Asia, 21 November 2022 – Despite a divergent economic outlook across markets in Asia Pacific, companies in the region are forecasting an average 4.8% increase in overall salaries in 2023, according to the annual Total Remuneration Survey (TRS) 2022 conducted by Mercer. This is a slight increase from 4.6% this year, which has seen soaring inflation rates in many markets.
For markets like India, Malaysia, New Zealand, Philippines and Taiwan, the inflation rate in 2023 will reach close to 2021 levels while it will remain considerably higher than 2021 levels in most other markets in the region including Singapore, Hong Kong SAR and Japan. Hence, while salary increments will increase next year, real salary increase will be nominal across the board, with the exception of Mainland China, India and Vietnam.
A pulse survey conducted in September 2022 also revealed that around two-thirds of the companies in Asia Pacific did not take measures to assist their employees in countering inflation. Yet, looking towards 2023, half of them feel that there will be significantly increased salary demands across all roles and skills.
|Hong Kong SAR||1.60%||1.90%||2.40%|
Source: Mercer 2022 Global Compensation Planning Report, October
Puneet Swani, Mercer’s Senior Partner and Career Business Leader for AMEA and Pacific, said, “From a people perspective, organizations need to find a balance and be creative to manage the cost of living increases through off-cycle corrections, one-off payments, and higher salary increments. At the same time, they need to keep a close eye on possible recession risks that would have a direct impact on consumer spending and business performance. We should avoid a situation where fixed costs soar and business results don’t match up, creating cost cutting pressures on organizations.”
Increase in salaries across most markets
India has the highest projected salary increase at 9.1%, followed by Vietnam (7.1%), Indonesia (6.1%), and the Philippines (5.5%). Malaysia and Thailand are not too far behind at 4.9% and 4.5% respectively. Japan (2.2%) has the lowest salary increase, followed by Australia (3.1%) and New Zealand (3.2%). While above the average rate, Mainland China (5.4%) is the only market that forecasted a slight decrease for 2023. Hong Kong SAR (3.7%) and Singapore (3.8%), regarded as the region’s financial hubs, came in below the average rate.
|Market||Average Salary Increase|
|Hong Kong SAR||3.27%||3.55%||3.71%|
Source: Mercer Total Remuneration Survey 2022
On markets’ salary trends, Mr. Swani said, “We observed a strong rebound late last year and early part of this year, with projected salary increase rates reverting to pre-pandemic levels for countries like India, Japan and Singapore. On the other hand, Mainland China’s salary increments have been muted primarily due to its extended lockdown and travel restrictions’ direct impact on the retail and hospitality sectors.”
Across the industries surveyed, the Retail & Wholesale industry is expected to see the biggest upturn with 5.4% salary increment, up from 4.7% in 2022, due to a significant rebound of both in-store and online sales as most markets open up. Other industries like Energy and Non-manufacturing are also forecasting increments over the prior year, with the Transportation Equipment forecasting the highest increase at 5.6% as growth in global trade and e-commerce activities has boosted demand for shipping and delivery services. The Services (Non-Financial) sector is expected to see the lowest increase at 4.7%.
Tighter labor market in Asia Pacific
Voluntary attrition rates have increased across all the markets this year, as compared to 2021. Based on the mid-year 2022 turnover rates, markets like New Zealand, India, Vietnam, Malaysia and Hong Kong SAR have the highest attrition.
More job opportunities abound as employers recover from the pandemic, and this has resulted in talent shortages across the globe. Close to 83% of employers in Mainland China, for example, are finding it difficult to fill jobs – as compared to 28% in 2021. Similarly, in markets like Singapore (84%, up from 64% in 2021) and Hong Kong SAR (83%, up from 68% in 2021), businesses are grappling with shortages that are more prevalent than usual.
The fierce competition for talent has pushed up wages too. Dissatisfaction with pay and the ability to get a higher salary elsewhere (67%) is the top reason for voluntary turnover in the region, while the ability to get better benefits at another company (25%) is also a growing trend among employees.
The pandemic has changed the way employers strategize their benefits, and companies that have yet to review their packages should promptly respond to workforce and business needs. Flexible work arrangements, additional mental well-being benefits, and better medical care and coverage are some ways employers can stay relevant and competitive in the current tight labor market.
Mr. Swani said, “Organizations need to approach the labor market challenge as a marathon – not a sprint. In the near-term, companies should focus on addressing the supply of talent by creating a better value proposition to attract new workers and retain existing ones through financial fixes like pay premiums and retention awards, and benefits like flexible work and paid time off. As for long-term solutions, employers need to rethink their talent strategies around talent acquisition and retention, and focus on building new work models like a talent marketplace.”
About Mercer’s Total Remuneration Survey
The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.
For more data and insights from Mercer’s Total Remuneration Survey 2022, please see here.
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