Asian salary increases 40% lower since economic crisis according to ECA International

According to ECA International’s latest Salary Trends Survey, pay rises across Asia Pacific are down 40% from those predicted prior to the global economic crisis. Levels in China have remained robust falling only a third below earlier forecasts, compared to 60% drops in Hong Kong and Singapore.

 

The survey found that pay increases for the Asia Pacific region will average 4.8% in 2009, 30% below last year’s 6.9% rises. Salaries in Japan, Taiwan, Hong Kong and Singapore have recorded the biggest downward adjustments with almost a third of Asia Pacific-based companies surveyed planning to put salary increases on hold.

 

“Asia Pacific has been severely affected by the economic downturn and this is reflected in how companies have planned their salary reviews in 2009”, said Lee Quane, ECA’s Regional Director for Asia. “This is most evident in Japan. Just over six months ago, companies operating in Japan were forecasting that salaries would increase by a relatively healthy 2.8%, now half the companies we spoke to said they will be freezing pay.”

 

Singapore’s workers can expect salary increases of 2% compared with last year’s 5% increases, well below the regional average of 4.8% and almost two-thirds lower than initial forecasts. The same increase will be seen in Hong Kong and marks a return to levels last seen when SARS hit Asia.  Approximately 36% of the companies surveyed in both cities said they will be freezing salaries.

 

ECA's Salary Trends Survey is conducted annually for over 50 countries. ECA re-ran its survey to monitor how changing economic conditions have affected companies’ business plans since the study was first conducted in September. The survey is used by international companies to monitor and benchmark company salary levels in local markets around the world.

 

Some locations in the region will still see big increases. Wage increases in India are expected to be the highest at 10.8%, followed by Vietnam (10.6%) – the only location in the region where rises are still higher than last year - and Indonesia (9%).

 

“There is still a huge demand for talent in India which is keeping salary increases high despite the current economic situation. While in Vietnam and Indonesia persistently high levels of inflation are keeping increases up.” said Quane.

 

Worldwide, salary increases are expected to fall from last year’s 6.2% average to around 4.7% as companies look for ways to cut costs in response to the global economic crisis.

 

“In 2008, a range of factors such as rising inflation, the competition for talent in many markets and the healthy level of economic growth meant that companies were awarding relatively high salary increases,” said Quane.

 

“However, the economic upheaval since last September has prompted many firms to revise salary increases significantly from previous predictions. Our results show that, globally, companies have revised their forecasts down, on average, by more than a third.”

 

A significant number of organisations are opting to freeze pay in the light of the economic downturn. More than a quarter of all companies surveyed plan not to increase salaries at all this year.

 

Despite the apparent reduction in salaries, the survey is not all bad news. “One thing to remember is that in the vast majority of locations surveyed, annual inflation figures today are also significantly lower than they were as oil and food prices have fallen from the highs they hit last year. In Singapore and Hong Kong, for example, current inflation is well below figures published six months ago.  This means that real wage increases - the difference between actual salary increases and inflation – may not differ significantly from last year. In some locations they are, in fact, higher than they were despite salary increases being lower.”

 

The highest nominal wage increases in the survey can be expected by Venezuelan employees who will see a 24% rise on average – up from last year’s 22%, followed by Argentineans who can expect 12% increments. High inflation, as a result of the economic policies in these countries, has contributed to keeping increases high.

 

The lowest increases will be in Japan, Lithuania and the Irish Republic.

 

In North America, forecasts by companies in Canada are being slashed by 75% from 4% to 1%. In the United States the 4% prediction now stands at 2.8%. On average, salary increases for the region are half as high as anticipated before economic crisis set in.

 

However, in South America, wage increases are only 13% lower than forecasts made last year. While workers in most economies witness lower wage growth than in 2008, salaries are anticipated to increase at a higher rate than last year in some South American economies, namely Brazil, Chile, and Venezuela.

 

“In North America 40% of companies will be putting salary increases on hold, while just 7% of South American-based companies intend to do the same,” said Quane.

 

Salary increases in Western Europe average around 2%, according to the survey, while those in Eastern Europe are just under 5%. Wage increases in Europe as a whole are down 35% from those awarded in 2008 and 43% lower than earlier predictions. Russia, Romania and Latvia will see the highest increases while workers in Lithuania, the Irish Republic and Switzerland are likely to experience the smallest pay rises in the region.

 

29% of European-based companies do not plan to increase salaries at all this year, according to this latest survey.

 

In Saudi Arabia companies surveyed said they have increased salaries by an average of 3.9%. In the UAE this figure stands at 4.8%. In both cases this is 43% lower than when predictions were made in September.

 

 

ECA is the world’s leader in the development and provision of solutions for the management and assignment of employees around the world.

 

Delivering data, expertise, systems and support in formats which suit its clients, ECA’s offer includes a complete 'out-source' package of calculations, advice and services for companies with little international assignment management experience or resource; subscriptions to comprehensive online information and software systems for companies with larger requirements; and custom policy and system development projects for companies who manage thousands of international assignees around the world.

 

ECA Salary Trends Survey 2008/2009 was first published in November. To monitor how changing economic conditions since the initial survey have affected companies’ business plans, ECA re-surveyed all participants who supplied 2009 data in February 2009 and the updated report is now available free to all participants or for purchase for non-participants. Information regarding ECA surveys can be found on the website.

 

The full survey reports current-year salary increases for local national employees and the anticipated increases for reviews in the forthcoming year, based on information collected from 230 multinational companies in 53 countries.  When the survey was rerun, 120 of these companies participated.