Pay increase in Hong Kong seen to rise in 2012—survey

Report showed average salary increase at 4.2% in 2011 and forecast at 4.6% in 2012 while performance bonus is at 20% of annual base salary.

Despite the potential for uncertain economic conditions, maintaining competitive levels of salary remains a key concern for many multinationals in Hong Kong in order to retain their best talent and offset the impact of rising inflation. According to Mercer’s Total Remuneration Survey 2011, salary increases are at 4.2% on average across industries in 2011 and are forecast to rise to an average of 4.6% in 2012. “Almost half of the companies surveyed indicated that they will offer a pay increase in the order of 5% in 2012, “said Ms Connie Leung, Hong Kong Business Leader for Mercer’s Information Products Solutions.

Mercer’s Total Remuneration Survey 2011 includes responses from more than 365 multinational companies across different industry sectors in Hong Kong including hi-tech, chemical, consumer goods, healthcare services, engineering and logistics.

Among different sectors covered in the survey, the healthcare services industry is expected to see the biggest pay increase at 5.0% in 2012. The expected salary increases for other industries are relatively lower, specifically 4.3% for hi-tech industry and 4.4% for chemical industry. “Many companies are grappling with uncertain business conditions and the current world economy, so they tend to be relatively conservative when budgeting for employee salary increases next year. It is critical that companies do not raise their fixed costs to an unsustainable level,” said Ms Leung.

Ninety-five percent of surveyed companies pay variable bonus to employees. The bonus payout is generally based on overall company and individual performance. The average bonus amount across different staff levels and industries is approximately 20% of annual base salary in 2011 and similar figures are expected for 2012.

Further, the survey also revealed that 52% of multinational companies in Hong Kong plan to increase headcount in the coming year and 46% of companies are looking at maintaining the same level of headcount. Only 2% of companies indicated that they may reduce headcount, according to a Mercer report.

“Employers in Hong Kong will face a lot of pressure when it comes to salary cost in 2012,” added Ms Leung. “Rising inflation raises employees’ expectations of pay increases. Balancing this expectation by maintaining competitive compensation levels to retain the best talent to drive business growth with the need for prudent financial planning will be employers’ key challenge in 2012.”