4.5% Base Pay Rise Recorded in 2012

(Thursday, November 01, 2012)

4.5% Base Pay Rise Recorded in 2012
Employers remain cautious on pay adjustment forecast next year
with concerns about turbulent economic climate 

[1 November 2012 - Hong Kong]  Facing the situations of a volatile global economy and labour shortages in certain sectors, employers at large remain prudent in their pay strategies but at the same time have to be flexible in pay adjustments in order to retain talent for corporate development and sustainability. The latest pay adjustment findings are reflected in the HKIHRM 2012 Pay Trend Survey conducted by the Hong Kong Institute of Human Resource Management (HKIHRM), which has been tracking pay adjustment in Hong Kong for almost three decades. 

The HKIHRM 2012 Pay Trend Survey covers a total of 102 companies from 17 sectors, with some 143,000 full-time salaried employees. Key findings of the survey are as follows: 

Base Pay Adjustment in 2012

94 companies (having a total of 128,810 employees and making base pay adjustment between January and October 2012) out of the 102 participating companies confirmed their pay adjustment during the survey period (January to October) and provided relevant base pay adjustment data for analysis. 

•The overall average base pay adjustment recorded for these 94 companies was 4.5%(weighted average), 0.3 percentage point higher than the figure recorded for the same period last year (4.2%) but lower than the forecasts of 5% announced in November 2011 and 4.7% in February 2012 by the HKIHRM.

 

•92 out of these 94 companies (97.9%) offered an overall base pay increase as compared to 100% in the same period 2011. One surveyed company recorded an overall zero base pay adjustment while another one an overall negative base pay adjustment.

 

•The top three sectors which offered the highest overall base pay increase are: construction (6.2%), and insurance and public utilities (both at 5.4%).

 

•Of the 128,810 employees concerned, 86.8% received a positive adjustment in base pay, 13.1% zero adjustment while 0.1% a negative adjustment. 

Mr Lawrence Hung, Chairperson of the Remuneration Committee of the HKIHRM, commented on the pay adjustment findings, “It is not surprising to find a slightly lower actual pay adjustment figure in 2012 when compared to the forecasts found in our survey last year and earlier this year. Considering a marked slowdown in the local and global economies, witnessed by less favourable economic data on gross domestic product, exports and imports, industrial outputs, as well as continuous job cuts in certain sectors, employers may choose to prepare for situations unexpected or uncertain. However, Hong Kong is near full employment throughout the year and labour shortage has been a concern for some sectors such as construction and retail. The pay adjustment figures thus reflect market force and corporate affordability amid economic turbulence.”

Bonus Payment for 2012 

Guaranteed Bonus

•All 102 companies provided data on bonus payment. Among them, 45 companies reported that they had a guaranteed-bonus policy, thus indicating that 37.3% of the total surveyed employees are eligible for a guaranteed bonus. Among those employees being awarded a bonus, the overall average bonus size was 1.01 months of base pay. 

Non-guaranteed Bonus

•A total of 89 companies with a non-guaranteed bonus scheme confirmed their bonus payment during the survey period.

 

•Of their eligible employees, 82.9% were awarded a non-guaranteed bonus, with the average bonus size being 1.61 months of base pay. This compared with 84.8% of eligible employees actually awarded a bonus of 1.43 months of base pay on average in the same period last year.

 

•The top three sectors which offered the highest non-guaranteed bonus are: financial services (5.02 months of base pay), shipping/terminals (2.95 months of base pay) and hotel (2.75 months of base pay) 

“It is noticed that the trend of offering non-guaranteed instead of guaranteed bonus prevails. In a pay-by-performance award system, non-guaranteed bonus is an important element considered to be fair and flexible, providing incentive to employees and greater flexibility to employers. The average amount of non-guaranteed bonus at 1.61 months of base pay this year is the second highest in the past ten years (the highest being 1.73 months of base pay in 2007). It demonstrates that amid economic uncertainties, employers are still willing to award high-performed employees,” remarked Mr Hung. 

 2013 Base Pay Adjustment Forecast

42 participating companies, which will have base pay adjustment in the period from January to April 2013, confirmed their budgeted adjustment and provided data. All of these 42 companies indicated that they would have an overall budgeted pay increase. The overall forecast adjustment by all these companies is 4.6% (weighted average). 

When tracking the factors which surveyed companies found most important in their pay adjustment decisions, the top five are company performance, individual performance, market pay adjustments, business unit performance, and competitors’ pay adjustments. As regards inflation, it will be more a factor for considering pay adjustment for general-level staff rather than all staff.  

Conclusion

“With the Third Quantitative Easing (QE III) of the United States already on board, the public keeps an eye on whether the money will flow into the economy and create jobs through corporate expansion and investment. However, the risk of inflation is expected. Recently, the Hong Kong Government has taken measures to maintain a stable Hong Kong currency in the face of an inflow of hot money which is suspected for speculative purpose. Hong Kong’s economic cycle is also greatly affected by development in mainland China, given further integration between Hong Kong and the Mainland. Employers and HR professionals at large may have to be mindful of the macro-economic climate since it will certainly affect decisions on short to medium-term business direction and manpower planning. However, we believe that under all circumstances, talent is always a key to corporate sustainability and success. An effective talent retention programme should also cover off-cycle adjustments which include both monetary and non-monetary practices, such as one-off retention bonus, special adjustment made to align with market and company practices, leadership development programme, career growth and progression prospects, room for creative work and expression for knowledge workers, as well as channels for key talent to express their needs and concerns. Employers can win in the war for talent only with proactive measures showing marked differences with competitors," concluded Mr Hung.

   

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About HKIHRM

As the most representative professional human resource institute in Hong Kong, the Hong Kong Institute of Human Resource Management (HKIHRM), a non-profit making organisation, has more than 4,800 members, with 560 of whom being corporate members. Founded in February 1977, the Institute aims at developing, maintaining and enhancing professional standards in HR management, and increasing the perceived value and influence of the HR profession. The Institute organises a wide range of professional activities such as multi-level training programmes and conferences, and provides services such as conducting surveys and publishing a professional journal. The HKIHRM is a member of the Asia Pacific Federation of Human Resource Management which is one of the continental federations under the World Federation of People Management Associations. For more information, please visit our website at http://www.hkihrm.org.  

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