All around the world, employers and employees alike are pressured by the economic impact of continually rising inflation. For instance, as of September 2022, the U.S. saw prices rise to 8.3% – much higher than what economists earlier predicted. Meanwhile the U.K. faced a 10.1% increase in consumer prices – a surge that hasn’t been seen in 40 years.
The same level of economic pressure has not yet hit as hard across Asia Pacific. Many markets in the region remain optimistic but are still cautious. Asia Pacific is expecting an average GDP growth of 4.3% in 2022 and 3.5% in 2023. Meanwhile, CPI is expected to drop to 2.5% in 2023 from 4% this year.
Additionally, unemployment in the region has been decreasing continuously since 2019. It is expected to dip to 4.1% in 2023 from 5.2% in 2022. Along with the stable economic growth and high demand for talent in the region, we expect to see the average salary rate increase to 5.1% in 2023 from 4.9% this year according to our 2022 Salary Budget Planning Survey report (July edition).1
However, the current economic dynamics we are facing globally still make most organisations feel uncertain about the near future. Sixty-six percent of Asia Pacific companies report they have no intention to expand or reduce headcount in the next 12 months. Organisations in markets with a conservative business outlook, such as Australia, Hong Kong and Thailand, do not plan to increase their workforce in the next 12 months. Even without the historic inflation highs other regions have seen, nonetheless employers in Asia Pacific are considering this as one of the major factors in planning their compensation and other HR actions.
We are seeing organisations reflect on the impact of inflation on their reward strategies. In Asia Pacific, inflation is not having a great impact on rewards yet, and the upward trend of salary increases from 2021 to 2023 in all markets were primarily influenced by intense challenges around talent attraction and retention. This was especially evident with retention strategies, as retention bonuses became more prevalent – bonuses ranged from 15% to 30% of individual base salary.
In the U.S. and the U.K. where inflation is hitting hard, many organisations have made increases on annual salary budgets and additional budget funds to make salary adjustments, usually on ’as needed’ basis. Additionally, salary adjustments were typically given to target groups, such as talent with hot skills and colleagues identified as retention risk. Apart from recognising top talent groups, retention bonuses are also being used to help subsidise higher living costs. Target groups for retention bonuses include managers, professionals, and talent with hot skills.
Many organisations in the U.S. and the U.K. have also been placing a greater emphasis on non-monetary elements of compensation, such as promoting and enhancing existing benefit programs and learning and development programs.2 Some Asia Pacific organisations have started looking into using these same strategies.
According to WTW’s 2023 Global Medical Trends Survey, healthcare benefit costs in Asia Pacific are expected to jump from 6.9% to 10.2% next year and almost three quarters of insurers expect this trend to continue in the next three years. Anticipating these increases, employers are looking into innovative short- and long-term approaches to support their employees’ benefits needs.
Among the short-term actions are benchmarking to review plan design, using technology to drive efficiency, consolidation of legacy benefits and a more aggressive approach to brokerage to drive optimal value. As for long-term measures, our 2021 Benefit Trends Survey reported that more organisations (59%) are focusing on detailed claims analytics to better understand claims trends and to optimise spending. Organisations are also enhancing wellbeing to improve health and resilience as a preventive measure to lower claims in the longer term, lowering sickness absence costs and reallocating budgets to support these initiatives instead of finding new funding.
Employee concerns about their financial situation are at an all-time high. The rising prices of goods have become a daily source of stress and worry for employees, which is also bringing a negative impact on employee experience and employee engagement. In fact, in 2022, more employees are considering leaving their companies even compared to pre-pandemic era – approximately a third of employees are expressly intending to leave their current employer or unsure and at risk. Furthermore, employees’ perception of rewards has dropped several points compared to last year, according to the 2022 WTW Employee Opinion Norm Database insights.3
While compensation is a key driver of attraction and retention, keeping talent engaged and enhancing their employee experience is driven by purpose, company culture and benefits that are significant to their present and future.
Use multi-faceted employee listening strategies to understand employees’ concerns related to the rising cost of living and job security. Recognise what your employees need, align these to your reward and benefit programs, and involve employees in the process.
Provide an education and communication toolkit to support managers with compensation messaging in the broader context of total rewards, the employee value proposition, career development opportunities and connection to purpose.
Create and deliver a transparent communication and engagement method about the business outlook and strategies, including the actions taken and those planned to support employees dealing with challenges.
Improve employee understanding of choices offered through total reward programs and provide meaningful information about economic conditions and financial management. Enhance digital delivery, personalised communication, and development of specific care pathways.
Establish a process of continuous review and improvement, enabling an agile strategy to guide you in adapting to the changing market conditions.
In these volatile times, employers and employees are both feeling the pinch. Using high-quality and reliable survey data to drive informed decisions and stay in touch with global and local economic trends is important right now. These movements can have a profound impact on business outlook and workforces across the region.
1 2022 Salary Budget Planning Survey Report (July edition)
2 2022 Inflation and reward actions pulse survey – US and Europe
3 WTW Employee Opinion Norm Database – Q2 2022