Skip to main content
Article | Beyond Data

Global compensation trends: Spotlight on China

Post-pandemic growth driving pay and talent trends in China

Compensation Strategy & Design|Future of Work|Talent|Total Rewards
Beyond Data

By Edward Hsu | January 5, 2021

China’s vibrant labour market is full of challenges and potential opportunities for HR. Here are five trends shaping China in 2021.

As China continues to move rapidly through the post-crisis operating stage of the COVID-19 pandemic, businesses are looking to achieve and maintain positive economic recovery throughout 2021. For HR functions in China, this presents a number of challenges, but also opportunities to rethink human capital strategies and to design a future-ready organisation to support continual business growth.

Our latest compensation survey data reveals five trends that will shape the China market in the year ahead.

Top five trends in China, including economic performance, talent boom in key industries, graduate pay, executive rewards, and demand for digital, risk and sales roles.
Top five talent and reward trends in China
  1. 01

    Optimistic economic expectations for China in 2021

    The economic forecast for China in 2021 is strong in the aftermath of COVID-19. GDP is anticipated to grow from 1.9% in 2020 to 7.3% in 2021. CPI is expected to remain stable at 2.8%.1

    With most organisations in China moving quickly to restore stability post-pandemic, their main goal in 2021 will be to accelerate or solidify business performance. This optimistic business outlook is reflected in both the average salary increase forecast of 6.0% for employees in 2021, rebounding from 5.0% in 2020, and an expected decrease in the percentage of companies that will freeze salaries.2

Contact Us
GDP in China is expected to rise from 1.9% to 7.3% in 2021, salary increases are expected to rebound from 5% to 6%, and CPI will reduce slightly from 2.9% to 2.8% next year, up from 2.1% in 2018.
Figure 1. Strong economic forecast and salary increases expected for China
  1. 02

    Post-pandemic talent boom for key industries

    There has been a sharp increase in demand for talent in the Energy, Capital Market, High Tech and Pharmaceutical and Health Sciences industries. The HR Omni Index from our new interactive platform, HR OmniSight, reveals that talent demand has increased sharply for these industries since the end of 2019, suggesting that employers in these sectors are well prepared for growth and development opportunities in 2021.

    Four core industries have experienced a rise in talent demand score from 2019 Q4 to 2020 Q2, including: Energy 32 to 55, Capital Market 41 to 68, High Tech 59 to 66, and Pharmaceutical 51 to 62.
    Figure 2. HR Omni Index score (talent demand) has increased in these four sectors
  2. 03

    Competitive salaries for new graduates in second and third-tier cities

    Starting salaries for fresh graduates is always a hot topic for HR functions across China. Human capital strategies for attracting and retaining these graduates can vary greatly by city due to the different paces of urban development.

    Overall, average starting salaries for fresh graduates in second/third-tier cities are 75% to 85% of graduate salaries in first-tier cities (Beijing, Guangzhou, Shanghai and Shenzhen). However, when we look across the general employee population in China, average salaries in second/third-tier cities are much lower compared to first-tier cities, at 65% to 75%.3 4 This difference suggests that employers in second and third-tier cities are prioritising competitive salaries for new graduates over other employees.

    Graduate starting salaries in second and third tier cities are 0.75-0.85 of those in first tier cities. Whereas, all employees (global grade 8-13) in second and third tier cities are earning 0.65-0.75 of the same group in first tier cities.
    Figure 3. Graduate starting salaries in second and third-tier cities are higher than other employee groups in comparison to first-tier cities
  3. 04

    Strong business performance is boosting executive rewards

    Our most recent compensation survey data shows that the pay gap between executives and employees in China is increasing. In 2020, take home pay for executives was nearly 20 times more than entry-level staff. This gap has widened steadily since 2018, when executive pay was 17.7 times higher than young professionals.4

    The difference in actual total direct compensation between entry-level professionals (P1) and  executives (EX) was 17.7 times in 2018, 18.4 times in 2019 and 19.5 times in 2020.
    Figure 4. The gap in compensation is increasing between executives and entry-level employees

Total direct compensation for executives has increased by 22% in the past two years, largely driven by the 42% average rise in annual incentives. Total guaranteed compensation increased by only 5% in 2019.4 This reflects the increasingly strong link between executive pay and overall financial performance of organisations in China.

Total guaranteed compensation for executives has only increased 5% since 2018. Long-term incentives decreased 18% in 2019, and increased 17% in 2020. Actual annual incentives increased 26% in 2019 and 12% in 2020.
Figure 5. Rising annual incentives is driving executive pay increases in China
  1. 05

    Increased demand for digital talent, risk management and channel sales

    At the peak of the COVID-19 crisis, many organisations took the opportunity to rethink their business development strategies. Digitalisation has played a key role in accelerating organisation transformation in China.

    Digitalisation has played a key role in accelerating organisation transformation in China.

    This shift has had an impact on talent demand trends across the country. Our HR Omni Index shows that IT development roles were the most popular in 2020, followed by roles in data science and business intelligence, risk management and channel sales.3

    Our data also shows that the increase in total compensation for these four functions was higher than the overall market.4

These functions saw a higher demand for talent and movement in pay

Figure 6. Top four functions for talent demand and increase in total compensation
Top four functions HR Omni Index score Increase in actual annual total compensation
(2019 to 2020)
IT Development 84 9%
Data Science and Business Intelligence 80 14%
Risk Management 74 10%
Channel Sales 73 19%
Overall market movement 6%

The fast-growing business landscape in China is driving opportunities. It’s important for HR to stay alert and informed of the latest pay and market movements, to ensure your human capital strategy is competitive and relevant.

For more information about our powerful data, insights, software and solutions in China, please contact Willis Towers Watson Data Services – China.

Sources

1 Economist Intelligence Unit – November 2020

2 2020 Salary Budget Planning Q4 Report

3 HR OmniSight (HR Omni Index is a proprietary Willis Towers Watson metric for comparing the relative talent demand in China)

4 2020 General Industry Compensation Survey Report – China (Shanghai/Beijing/Shenzhen-Guangzhou/East China/North China/West China/South China)

Author

Leader, Rewards Data and Software – Asia Pacific