observed that all the industries that participated in the Mercer survey have a more positive outlook for next year.”
The research shows that companies in Asia and the Pacific are focusing more on benefits for their employees. They are developing differentiated employee value propositions to appeal to the different worker segments, such as an increased focus on long-term incentives coupled with retirement benefits in Japan and South Korea, where the average age of employees is 45. 
There is also an increased focus on flexibility in benefits and more learning and development opportunities for the younger workforce in such markets as India, Indonesia and the Philippines.