If 2021 was a year of recovery, 2022 is a year of sustained momentum for Asia Pacific. The region is seen to perform better than the rest of the world, despite continually rising inflation. According to the latest EIU Global Outlook (Market Exchange Rates), Asia Pacific’s GDP growth for this year is set at 4.6%, with a consumer price index (CPI) rate of 2.9%, while the global average is 3.9% and 5.6% respectively. This puts Asia Pacific organisations in a solid position to leverage the positive economic outlook to their advantage.
Expectations are high for the economies in this region, further evident in the prevailing talent and salary trends, which are returning to pre-pandemic levels. This can also be attributed to the rising inflation and tighter labour market we have now. At the same time, the disruption caused by the pandemic has brought lasting effects in the forms of hybrid work set-up and rapid digitalisation, prompting organisations to rethink their Total Rewards strategies.
Certainly, this positive economic outlook will have a differing impact on each Asia Pacific market. Allow us to give you a closer look at the emerging talent and pay trends across Asia Pacific sub-regions.
North Asia
Organisations in China, Hong Kong, Japan, South Korea and Taiwan are bullish about their financial performance for 2022 and it’s translating to higher salary budgets this year. According to WTW’s Salary Budget Planning Survey Report (December 2021 edition) there are three primary factors impacting salary budgets in 2022 for North Asia. Namely the tight labour market, stronger financial results (actual and forecast), and concerns related to cost management (inflation, rising cost of supplies).
57% of organisations in North Asia have concerns over tight labour market; 44% anticipated stronger financial results and 35% have concerns related to cost management.
The forecast of stronger financial results stems from the fact that half of organisations in North Asia see an upward projection of their business outlook for this year. Taiwan is the most confident, enjoying an upswing of 6.8% from last year’s outlook to 54%, while other markets remained stable.
The already tight labour market is expected to only get tighter as 40% of organisations in North Asia plan to increase headcount this year. Much of the talent attraction efforts will focus on acquiring the hottest jobs in this region particularly sales, IT and engineering jobs. New retailers are also ramping up their digital talent investments further increasing the demand for digital talent, particularly those with skills in IT development, supply chain management, and digital marketing.
Lastly, rising inflation is also pushing salary increase rates up and understandably so. Among markets in North Asia, Hong Kong is predicting the largest year-on-year jump in 2022, with 3.8% compared to 3% in 2021. China has the highest salary increase rates at 6%, up from 5.5% last year.
The chart shows Hong Kong predicting the largest jump in 2022, with 3.8% compared to 3% in 2021. While China has the highest salary increase rates at 6%, up from 5.5% last year.
The aging population and declining birth rates are also of concern for employers in North Asia. This poses a risk to stability and sustainability for their leadership succession plans, and also places pressure on where and how to source young talent.
South Asia, Australia and New Zealand
Following the same trend as North Asia, 2022 salary increase rates are expected to be higher in the South Asia markets of Bangladesh, India and Sri Lanka, and across Australasia, and can be attributed to the same set of factors. However, the same rates don’t apply across all sectors. In India, for example, the High Tech and Pharmaceutical sectors posted the higher salary increase forecasts, while for Australia and New Zealand it is Financial Services. Half of the organisations in these markets are also more optimistic than last year in terms of their financial performance as business activities resume.
Clearly, there is a war for talent in these two subregions.
Economic growth is picking up where it left off pre-pandemic, particularly in India. As a result, four out of 10 companies are looking to add more employees in the next 12 months. However, voluntary attrition rates have increased significantly in just half a year and are considerably higher than involuntary attrition, except in Bangladesh. Clearly, there is a war for talent in these two subregions. The hottest jobs in the frontline are those in engineering and technology for Australia, India and New Zealand, and sales for Bangladesh and Sri Lanka.
The chart shows voluntary attrition rates have increased significantly in just half a year for Australia, India, New Zealand, Sri Lanka and are considerably higher than involuntary attrition, except in Bangladesh.
Wide-scale digitalisation is also occurring in India today and it’s spreading to nearby Bangladesh and Sri Lanka. As a result, the demand for digital talent has increased rapidly resulting in rising people costs, around 20% attrition rates among leading players in the technology sector, and adoption of skill-based pay to support retention of critical skills.
Southeast Asia
Markets in Southeast Asia continue to be cautiously optimistic this year. Compared to the other sub-regions in Asia Pacific, only 40% to 45% of organisations in Southeast Asia have stated that their performance this year will either be ahead or well-ahead of 2021.
40% to 45% of organisations in Southeast Asia have stated that their performance this year will either be ahead or well-ahead of 2021.
Each market is expecting higher salary increases than 2021. Indonesia and Thailand are forecasting the highest rise at 7% (from 6.3%) and 4.9% (from 4.3%) respectively. However, it won’t be equal across all industries – Chemicals, Fintech and High Tech are among the sectors set to receive the highest salary rises.
Based on WTW’s Reimagining Work and Rewards Survey, attracting and retaining talent with digital skills is the most cited challenge among employers in this subregion. Among the talent groups in highest demand are sales, people analytics, and digital talent. To address this challenge, employers are boosting their pay and rewards strategies by starting to differentiate beyond pay.
To address this challenge, employers are boosting their pay and rewards strategies by starting to differentiate beyond pay.
Differentiation is gaining ground in Southeast Asia because of the great need for digital talent. According to WTW’s 2021 Artificial Intelligence and Digital Talent Survey, among the emerging reward trends are offering alternative work arrangements, providing enhanced levels of base pay and offering dedicated career progression models.
54% of employers offer alternative work arrangements; 48% provide enhanced levels of base pay and 41% offer dedicated career progression models.
Overall, the Asia Pacific market has a generally positive outlook in terms of the prevailing rewards and salary trends that are taking cues from the strong economic performance of the region. But it comes with some caveats such as the tight labour market and the difficulty to attract and retain digital talent. If not addressed successfully, these can become roadblocks to growth for many organisations. It’s important to ensure rewards and pay policies are responsive to the most recent developments in the talent market and meet talent needs. Employers can embrace a more comprehensive view of Total Rewards, recognising the important role that career growth, retirement plans, company stock and other programs play in meeting attraction and retention objectives.
Sources
WTW Salary Budget Planning Survey Report (December 2021 edition)
WTW Reimagining Work and Rewards Survey
WTW 2021 Artificial Intelligence and Digital Talent Survey
