Press Release

Asia Pacific 2017 salary rises projected at 5.9%, but declining trend suggests lower – Willis Towers Watson study

Salary increase budgets after inflation forecast at 2.9% in 2017 vs 3.5% in 2016

October 4, 2016
| Australia, Bangladesh, Cambodia +15 more
  • China
  • Hong Kong
  • India
  • Indonesia
  • Japan
  • South Korea
  • Myanmar
  • New Zealand
  • Pakistan
  • Philippines
  • Singapore
  • Sri Lanka
  • Taiwan
  • Thailand
  • Vietnam

HONG KONG, 4 October 2016 — Salaries across Asia Pacific are projected to rise 5.9% in 2017, up a fraction from 5.8% this year but in fact reflecting broader downward pressure on salary increase budgets in the region, as employers seek to keep costs down amid slowing economic growth, according to a report released today by leading global advisory, broking and solutions company Willis Towers Watson (NASDAQ: WLTW).

Salaries were projected to rise 6.4% in 2016, but in reality rose just 5.8% - the first time below 6% since 2012 (see figure 1 below). If that pattern continues in 2017, actual increases will be well below the 5.9% forecast by the companies surveyed. It will also mark the third year in a row that salary increase budgets have declined.

The findings from Willis Towers Watson’s 2016 Asia Pacific Salary Budget Planning Report show that once average inflation for Asia Pacific of 3% is taken into account, the projected increase in real terms for 2017 will be 2.9%, down from 3.5% in 2016.

The report looks at a range of job grades across various industry sectors. It is designed to provide companies with guidance for their annual salary forecasting for the year ahead. The industries covered include technology, financial services, pharmaceutical and health sciences, chemical, energy and natural resources, media, retail, construction and engineering, transportation and consumer goods.

Figure 1: Actual and Projected Salary Increase Budget (Asia Pacific Average)

Willis Towers Watson Media

Among the 22 Asia Pacific markets covered in the report, only six are expected to see higher base salary increases in real terms during 2017 compared to 2016: Sri Lanka, Indonesia, China, Cambodia, Hong Kong and Taiwan (see figure 2).

Figure 2: Salary Increase budget by country, with inflation

Willis Towers Watson Media

“We are seeing lower salary increase budgets across much of the region,” said Sambhav Rakyan, Data Services Practice Leader, Asia Pacific, at Willis Towers Watson. “Back around 2012 and 2013, companies in Asia pumped a lot of money into their salary budgets and drove salaries up, but they didn’t see the revenues rise in tandem, so it made such increases unsustainable. Now these companies are being much more prudent.”

Mr. Rakyan added that, as the available budget shrinks, companies need to be smarter about how they use them to retain talent. “It’s important to prioritise the best performers and also to review how employees are rewarded with other incentives, such as more attractive benefits,” he said.

The highest salary increases in 2017 will be in Pakistan (10.2%), Bangladesh (10%) and India (10%), though in real terms growth will be 5% for Pakistan, 4.2% for Bangladesh and 4.3% for India.

In East Asia and South East Asia, before inflation is factored in, Vietnam will see the highest base salary increases at 9.6%, followed by Indonesia (9.0%), and China (7.0%), while Japan will have the smallest (2.3%).

Hong Kong and Singapore are set to see similar overall growth at 4.0%, but Hong Kong's inflation forecast (2.3%) is much higher than that of Singapore (0.8%), so salary increases in real terms are set to be much lower in Hong Kong (1.7%) than Singapore (3.2%).

The Willis Towers Watson report shows that, with tighter budgets, organisations very discernibly prioritise their top performers. It shows that 37.6% of the budget for salary increases goes to the top performers. Another 33.7% is shared by above average performers while the remaining 29.2% of the budget goes to average performers (see figure 3).

Figure 3: Allocation of Salary Increase Budget by Performance Rating

Willis Towers Watson Media

“The data clearly shows a greater emphasis on rewarding high performers rather than across-the-board increases for all. Without such differentiation, companies will face pressure in attracting and retaining talent, especially for in-demand areas, such as sales and digital roles,” said Mr. Rakyan. “Employers have to think beyond inflation-linking and look at more nuanced factors such as affordability, growth expectations, both employee and company performance, and specific talent and skills needs.”

Maggy Fang, Head of Talent and Rewards, Asia Pacific, at Willis Towers Watson, said: “It is important for companies to improve transparency in their communications with employees about salary increases. Then, even if they don’t like the outcome, employees will at least understand the rationale behind it. Our experience is that they appreciate this.”

Willis Towers Watson notes that companies need to rethink whether annual base salary increases are the best way to reward employees. There may be alternatives worth considering to better meet their needs and reflect their contribution.

“Nowadays people are looking for other options besides a standard annual pay rise. Employees are looking at how and when their performance is rated, and also for more flexibility in their benefits packages. Therefore companies need to adopt a more holistic approach and consider total rewards factors such as career development opportunities, recognitions, ongoing communications, and flexible working arrangements,” said Ms. Fang.

About the survey

The 2016 Asia Pacific Salary Budget Planning Report is a bi-annual survey compiled by Willis Towers Watson’s Data Services Practice. The survey, timed to coincide with companies’ compensation planning for 2017, looks at a range of industry sectors and job grades from factory shop floor to executive suite, and focuses on salary movement and review practices.

The survey was conducted in July 2016. Approximately 4,000 responses were received from companies across 22 markets in Asia Pacific. Click to purchase the latest Salary Budget Planning Report online.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.