Employers in Asia Pacific may have reduced pay rise budgets in 2020 in response to the economic implications of the COVID-19 crisis, but the good news is, remuneration is expected to bounce back closer to pre-pandemic levels next year, according to Willis Towers Watson.
Surveying 3800 employers across 22 markets in APAC, the report shows that one-third of companies (34%) have curtailed their employees’ salaries in response to the COVID-19 crisis. Another 29% of employers are planning or considering actions to manage labour costs or create incentives for employees.
Among companies that reviewed salaries, the proportion of those planning a salary freeze this year is six times higher than before the pandemic (23.5% in 2020 vs 5.1% in 2019), while the proportion of companies postponing a salary increase is almost five times higher (13.4% in 2020 vs 2.4% in 2019).
Compared to last year, 62% of companies plan to continue with their regular review of salary increases for their employees this year (vs 91.4% in 2019).
“It's no surprise to see that many companies have reduced their salary budgets. Most businesses around the world are in cash preservation and cost optimisation mode. Here in Asia Pacific, 49% of companies have already taken hiring or restructuring actions. Although companies are now stabilising their businesses, the full extent of the economic impact of the pandemic is yet to play out. Companies are extremely cautious and have rapidly adopted various strategies to protect their business as the sustained recovery will be gradual and slow in most markets,” said Edward Hsu, business leader for rewards data & software, Asia Pacific, at Willis Towers Watson.
"The pandemic is also forcing employers to rethink virtually every aspect of how work is being done, the type of talent they need and how to reward this work as they transform their businesses. Companies should review their business priorities and talent requirements to prepare for next year, especially if they need to re-allocate resources and salary budgets to the changing business environment and objectives.”
Pay rise projections for 2021 are more optimistic as employers in Asia Pacific anticipate that salary budgets will bounce back closer to pre-COVID-19 levels, at an average of 5.8% next year.
Emerging markets such as Bangladesh, India, Indonesia, Myanmar, Sri Lanka and Vietnam are projecting a stronger rebound of salary increases, indicating healthy optimism in the recovery of their economies.
The survey also found that companies in the fntech, pharmaceutical and healthcare sectors are planning to increase their salary budgets next year due to the brighter business outlook in these industries.
In recent years, the fintech industry has been leading the transformation of traditional financial services companies. From enabling financial transactions to be carried out remotely to facilitating contactless payment and the distribution of government aid during the pandemic, fintech companies have been crucial in supporting the battle to curb COVID-19 infections in many countries. This has kept the sector’s salary increases ahead in most markets.
Conversely, the report shows a decreasing salary budget in the energy and natural resources industry. The outbreak of the coronavirus, coupled with an oil price crash and economic downturn present an enormous challenge for the sector, which leads to a lower projected salary budget for next year (3.7% in 2021 vs 4.4% in 2020).