Pay rises are making a comeback. Companies in Asia Pacific (APAC) plan to give employees larger rises next year as they recover from the economic fallout of the pandemic and face mounting challenges attracting and retaining employees, according to the latest Salary Budget Planning Report by Willis Towers Watson.

As a fast-growing region, markets in APAC will see the highest 2022 salary increases, while countries in North America and Western Europe are expected to stay flat, and the rest of the regions taking longer to recover and stabilize. Companies in APAC are projecting average salary increases of 5.3 percent for executives, management and professional employees, and support staff next year. This is up from the average 4.9 percent increases employees were granted this year. Emerging markets such as India at 8.8 percent and Indonesia at 6.5 percent are forecasting significant salary budget increases for 2022 compared with this year.

With APAC expected to perform better than the rest of the world in trade, the overall manufacturing output across the region has also shown substantial recovery. In addition, the pandemic has produced accelerated growth and enormous demand for wireless communication. Strong foreign direct investment into the region along with the demand for technology, communication and 5G equipment, have created new demand and job opportunities across the High Tech and Media industries. High Tech companies in the region are projecting the largest increases (5.5 percent) followed by Manufacturing (5.4 percent), Pharmaceutical and Health Sciences (5.2 percent) and Media companies (5.2 percent).

“Many businesses awarding high salary increases are also acknowledging and rewarding their employees who have demonstrated resilience throughout the pandemic. Although there is a positive outlook among businesses, companies are also monitoring the inflation trend as it looks set to increase in several markets in APAC. Organizations may further adjust their 2022 salary budget forecast in the later part of this year,” said Edward Hsu, Business Leader, Rewards Data and Software, Asia Pacific, Willis Towers Watson.

Higher salary rises in 2021 are partially attributed to few companies freezing pay increases compared to last year. In 2020, an unprecedented number of companies cancelled salary reviews (30 percent) in APAC, whereas in 2021, the figure dropped to 13 percent and is forecast to return to the low level of 2.5 percent next year. Notably, rises are returning to close to pre-pandemic levels. The larger rises coincide with a surge in demand for labor and a shortage in supply of specific professional roles with premium skills.

Companies are also going through extensive planning in 2021 and will be experimenting with hybrid models that better fit employees’ lifestyles, which may also result in long-term business savings. The buoyant job market and the challenge of engaging employees outside of an office environment mean that companies will need to pay top dollar to hold on to their top talent.

With the recovering environment in many markets, attrition rates have also moved up in countries with positive business outlooks, including Australia, China, Singapore, Taiwan and Vietnam.

“Attracting and retaining employees remains a major challenge for employers. In fact, the current environment makes these challenges even more difficult. Employers need to deliver a sound employee value proposition supported by comprehensive Total Rewards programs. Beyond competitive salaries, which are table stakes at the moment, companies also need to focus their spend on a diverse set of benefits, wellbeing and upskilling programs to drive employee engagement,” added Edward.

Companies in Fintech, Media, and Pharmaceutical and Health Sciences reported the highest average salary budget increments at 4.2 percent, 4.0 percent and 4.4 percent respectively for next year. Industries such as Energy and Natural Resources indicated the lowest average salary budget increase at 3.1 percent for 2022.

Organizations are also likely to create more jobs in functions such as sales, information technology and engineering. The survey shows that 27 percent of companies plan to increase headcount in the next 12 months. Compared to last year, this is a positive outlook as only 12 percent of companies were planning to add headcount in their recruitment plans for 2021. Increments are expected across the board in organizations, particularly at junior and mid-levels, partially driven by the turnover rates at these levels.

“Companies are between a rock and a hard place when it comes to compensation planning. On the one hand, employers need to continue effectively managing fixed costs as they rebound from the pandemic. On the other hand, companies recognize they need to boost compensation, especially in sectors where there may be a manpower crunch. This situation has driven organizations to explore alternative options to fixed pay increases, including sign-on, referral and retention bonuses, functional and skill premiums, mid-year adjustments or pay increases,” said Vidisha Mehta, Head of Talent and Rewards, Singapore, Willis Towers Watson.

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