Salary increases in 2019 and 2020: Asia Pacific outlook

With planning for 2020 underway in most organisations, timely data by Willis Towers Watson has provided a yearly outlook on actual and projected salary increases in 2019 and 2020 respectively, across 20 markets, including Singapore, Malaysia, Thailand, Indonesia, and more.

With continuous pressure on businesses in the region to keep costs down, salary increases in APAC remain stable at an average of 5.6% this year (same as 2018), slightly lower than the projected increase of 5.9% last year, per the latest Salary Budget Planning Survey Report (Q3).

For 2020, the projected salary increase at the regional average is expected to be 5.7%.

 

Deep dive into the regional average

Overall, organisations have been conservative in setting their salary increase budgets for 2020. Only nine out of 20 markets surveyed plan to have a higher salary budget next year (with an increase of at least 0.1%). These include Bangladesh, Cambodia, China, India, Japan, Pakistan, Sri Lanka, Thailand and Vietnam.

Early projections indicate that salary movements will remain unchanged for the rest of the markets, including Australia, Hong Kong, Indonesia, Macau, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea and Taiwan.

Breaking down the results by market, this means:

• India is expected to see the highest salary increases in both 2019 and 2020, remaining stable at 9.9% and 10% respectively.
• Salary budgets in 2020 are expected to grow 9% or more in three markets: Pakistan (9.6%), and Bangladesh and Vietnam (9% each).
• Relatively higher salary budgets will be seen in Indonesia, with a 2019 actual and a 2020 projected increase of 8%.
• Singapore will continue to see a more conservative salary increase at 4% for both 2019 and 2020.
• Across the straits in Malaysia, salary budgets will continue to remain stable as well at 5.2% for both years.
• This is in line with the trends in Thailand as well, where salary budgets increasing by 5.1% in 2019, and are projected to go up by 5.2% in 2020.
• Salary budgets in 2020 are expected to go up by less than 4% in Australia (3%), Japan (2.5%), New Zealand (3%), and Taiwan (3.8%).
• China will see a growth of 6.5% in salary budgets in 2020, while salaries are expected to go up by 4% in both Hong Kong and Macau.

More details are depicted in the graph below:

 

Salary outlook by sectors/industries

• Employers in the fintech industry in China, Hong Kong and Singapore are planning to increase their salary budget by up to 2.1% next year on average, the highest jump among all industries (6.2% in 2020 versus 4.1% in 2019).
• The high tech industry in Asia Pacific is also projecting one of the highest salary increases next year (5.8% in 2020 versus 5.7% in 2019).
• In the pharmaceutical and health sciences industry, 42% of the companies expecting a better outlook in business performance next year, bolstered by the increase in health conscious consumers, and as a result of the increasing demand from the ageing population. Employers in this industry are projecting a salary budget increase of 5.9% for next year, a 0.2% increase from 2019.
• Salary increase budgets in the banking industry are the lowest and expected to remain stable at 4.7% next year. The sector has been facing headwinds due to the volatile economic environment, decline in business outlook and the intensifying competition from fintech developments.
• Despite these, the banking industry still draws the highest variable pay among all industries in the region. Employers in the banks are projected to pay a variable incentive of about three months (24.9%) of base salary to employees in 2020.
• Salaries in the insurance industry will see an increase from 5.1% this year to 5.3% in 2020. Variable pay in the Insurance industry is also among the highest at more than two months (17.7%) of base salary. The industry is also expected to add more headcount next year.

Overall, while most companies are keeping their salary budgets steady, it was found that close to two thirds of the organisations surveyed expect their headcount growth rate in 2020 to be in line with this year’s expansion. One-fourth of the organisations (25%) expect their headcount growth to stay ahead next year.

Edward Hsu, Business Leader, Data Services and Compensation Software, Asia Pacific, Willis Towers Watson, commented: "Jobs in sales, engineering and technical skilled trades are the top three functions that organisations are likely to recruit in the next 12 months.

"In particular, engineering jobs are in demand and this could be driven by the increase digitalisation and ongoing transformation of business across industries."

Singapore-specific industry/salary/recruitment trends

In 2019, the salary increase budget remains flat at 4% in Singapore across most industries and employee categories. The increase is projected to remain the same in 2020.

• The following sectors show a smaller salary increase budget this year: fintech at 3.0%; construction, property and engineering at 3.1%; banking at 3.5%; and business and technical consulting at 3.9%.
• However, the fintech industry shows one of the highest salary budget increment next year with employers projecting a growth of 0.5% (3.5% in 2020 vs 3% in 2019). This could be due to the increase in fintech investments, where the sector is looking to hire to support business  growth.
• Employers in the construction, property and engineering industry are also projecting a higher growth in salary increase budget in 2020 with a potential growth of 0.9% (4% in 2020 versus 3.1% in 2019).
• On the other hand, these sectors show a possible slowdown in salary increase next year: retail (projected 3.9% in 2020 versus 4% in 2019); chemicals (projected 3.9% in 2020 versus 4% in 2019); and media (projected 3.8% in 2020 versus 4% in 2019).
• In 2019, employers in the banking and insurance sectors pay the highest variable incentives to employees in Singapore based on 2018 performance - banking at 3.3 months and insurance at 2.4 months of base salary.
• For 2020, it is expected that variable pay by employers in Singapore will be one of the highest among Asia Pacific countries, slightly behind Thailand and Myanmar, at an average of about two months of base salary across all employee categories.
• Recruitment plans by companies in the next 12 months:• Planning to add headcount: 23% of the surveyed companies• Maintain headcount: 71% of the surveyed companies• Reduce headcount: 6% of the surveyed companies
• Top three functions for recruitment in the next 12 months:• Sales (54% of the surveyed companies)• Engineering (43% of the surveyed companies)• Technical skilled trades (34% of the surveyed companies)

Outlook on recruitment and business performance

• Two-thirds (66%) of the 1,128 surveyed organisations expect their company performance in 2019 to be in line with last year while only 25% of companies see better business results this year, a drop of 10% from 2018.
• Companies are experiencing more risks in their business environment as the unstable political and economic outlook declined, as well as the slowdown in global demand resulting in weaker export performance in Asia Pacific.
• With the cautious business outlook, recruitment efforts are expected to slow down over the next 12 to 24 months. Only 22% of Asia Pacific organisations plan to add new headcount compared to 27% last year.
• Organisations planning to maintain their current headcount increased from 66% in 2018 to 72% in 2019. As with the previous year, only 7% of organisations plan to reduce their headcount.

Edward Hsu noted that the report found a drop in voluntary attrition rates across the region, from 14.3% in 2017 to 10.4% last year, likely due to the global economic uncertainty.

He added: "On the contrary, we are seeing an increase in involuntary attrition, rising from 3.6% in 2017 to 4.0% in 2018," elaborating that companies in the manufacturing, energy and natural resources, andpharmaceuticals and health sciences industries have the highest involuntary attrition rate in the region.

Graphics / Willis Towers Watson