Salary Increases in Asia Pacific Still Lean in 2003 as Employers Remain Cautious, Hewitt Study Finds

Employers throughout Asia Pacific continued to keep a tight rein on the purse strings in 2003 as salary increases remained at low levels, according to the Annual Asia Pacific Salary Increase Survey conducted by Hewitt Associates (NYSE: HEW), a global human resources delivery and consulting firm. Projections for 2004 indicate that salary increases will remain marginal, though fewer projections for pay freezes offers a ray of hope.

Hewitt surveyed 991 foreign, locally-owned, and joint-venture companies between July and September 2003, in 11 markets-Australia, China, Hong Kong, India, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand.

The study measures actual and projected salary increases, and compensation practices for five job categories: Senior/Top Management, Manager, Professional/Technical/Supervisory, Clerical and Support, and Manual Workers.

Once again, all markets showed an average overall salary increase for 2003, with the highest average salary increases being awarded in India, followed by Korea, the Philippines, and China. As in the previous year, employees in the Indian software development industry were awarded the highest average salary increases-at 14%. This figure was, nevertheless, 10 percentage points lower than the industry's average salary increase in 2002.

Excluding India, employees in the Philippines enjoyed the biggest average salary increases, ranging from 7.1% to 8.6% across job categories, down from the respective 2002 figures of 6.4% to almost 10%. In Korea, the range spanned 7.3% to 7.0%, while in China, employees continued to enjoy average salary increases ranging from 6.7% to 7.3%, though those in Senior/Top Management saw lower increases. The respective figures in China for 2002 were 6.5% and 8.7%.

In the more developed economies of Hong Kong and Singapore, salary increases remained low. In Singapore, the average overall salary increase budget for 2003 ranged from 2.1% to 2.4%, while Hong Kong's employees were left with increases in the range of just 1.3% to 1.5%. Similarly, average salary increases in Japan-which has a sixth job category, Board Director-ranged from 2.1% to 1.6%. Elsewhere in the region, in Thailand, Malaysia, Taiwan, and Australia, average salary increases for 2003 ranged between 3% and 5%.

"Although employees in countries with faster growing economies still saw reasonable pay rises, the increases are only slightly higher than those of the previous year," said Mick Bennett, Hewitt's Managing Director for Asia Pacific. "Employers are still cautious over the slow pace of the economic recovery, and the outbreak of SARS earlier in the year may have had some impact on salary increases because there are fears the virus will return as the weather gets colder."

A Better Tomorrow?

In almost all cases, employers appear to be a little more confident about the direction of the economy in 2004, reflected in the projections for slightly higher salary increases next year. Survey respondents in all countries projected, on average, salary increases for 2004 that were merely 1% higher than increases in 2003.

Nevertheless, far fewer companies are projecting pay freezes in 2004. In India, Malaysia, and the Philippines, where 2003 pay freezes were reported by 4%, 8%, and 3% of respondents, respectively, no respondents project the need for pay freezes in 2004. Australia and Korea are the only countries in which pay freezes are projected in 2004 at the same rate as this year by 2% and 5% respectively. In Hong Kong, where as many as 39% of respondents reported pay freezes in 2003-the greatest number-32% of respondents still expect to freeze pay in 2004. In Singapore, however, where 36% of respondents reported pay freezes this year, the number of respondents projecting pay freezes in 2004 dropped dramatically to 17%.

Retaining Top Talent

Variable Pay as a percentage of total compensation is still seen by employers as an important means of attracting and engaging senior management and potential future leaders. Those in the Senior/Top Management job group are still largely the employees receiving the largest portion of variable pay. The highest level of Variable Pay is still paid in Australia, where employees in the Senior/Top Management category receive almost 28% of their total compensation in Variable Pay. The practice is also strong in Singapore and the Philippines, where Senior/Top Management receive Variable Pay at rates of almost 25% and 21%, respectively.

Frank Johnson, Hewitt's Asia Pacific business head for Talent and Organizational Analytics Consulting, (TOAC) said, "As corporate revenues and budgets stagnate, and as talent, attraction and retention pressures continue to increase, organizations are considering diverting a higher proportion of the kitty toward rewarding critical talent through 'Variable Pay' to drive business results. When compensation is tied to performance, people want to do their best because they see gains in a more direct way."

A related issue that participants voiced concern over this year was staff turnover, which comes at a high cost to companies. The average overall turnover rate among respondents in most markets surveyed was approximately 10%. However, the greatest turnover was reported among survey participants in Malaysia, where the average overall turnover rate was as high as 17.7%. Other markets with high turnover rates include Australia (14%), China (13.4%), and Taiwan (13.3%). Thailand and Singapore reported lower rates, with overall average turnover rates of 8.5% and 9.8% respectively.

Findings of the U.S. Salary Increase Survey

Hewitt's 27th Annual U.S. Salary Increase Survey, the results of which were released in September, showed record low salary increases in the United States in 2003. Hewitt surveyed 1,276 companies across the U.S., which reported average salary increases ranging from 3.3% to 3.5%, the lowest growth since the firm began collecting data. Projections for 2004 were slightly higher, ranging from 3.5% to 3.7%. Additionally, 8% of the U.S. study participants reported salary freezes in 2003, while only 2% projected salary freezes for 2004.

For details on how to obtain a copy of the market reports, please send an e-mail to: [email protected] .

About Hewitt Associates

Hewitt Associates (www.hewitt.com/www.hewittasia.com) is a global human resources delivery and consulting firm. It provides services from offices in 38 countries.

For more information, please contact,

Mana Lohatepanont

Tel: +662-636-0575

Email: [email protected]

Frank Johnson,

Tel: +86-21-6391-6788

Email: [email protected]

Munish Malik,

Tel: +852-2877-8600

Email: [email protected]

--Distributed by AsiaNet (www.asianetnews.net)--

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