One in three organizations (33%) in Asia-Pacific (APAC) are reacting to the rising inflation and slowing growth, including by conducting off-cycle wage reviews. This is based on a survey by Mercer conducted in July.
The survey also reveals that 11 per cent of companies are adopting a cost-of-living adjustment, while 10 per cent are handing out a one-time lump sum payment to employees to offset market inflation and the corresponding rise of goods.
Salary increase percentages for 2022 are higher than prior year across all industries and markets in the region, with some even above pre-pandemic levels. India (9.4%) has the highest salary increase in 2022, followed by Vietnam (7.4%) and Indonesia (6.7%). Japan, New Zealand and Australia are the lowest at 2.5 per cent, 3.1 per cent and 3.3 per cent respectively.
However, salaries are still behind the inflation trail in most APAC nations except for a few nations (China, Hong Kong SAR, Indonesia, Vietnam). Inflation is expected to improve in 2023 (compared to 2022), real wage increments are still 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 labor 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.”
Talent Shortage Continues
Companies within the region are also reporting a talent shortage plus higher cases of voluntary attrition. In APAC, the average voluntary turnover was 11.1 per cent in 2021, a 1.2 per cent increase from 9.9 per cent in 2020, with significant changes in turnover rates for markets such as New Zealand (+3.7%), India (+3.5%), Singapore (+2.4%) and Philippines (+2.3%).
The top reasons for employee turnover continues to be unhappiness over current salary and getting a better offer with higher wages from another company. The companies are responding too — 42 per cent are offering retention bonus schemes, compared to 31 per cent in 2019.
Employers in APAC are adding a premium of 7-20 per cent when recruiting talent at the same level in the existing role in their organizations. In a market like Australia, this premium can be as high as four times higher, when compared to average annual salary increases given to employees.
Tobing remind employers that the war on talent could become tricky as salary increases cannot be rolled back once inflation decreases. “Employers must consider the broader employee experience as they cannot win the war for talent on compensation alone,” he adds.
Salary increments expected to stay around 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. 46 per cent 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, said, “Companies should approach these labor 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 optimize the use of talent in the workplace.”