Cautious approach to pay in Asia’s financial sector

Author: Liana Cafolla | Date: 24 Feb 2016

Mercer report takes industry’s pay pulse, while HSBC says it won’t be hiring in 2016

Caution is the watchword in this year’s approach to compensation in the financial services industry, according to a new report from Mercer, a global consultancy.
 
The ‘Global Financial Services Executive Compensation Snapshot Survey’ revealed that increasing emphasis on risk management and regulatory requirements is feeding into organisations’ pay plans, leading to increases in fixed pay, decreases in bonuses and a growing focus on non-financial performance.
 
Almost two-thirds of the 71 organisations surveyed globally said they had increased fixed pay by at least five per cent, and 58 per cent had cut variable pay by more than five per cent. Total compensation levels are expected to remain relatively unchanged in 2016 and most organisations are not planning more changes to their pay mix.
 
The report forecasts average increases in base salary of 4.3 per cent in Asia, the highest of any region in 2016, and on par with increases forecast for Latin and South America.
 
Pay in banking, insurance and investment management businesses are set to rise by up to 4.8 per cent in Asia.
 
‘’We are at tipping point in Asia, as organisations prioritise business-critical functions and share resources across their organisations to increase overall productivity,’’ says Dr Hans Kothuis, Mercer’s executive rewards practice leader for Asia and the Middle East. ‘’Financial institutions in Asia are adopting a cautious outlook towards compensation for 2016.’
 
That caution was reflected in HSBC’s recent – and rapidly reversed – decision to freeze pay this year. The bank has told investors it plans to make cost reductions of up to $5 billion by 2017. The pay freeze was announced in late January, but was quickly followed by a memo to the bank’s 266,000 staff on 11 February from chief executive Stuart Gulliver, who said that staff protests about the manner in which the freeze was announced had persuaded him to change course – although a hiring freeze announced last year remains in place. ‘’We will therefore proceed with the pay rises as originally proposed by managers as part of the 2015 pay review,” he said. Bonuses for 2015 due to be paid this year would not be affected, he added.
 
In the memo, Gulliver was cautious about HSBC’s expected revenues in 2016, citing falling oil prices and slowing growth in China and the UK as some of the reasons for his concern. “These macroeconomic pressures mean we must be cautious and realistic about the outlook for our revenues in 2016,’’ he wrote. ‘’Several of our competitors have recently announced large-scale redundancies, salary freezes, bonus reductions and further cost reduction programmes in addition to those already in place, and hence it is clear we are not alone in facing these challenges.”
 
The memo was circulated days before the bank decided to retain its headquarters in the UK after widespread speculation that it was contemplating a move to Hong Kong.