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Salary increases continue to trail inflation in most APAC markets, with the exception of Mainland China, Hong Kong SAR, Indonesia, and Vietnam.
In light of slowing growth and rising inflation, one in three organisations (33%) in Asia Pacific (APAC) is conducting off-cycle wage reviews and adjustments in an attempt to cope.
Similarly, companies are also adopting other measures such as providing a separate market or cost of living adjustment (11%) as well as providing a one-time, lump sum payment to their employees (10%) to offset market inflation.
Further observed in the survey by Mercer, salary increase percentages for 2022 are higher than the prior year across all industries and markets in the region, with some even above pre-pandemic levels.
Particularly, India (9.4%) experienced the highest salary increase in 2022. This was then followed by Vietnam (7.4%) and Indonesia (6.7%), with Japan, New Zealand, and Australia noting the lowest at 2.5%, 3.1%, and 3.3% respectively.
However, salary increases continue to trail inflation in most APAC markets with the exception of Mainland China, Hong Kong SAR, Indonesia, and Vietnam. The report suggests that even as inflation is expected to fall below 2022 levels next year, real wage increments are unlikely to keep up in most markets.
Kulapalee Tobing, Mercer’s Regional Industry and Solutions Leader for Asia Pacific, said: “With real salary increases still negative for many markets, this has accelerated the need for employers to reassess their compensation strategies to retain talent in a tight labour market. Employers need to give special consideration to their workforce most impacted by inflation, and focus compensation efforts on the supply and demand for talent, or risk losing their people.”
Companies are facing a global talent shortage with higher levels of voluntary attrition
Apart from inflation challenges, companies in the region are also facing a global talent shortage with higher levels of voluntary attrition. The average voluntary turnover in APAC was 11.1% in 2021 — a 1.2% increase from 9.9% in 2020. Namely, markets such as New Zealand (+3.7%), India (+3.5%), Singapore (+2.4%), and the Philippines (+2.3%) experienced the most significant changes in turnover rates.
Dissatisfaction with pay and the ability to get a higher salary at another company continues to be the top driver for employee turnover, with 67% of the response. To retain talent, 42% of companies are providing a retention bonus scheme, compared to 31% in 2019.
To attract talent, companies in APAC are also paying a premium of between 7-20% when recruiting talent at the same level as the current role in their organisations. In some markets across the region, such as Australia, this premium can be as much as four times higher, when compared to average annual salary increases given to employees.
In the face of such challenges, Tobing added that it is important to note that salary increases are sticky and cannot be rolled back when inflation decreases. As such, employers must consider the broader employee experience as they cannot win the war for talent on compensation alone, he advised.
Salary increments expected to remain about the same in 2023
With the exception of sectors such as life sciences and high tech, salary increments for 2023 are expected to remain at around 2022 levels, despite inflation outpacing salary gains. According to the study, 46% of companies are adopting a wait-and-see approach in factoring inflation into their 2023 salary increase budgets.
Puneet Swani, Career Business Leader, Asia, Middle East, Africa and Pacific, Mercer, commented: "Companies should approach these labour market challenges as a marathon and not a sprint. While addressing the supply of talent using financial fixes and enhancing benefits may work in the short term, employers must plan for the long term – by identifying skill adjacencies and reinventing work to address the demand through new work models to optimise the use of talent in the workplace."
Image / Shutterstock
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