Skip to main content
Article | Beyond Data

Three salary budget planning scenarios for Asia Pacific in 2022

Compensation Strategy & Design|Talent
Beyond Data

By Edward Hsu | January 31, 2022

Salary budget trends in Asia Pacific reveal three actions employers are expected to take in 2022.

Recovery has been the common theme for many markets and organisations so far in 2022. Asia Pacific’s GDP grew by 5.7% in 2021, this momentum is seen to continue into 2022 with a 4.6% growth rate.1 However, as encouraging as the GDP growth is, the sustained rise in inflation is posing a risk to recovery in many markets.

Organisations’ salary budget plans are greatly dependent on these factors. With critical market data at hand, how is the salary budget landscape looking in 2022? Our survey data results reveal three likely scenarios.

  1. 01

    Reinstatement of pre-pandemic salary review cycle

    The roll-out of mass vaccinations and ongoing developments have revitalised economies across the region as restrictions ease in many markets. Organisations are finding the optimism and confidence to adjust their pay policies accordingly, particularly with resumption of regular salary reviews, as businesses return to normal operation.

    According to our 2021 Salary Budget Planning Survey Report – Asia Pacific, 85% of employers had regular salary reviews last year – a significant increase from 63% in 2020. Conversely, only 14% of organisations implemented either a salary freeze or postponement in 2021 compared to 36% in 2020.1

    Taking this a step further, nearly all organisations are expected to return to their usual salary review cycle in 2022.

    Bar graphs showing the status of salary review processes in Asia Pacific - description below
    Figure 1. Status of salary review processes in Asia Pacific

    Salary freezes have declined from 27% to a projected 1% in 2022, and regular reviews are projected to return to 98% in 2022 up from 63% in 2020.

  2. 02

    Higher salary budgets

    As economies bounce back and the pressure of rising inflation rates weighs in, employers see it fit to allocate higher salary budgets. According to our survey results, more than four out of 10 organisations in Asia Pacific are devoting higher salary budgets for 2022 than they did for 2021.

    A quarter of responding employers indicated that they have chosen to increase their 2022 budgets from those initially projected last year. Our study shows that employers are influenced by different factors to make this change, such as concerns over a tighter labour market (30%), anticipation of stronger financial results (23%) and concerns related to cost management, such as inflation and higher cost of supplies (19%).1

    Charts showing the changes to 2022 compensation cycles and salary budgets in Asia Pacific - description below
    Figure 2. Changes to 2022 compensation cycles and salary budgets in Asia Pacific

    42% expect budgets to be higher than last year’s cycle and 7% expect lower. While 25% expect higher salary budgets than previous 2022 projections, and 4% say lower.

    Salary increase rates are also expected to be higher for 2022 than the previous year. In addition, with Asia Pacific’s consumer price index (CPI) expected to hit 3%, employers will most likely take living costs into account for salary increases. The business direction of many organisations may also affect this, which could reflect on pay for position, particularly for hot jobs. Job functions with highest pay increases are Direct Sales (5%), Information Technology (4%) and Technical Specialty/Skilled Trade (4%), highlighting the trending focus on growth, sales and digital transformation.2

  3. 03

    Retention strategies to counter rising attrition rates

    With organisations concerned over the tighter labour market these days, we are seeing increasing attrition rates to reflect that. The total attrition rates in several markets such as Australia, Hong Kong and Thailand increased significantly, either returning to or exceeding pre-pandemic levels.1 The labour market anticipates new joiners not only from the unemployed, but also from the currently employed, prompting employers to closely look into their retention strategies.

    This is an opportune moment for employers to perform a systematic review of their total reward programs.

    Whether an organisation is experiencing the ‘Great Resignation’ or the ‘Great Hire’ phenomena, having relevant and competitive pay and benefits packages remains critical to attracting and retaining talent. This is an opportune moment for employers to perform a systematic review of their total reward programs – including base pay, allowances, short/long term incentives, benefits, working environment, etc. In fact, benefits review is one of HR’s priorities as employers find it critical to enhancing employees’ experiences in the benefits program. According to our 2021 Benefit Trends Survey, 57% of employers believe the tight labour market influences their benefits strategy.3

    Bar graphs showing attrition rates in selected markets in Asia Pacific - description below
    Figure 3. Attrition rates in selected markets in Asia Pacific

    Attrition rates for Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand across 2019 to 2021, with all markets except the Philippines showing an upward trend between 2020 and 2021.

    Fierce competition for talent can also impact these scenarios...

    These scenarios are not cast in stone and will still be highly dependent on how employers respond to market changes. The pandemic situation also remains volatile. Crucial factors such as inflation and economic growth rates may change in the coming months, therefore budgets may still be adjusted accordingly. Fierce competition for talent can also impact these scenarios where employers are prompted to conduct off-cycle salary reviews and salary budget adjustments in order to retain talent.

    Employers will need to keep an eye on emerging trends in the market, made possible with the help of reliable, relevant and timely compensation market data.

Sources

1 WTW 2021 Salary Budget Planning Survey Report (December edition) – Asia Pacific

2 WTW 2020-2021 Compensation Surveys – General Industry

3 WTW 2021 Benefit Trends Survey – Asia Pacific

Author

Rewards Data Intelligence Leader, International, Asia and Australasia

Contact Us