Rising inflation and the continuing talent crunch in the APAC region are increasing operational costs. And according to the latest Salary Budget Planning Survey Report by WTW (Willis Towers Watson), employers have no choice.
The survey of 5,728 companies in APAC, conducted between October and November 2021, found that 42% of respondents are planning for salary hikes this year. A quarter of the respondents (25%) have changed and increased their expected salary increase budgets for 2022 from the original projections made in July last year.
Companies in APAC are now budgeting an overall average increase of 5.08% for executives, management and professional employees, and support staff this year. Companies gave employees average pay increases of 4.62% in 2021.
“There seems little doubt that costs, wages, and prices are going up this year. Our study shows that employers are influenced by different factors in adjusting their salary budget projections this year,” said Edward Hsu, WTW’s business leader for rewards data and software in the Asia Pacific. “However, with APAC’s consumer price index (CPI) expected to hit 3% or even more in some markets, employers will most likely take living costs into account for salary increases.”
According to the study, 30% of employers cited the tight labor market for increasing their budgets from prior projections. In addition, 23% pointed to anticipated more robust financial results and 19% on concerns related to cost management such as inflation and the rising cost of supplies.
The war for talent is now a concern across all industries. For some, it is a shortage of workforce or skills that’s creating demand and increasing manpower costs. Others see a push for growth (especially with the global trend of treating the pandemic as an endemic) raising talent acquisition costs.
“Whether an organization is experiencing the Great Resignation or the Great Hire phenomena, having relevant and competitive pay and benefit packages remains critical to attracting and retaining talent,” said Tan.
Digitalization and the pandemic have also added costs as work is being reprioritized. “There is a great reprioritization of work, rewards, and careers underway, and it’s putting significant pressure on compensation programs for many employers,” he added.
These factors have pushed total attrition rates in Australia, Hong Kong, Singapore, South Korea, and Thailand past pre-pandemic levels.
All this means that salary alone will not be good enough. “Bigger pay rises alone will not be enough to help address their attraction and retention challenges. Winning the talent race will require employers to continue to be creative and comprehensive with their Total Rewards strategy. It is also important to design a forward-looking rewards program that is built for future success to support the business,” Tan explained.
Image credit: iStockphoto/Cemile Bingol