Region’s economic woes dampen outlook for 2016 salary rises
Author: Liana Cafolla | Date: 03 Nov 2015
Aon Hewitt forecasts small wage rises in Singapore, Malaysia and Hong Kong next year
Lacklustre economic performance across much of Asia-Pacific and China in the second half of the year has dampened expectations of salary increases across the region, according to Aon Hewitt’s latest compensation and total rewards report.
“We’re not expecting to have a really good year-end this year,” said Tzeitel Fernandes, principal at Aon Hewitt in Hong Kong. Slow economic growth in the region is likely to see HR turning towards more sustainable rewards – such as paying for performance, and focusing on longer-term incentive and partnership-type arrangements – than are currently used, she said.
Salaries in Singapore are projected to rise by 4 per cent in 2016 compared to 3.9 per cent in 2015, while wages in Malaysia are expected to increase by 5.1 per cent, up slightly from this year’s growth rate of 4.8 per cent. Salaries in China are expected to increase by 7.7 per cent next year, compared to a 7.6 per cent rise this year.
Although Hong Kong has been affected by the slowdown in China, strong consumption in the domestic market coupled with the continuing strength of the building and construction sector are buoying the economy, said Gary Chin, rewards practice lead for Aon Hewitt in Hong Kong. Salaries there are expected to increase by an average of 4.6 per cent across the entire market in 2016, slightly up on the average rise of 4.5 per cent over the last five years.
Wage increases are expected to be distributed relatively evenly throughout organisations’ hierarchies, Chin added, with the biggest differential of 64 per cent seen between senior management and directors, reflecting the importance placed on strategic roles.
“Employers are still attempting to differentiate merit increases and bonuses by performance level, although the variance in terms of the amounts received by top performers and their average-performing counterparts have narrowed,” Chin said. “This poses challenges around motivation and retention for employers in the city.”
Hong Kong’s unemployment rate for 2015 is among the region’s lowest, at just 3.2 per cent. Voluntary attrition fell slightly, at 12.6 per cent in the year to June 2015, compared to 14 per cent for the previous year. This “reflected the ‘wait and see’ attitude of employees who hesitate before jumping ship”, said Chin.
Workers in the construction and engineering sector can expect to receive the biggest pay rise next year. Hong Kong’s 10 huge construction projects are fuelling salary increases that are projected to reach 5.1 per cent in 2016, up from 4.9 per cent this year.
The smallest rises are expected in the hospitality, restaurant and travel sector (wages are projected to grow by 4.1 per cent next year) and in the transportation, logistics and shipping industry, where pay is forecasted to increase by just 3.9 per cent (compared to a 4.1 per cent rise this year). The transportation sector has suffered from a slowdown in GDP growth, which has affected exports and logistics, while the drop in inbound tourism has had a negative impact on the hospitality sector.