India has once again reported the highest average salary increase in Asia at 13.8 per cent in 2006, as compared to 14.1 per cent last year, says the 7th annual Asia-Pacific Salary Increase Survey conducted by Hewitt Associates.
The study says that the Asian markets have maintained steady growth in the last year, which has led to a stabilisation of salary increases in most markets during 2006. Though employers are reporting pay increases, the hikes are modest in comparison to previous years, and this trend looks set to continue in 2007.
Hewitt surveyed more than 1,400 foreign, locally owned, and joint-venture companies. The survey covered 11 markets: India, Australia, China, Hong Kong, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand.
About India, the survey said:
- Information was collected from 169 organisations.
- None of the participating companies reported a salary freeze for 2006, and none expect a salary freeze for 2007.
- The average overall salary increase budget ranged from 11.9 per cent to 15 per cent for the five employee groups surveyed for 2006, and from 12.3 per cent to 15 per cent for 2007.
- Employees at professional/supervisor/technical level received the highest average increase of 15 per cent, and are expected to do so again next year with 15 per cent.
- 77 per cent of participating companies position their salary by comparing total cost to company with the market, while only 7.2 per cent benchmark base salary with the market.
- At 19.5 per cent, senior/top management has the highest percentage of variable pay in total cash compensation. This is expected to rise to 20.7 per cent next year.
- 31 per cent of participating companies offered fixed bonuses to their employees in 2006.
- Stock options are the most popular form of long-term incentive among participating companies.
Meanwhile, for the second year in a row, the Philippines recorded an average overall salary increase of 8.2 per cent, while salaries in China rose by 8 per cent, down from 8.3 per cent last year.
As Singapore's economy continued to strengthen, employees experienced average salary increases of 4.6 per cent, up from 3.9 per cent in 2005 and demonstrating one of the largest year-on-year hikes.
Meanwhile, Thailand and Malaysia saw raises of 6.5 per cent and 6.2 per cent, respectively, marking an increase from 6.3 per cent and 5.6 per cent in 2005. Salaries also rose in Australia, Korea and Hong Kong.
"While organisations are being driven to increase their spend on compensation as a result of the ongoing attraction and retention challenges, many companies are reassessing their human resources strategies and broader business goals to ensure they are getting the most out of their talent and increasing productivity," said Nishchae Suri, head of Hewitt's Talent and Organisation Consulting Analytics practice in Asia.
Increasing market orientation
With the pressure to retain key talent growing, an increasing number of organisations are ensuring their pay is competitive by closely monitoring market movements, says the study.
Over 80 per cent of participating organisations review their markets annually, using multiple sources of information to benchmark compensation, such as industry surveys and information through personal contacts.
While 81.6 per cent of participating organisations continue to practice industry benchmarking, a record 20.2 per cent are now benchmarking against best-in-class companies.
Rising variable payouts
Hewitt's study indicates that variable pay continues to be an important means of attracting and retaining talent, with 78 per cent of responding organisations using them.
Individual performance awards continue to be the most popular, with 56.2 per cent of responding organisations saying they are their preferred type of variable pay plan. They also indicated individual performance awards have the highest impact on business results, followed by business incentive plans and team awards.
According to the study, companies increased variable payout in 2006 to 14.9 per cent of their payroll, up from 14.5 per cent in 2005. This year, target variable payout was highest for senior/top management at 21.8 per cent, and is expected to rise to 22.3 per cent in 2007.
Hewitt's study also highlights that the prime challenge faced by organisations in implementing variable pay plans is poor communication of their objectives and measures to employees.
Achieving business objectives through rewards
Although organisations have the right intent when it comes to fostering a healthy performance and reward culture, most said they are only partially achieving their objectives of attracting, engaging and retaining talent, as well as achieving business results.
At 60.1 per cent, more than half of participating organisations said their reward programs do not achieve the desired outcome because of budgetary constraints, while 33.3 per cent cited lack of communication as the primary reason.
