Asia Pacific employers will pay more for their talent, and there’s nothing that they can do.
According to Mercer’s latest Salary Movement Snapshot Survey, regional employers can expect a median 5.4% increase in overall salaries for 2022 amid uncertainty as economies start to reopen. In 2021, the percentage was 5.1%, while in 2020, it was 4.8%.
The projected salary increments reflect a faster and more robust economic rebound when compared to the global financial crisis, with real Gross Domestic Product (GDP) growth expected to increase by 5.1%2 in 2022 as stated in the World Economic Outlook by the International Monetary Fund.
According to the IMF, Asia Pacific remains the fastest-growing region globally. Still, the gap in economic recoveries across the region is widening, with risks tilted to the downside due to uncertain pandemic dynamics and vaccine coverage and efficacy against new virus variants.
“The projected salary increments highlight a divergence in pay progression between emerging and developed economies. We are seeing markets that have kept COVID-19 under control reporting higher than average pay raises,” said Puneet Swani, Mercer’s career business leader for Asia, the Middle East, Africa, and the Pacific.
Excluding companies that have implemented wage freezes, Pakistan (9%) has the highest projected salary increase in 2022, followed by India (8.7%) and Bangladesh (7.8%). Japan, New Zealand, and Australia are the lowest at 2.3%, 2.6%, and 2.8%, respectively. Hong Kong (3.5%), Singapore (3.5%), Malaysia (4.5%), Philippines (5%), and Thailand (5%) came in below the regional median of 5.4%, while Indonesia came in above at 6.5%.
“Even though recovery is uneven across the region, companies are showing renewed business confidence as well as getting used to working with the pandemic, and this is reflected in the rebound in salary increments,” he added.
The Chemicals industry employers are expected to pay the most in salaries, with an average increment of 5.5% in 2022, up from 4.9% in 2021. Other industries such as High Tech and Consumer Goods will also experience increases over the prior year. Overall, the Consumer Goods industry will see the highest increases in salaries for 2022 at 5.8%, while the Retail sector will see the lowest increase at 4.3% across the region.
“Industries that were relatively immune to the impact of the pandemic, such as Consumer Goods, Chemicals, Life Sciences, and High Tech, are providing merit salary increases as usual. However, industries negatively impacted by the pandemic and more vulnerable to uncertainties like borders opening up and the return of tourism are seeing the impact on their operations, business performance, and eventually compensation. These include the Hospitality, Airlines, Retail and Luxury Goods sectors,” observed Swani.
APAC is in a hiring frenzy
Hiring accelerated in the second half of 2021 across the APAC region. The increase comes as businesses shift their attention from reducing staff to hiring more, although still not at pre-pandemic levels.
Recruitment efforts are expected to increase further in 2022, with more than three in 10 companies on an average intending to add headcount — another third remain undecided, compared to less than two in 10 in 2021. Only 2.8% of Asia Pacific employers said they have plans or are considering implementing further layoffs and workforce reductions next year, compared to 7.8% in 2021.
“Despite the impact of the pandemic on global unemployment, employers in many markets are having difficulty finding talent, especially with very limited talent mobility across countries due to border restrictions, and companies are looking to attract and retain their employees with more competitive compensation and benefit packages,” said Swani.
Flexibility continues to be a major ask
There is a greater emphasis on flexible work and pay-for-skills approaches as regional companies battle over talent.
Employers who successfully reshape their workforce and total rewards models would gain an advantage in retaining talent and keeping employees engaged and productive even as they move beyond the pandemic.
Mercer’s 2021 Flexible Working Policies & Practices Survey show that 54% of companies in the Asia Pacific have implemented or are actively developing a long-term, flexible working strategy. With minimal impact on productivity, collaboration, or employee development, more employers are also willing to offer either part-time remote working (76%), flex-time (75%), or full-time remote working arrangements (32%) as part of their future of work policy, up 46%, 12% and 22% respectively in relation to pre-pandemic levels.
Skills eclipse education, experience
Employers also recognize the value of knowing what skills reside within the organization, how demand for skills can swiftly shift with the market, and the importance of deploying or developing existing employees to meet changing needs.
“Adopting skills-based pay approaches, either by replacing or complementing existing job-based models, creates a competitive edge in today’s changing business environment by supporting the attraction, development, and retention of critical skills. In the near future, jobs are no longer going to be the organizing unit of work, but skills would be,” said Swani.
As skills begin to overshadow education or experience, more companies are implementing skills-based pay practices to attract new talent and retain critical skills. However, only 16% of companies in the Asia Pacific formally monitor the market demand for skills.
“Employers must increase focus on pay for skills across the employee life cycle that is aligned with overarching rewards and talent strategies to future-proof their workforces for whatever upheavals that may come,” Swani added.
Image credit: iStockphoto/AaronAmat