Hewitt Studies Reveal Companies Revise Their Pay Forecasts in Response to the Economic Downturn, but Top Performers Continue to be Treasured

2008-11-20 18:05 1298

SHANGHAI, Nov. 20 /PRNewswire/ -- The majority of companies seem set on cutting salary planning budgets and variable compensation payouts as concerns about the uncertain economy put pressure on cost reductions, according to two new surveys conducted by Hewitt Associates, a global human resources consulting and outsourcing company.

According to the Hewitt China Economic Impact Survey conducted in October, 63 per cent of companies in China expect to or have already implemented changes to their salary Increase budget policies. A total of 253 companies were polled out of which 183 manufacturing companies, 65 service companies and 5 companies in multiple industries.

Salary increase projection for 2009 stood at 8.6 per cent -- down 1.6 per cent from 10.2 per cent in an earlier projection exercise conducted during June-September period. For those companies making changes, the salary increase projection for 2009 is even lower, only standing at 8.0 per cent.

The top two reasons for changes to salary planning budget were concerns about the broader economy (69 per cent) and cost reductions (66 per cent)

A majority of companies (65 per cent) also expect to tweak variable compensation payouts such as bonuses although the impact will be felt more strongly next year. For 2008, 47 per cent of companies expect to reduce them slightly by less than 10 per cent and 36 percent to reduce them significantly by more than 10 percent. However in 2009 only 39 per cent expect a slight reduction and 44 per cent are forecasting a significant cut. In contrast only five percent expect to significantly increase by more than 10 per cent payouts this year while only five per cent expect to do so next year.

The study also revealed that companies are counting on top performers to pull through tough times. So while 63 per cent of companies are putting a hiring freeze in place, some 50 per cent still plan to hire strategically when there is a need to do so.

Richard Kantor, regional Talent and Organization practice leader for Asia Pacific, said: "High quality talent continues to be a scarce and valued resource in this region. Smart organizations are using this time of turbulence to selectively recruit some of the very best talent. Sixty percent of survey participants across the region reported that they still have strategic hiring practices in place, even under current conditions."

Kantor added: "Top performers require top rewards. Despite more conservative salary forecasts by companies in the past few months, organizations say that they continue to invest in top performers, and take greater measures to retain their best people."

According to study findings, top performers get almost four percent (3.8 percent) more on average (excluding Japan at 1.5 percent) across Asia Pacific, with China at 4.2 percent, the Philippines with the highest at 7.8 percent and Thailand at 5.8 percent.

On top of differentiated cash rewards, other retention approaches for top performers include companies providing additional learning and development opportunities (61 percent of respondents in China), granting discretionary restricted stock and/or stock options (22 percent of respondents in China) and offering retention bonuses for specified period of employment (25 percent of respondents in China)

A majority of 58% surveyed companies said they will not reduce their promotions.

Stella Hou, Hewitt regional practice leader for Broad-Based Compensation in Asia Pacific, said: "We are on the threshold of what could be the beginning of a longer-term rebalancing of salaries following rapid increases year after year in many fast-growing developing markets.

"There is a large amount of uncertainty and rapidly changing circumstances that continue to impact decision-making on a daily basis. We still see companies taking the position of 'wait and see', given this uncertainty. However, some leading companies plan to or already are taking actions now to prepare their organizations to weather the potential storm. No one knows at this stage how long, how deep, and even what markets or industries will be most affected."

Companies say they will continue to invest in Asia, and further expect relatively faster growth from this region, though growth is anticipated at a much slower pace.

Hou added: "Organizations will still need to keep their workforce at a reasonable size and continue to prepare for the turnaround. Many see this as an opportunity to consider acquisitions, to make their organizations leaner, and to re-skill workforces as companies focus on core business. Pay freezes and pay cuts are not being considered at this time by and large."

Hou said: "Companies that take care of their workforces over time, take extra efforts to reward and keep top performers, and substantially increase the productivity of the 'rest' stand an even better chance of mitigating the downside while positioning for the upside. It also appears that employees are willing, generally, to stay with companies providing clear growth opportunities and a visible career path."

About Hewitt's Salary Increase Survey

Hewitt surveyed 2,200 foreign, locally-owned, and joint-venture companies in this 9th annual Asia-Pacific Salary Increase survey, making this the most comprehensive salary study in the region to date. The survey was conducted between June and September 2008, and covered 18 markets including Australia, Bahrain, China, Hong Kong, India, Japan, Korea, Kuwait, Macau, Malaysia, New Zealand, the Philippines, Qatar, Singapore, Sri Lanka, Taiwan, Thailand, and the United Arab Emirates.

It measured actual and projected salary increases, and compensation practices for six specific job categories, namely top executive, senior management, middle management, junior manager/supervisor/professional/, general staff, and manual workforce.

About Hewitt's Asia-Pacific Economic Survey

A special survey was conducted as a follow-up to the Asia-Pacific Salary Increase Survey this year as a result of the escalation of the economic crisis on a global scale. Over 700 responses identifying how the economic crisis was affecting company planning and HR programs were received in October.

Asia-Pacific Economic Survey results were obtained from 12 markets including Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, and Thailand.


For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering retirement, financial and health management; compensation and total rewards; and performance, talent, and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. For more information, please visit .

Source: Hewitt Associates
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