When it comes to pay raise amid inflation, 33% of companies in Asia Pacific is conducting off-cycle wage reviews and adjustments, said Mercer recently when releasing results of a July survey.
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, the firm noted.
- Pay raise 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%, 3.1% and 3.3% respectively.
- However, salaries increases continue to trail inflation in 2022 in most APAC markets with the exception of Mainland China, Hong Kong, Indonesia and Vietnam.
- Even as inflation is expected to fall below 2022 levels next year, real wage increments are unlikely to keep up in most markets.
- 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, said Kulapalee Tobing, Mercer’s Regional Industry and Solutions Leader for Asia Pacific.
“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,” Tobing noted.
Higher premiums to attract talent
Inflation challenges aside, companies in the region are also facing a global talent shortage with higher levels of voluntary attrition, Mercer observed.
In APAC, the average voluntary turnover was 11.1% in 2021, a 1.2% increase from 9.9% 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%), according to the firm.
Dissatisfaction with pay and the ability to get a higher salary at another company (67%) continues to be the top driver for employee turnover, Mercer pointed out.
To retain talent, 42% of companies are providing a retention bonus scheme, compared to 31% in 2019, the firm added.
To attract talent, companies in APAC are also paying a premium of between 7-20% when recruiting for talent at the same level as the current role in their organizations, survey results indicate.
In some markets across the region like Australia, this premium can be as much as four times higher, when compared to average annual salary increases given to employees, Mercer said.
It’s important to note that salary increases are sticky and cannot be rolled back when inflation decreases, Tobing said.
“Employers must consider the broader employee experience as they cannot win the war for talent on compensation alone,” she advised.
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, Mercer said.
In addition, when it comes to pay raise amid inflation, 46% of companies are adopting a wait-and-see approach in factoring inflation into their 2023 salary increase budgets, the firm added.