As China continues to move rapidly through the post-crisis operating stage of the COVID-19 pandemic, businesses are looking to achieve and maintain positive economic recovery throughout 2021. For HR functions in China, this presents a number of challenges, but also opportunities to rethink human capital strategies and to design a future-ready organisation to support continual business growth.
Our latest compensation survey data reveals five trends that will shape the China market in the year ahead.
Optimistic economic expectations for China in 2021
Post-pandemic talent boom for key industries
Competitive pay for new graduates in second and third-tier cities
Strong business performance is boosting executive rewards
Increased demand for digital talent, risk management and channel sales
Top five talent and reward trends in China
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01
Optimistic economic expectations for China in 2021
The economic forecast for China in 2021 is strong in the aftermath of COVID-19. GDP is anticipated to grow from 1.9% in 2020 to 7.3% in 2021. CPI is expected to remain stable at 2.8%.1
With most organisations in China moving quickly to restore stability post-pandemic, their main goal in 2021 will be to accelerate or solidify business performance. This optimistic business outlook is reflected in both the average salary increase forecast of 6.0% for employees in 2021, rebounding from 5.0% in 2020, and an expected decrease in the percentage of companies that will freeze salaries.2
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02
Post-pandemic talent boom for key industries
There has been a sharp increase in demand for talent in the Energy, Capital Market, High Tech and Pharmaceutical and Health Sciences industries. The HR Omni Index from our new interactive platform, HR OmniSight, reveals that talent demand has increased sharply for these industries since the end of 2019, suggesting that employers in these sectors are well prepared for growth and development opportunities in 2021.
Figure 2. HR Omni Index score (talent demand) has increased in these four sectors -
03
Competitive salaries for new graduates in second and third-tier cities
Starting salaries for fresh graduates is always a hot topic for HR functions across China. Human capital strategies for attracting and retaining these graduates can vary greatly by city due to the different paces of urban development.
Overall, average starting salaries for fresh graduates in second/third-tier cities are 75% to 85% of graduate salaries in first-tier cities (Beijing, Guangzhou, Shanghai and Shenzhen). However, when we look across the general employee population in China, average salaries in second/third-tier cities are much lower compared to first-tier cities, at 65% to 75%.3 4 This difference suggests that employers in second and third-tier cities are prioritising competitive salaries for new graduates over other employees.
Figure 3. Graduate starting salaries in second and third-tier cities are higher than other employee groups in comparison to first-tier cities -
04
Strong business performance is boosting executive rewards
Our most recent compensation survey data shows that the pay gap between executives and employees in China is increasing. In 2020, take home pay for executives was nearly 20 times more than entry-level staff. This gap has widened steadily since 2018, when executive pay was 17.7 times higher than young professionals.4
Figure 4. The gap in compensation is increasing between executives and entry-level employees
Total direct compensation for executives has increased by 22% in the past two years, largely driven by the 42% average rise in annual incentives. Total guaranteed compensation increased by only 5% in 2019.4 This reflects the increasingly strong link between executive pay and overall financial performance of organisations in China.
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05
Increased demand for digital talent, risk management and channel sales
At the peak of the COVID-19 crisis, many organisations took the opportunity to rethink their business development strategies. Digitalisation has played a key role in accelerating organisation transformation in China.
Digitalisation has played a key role in accelerating organisation transformation in China.
This shift has had an impact on talent demand trends across the country. Our HR Omni Index shows that IT development roles were the most popular in 2020, followed by roles in data science and business intelligence, risk management and channel sales.3
Our data also shows that the increase in total compensation for these four functions was higher than the overall market.4
These functions saw a higher demand for talent and movement in pay
| Top four functions | HR Omni Index score | Increase in actual annual total compensation (2019 to 2020) |
|---|---|---|
| IT Development | 84 | 9% |
| Data Science and Business Intelligence | 80 | 14% |
| Risk Management | 74 | 10% |
| Channel Sales | 73 | 19% |
| Overall market movement | 6% | |
The fast-growing business landscape in China is driving opportunities. It’s important for HR to stay alert and informed of the latest pay and market movements, to ensure your human capital strategy is competitive and relevant.
Sources
1 Economist Intelligence Unit – November 2020
2 2020 Salary Budget Planning Q4 Report
3 HR OmniSight (HR Omni Index is a proprietary Willis Towers Watson metric for comparing the relative talent demand in China)
4 2020 General Industry Compensation Survey Report – China (Shanghai/Beijing/Shenzhen-Guangzhou/East China/North China/West China/South China)
