The past year was not an easy one for Hong Kong. Stifling pandemic controls, tumbling stock market, slowing global demand and the ongoing economic slump in China have led to a 4.2% contraction in Hong Kong’s GDP. As economic woes deepened, more than 100,000 residents left the city, leading to its biggest drop in population in at least 60 years.
As the city starts its road to recovery, the journey ahead is expected to be long and bumpy without the return of its lost talent. According to WTW’s 2022 Salary Budget Planning Report, the number of companies in Asia expecting challenges in attracting and retaining talent this year has almost doubled compared to two years ago, from 31% to 65%. To make matters worse, attrition rate in Hong Kong rose to 18% in 2022, higher than any other countries in Asia Pacific.
Rising attrition rate and a tighter labour market have put the pressure on companies to review compensation to ease hiring and retention. Across the region, pay and bonus are the top considerations for employees when looking for a new job. This is expected to boost salary increase in Hong Kong by 4% in 2023.
Beyond the competitive labour market, in the same survey by WTW, close to 70% of companies identified inflation as a key factor influencing salary increase in their companies. Compared to the rest of its Asia counterparts, companies in Hong Kong have benefited from a relatively restrained inflation spike over the past year. But with inflation expected to continue to fluctuate in the coming year, pegging compensation against it will only create pressure on business margins and further dampen companies’ ability to compete in the shrinking talent pool.
Therefore, it is time for companies to reconsider their current approach to counter the competitive labour market and inflationary pressures. Beyond pay and bonus, companies often forget that job security, flexible work, leave benefits and sense of purpose are also key factors employees look to when considering a new job. This means that instead of only relying on salary increase, business leaders need to adopt an integrated approach and start enhancing their employee benefit schemes and experiences to stand out in the war for talent.
We outlined three ways this can be achieved:
With close to half of employees planning to change jobs, companies have a tough road ahead as competition heats up for the top talent in Hong Kong. As inflationary pressure continues to rise globally, they need to understand that talent attraction does not need to come at the expense of operational resilience. The race for talent cannot be won with increased salary alone. Instead, enhancing employee experience and benefits will be the key factors that truly set companies apart.
This article was first published on ET Net in Chinese on 22 February 2023.