Thailand Compensation and Benefit Trends 2016: Voluntary Turnover Rates Soar as Performance Pressure Mounts
China Posts an Average Salary Increase Rate of 6.7% and Turnover Rate of 20.8% in 2016
With Voluntary Employee Turnover on the Rise, Technology Sector Companies in Singapore and Asia-Pacific Boost 2017 Salary Budgets
Modest Growth of 4.3% in Hong Kong Salaries Despite a Global Slowdown
Aon Hewitt Announces Best Employers Middle East 2016 Winners
• Turnover rate is the highest for junior management/supervisor levels across industries, at 14% for voluntary turnover and 5.3% for involuntary turnover.
• Salary increases range from 4.7% to 6% in 2016 across industries surveyed.
• Performance is the top factor to influence pay decisions—with the average 2016 bonus payout rate at 4.5% higher than in 2015.
16 November 2016, Bangkok, Thailand – Performance continues to drive pay-related decisions for 95.1% of employers in Thailand, the Total Compensation Measurement (TCM) Study and Benefit Survey 2016 reveals. The survey was conducted by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON).
An alarming discovery is that both voluntary and involuntary turnover rates are highest among junior managers and supervisors, across all industries in Thailand. This reflects the mounting pressure on these employees to sustain their performance levels, even as they make the significant leap from individual contributors to their first managerial roles.
While the average rate of variable pay (or bonus payout) versus fixed pay is set at 18% for both individual contributor and management level, the increase in performance expectations could impact the variable pay component for junior managers struggling with the transition.
Panuwat Benrohman, Partner, APACMEA and Managing Director, Aon Hewitt Thailand, says: “The high turnover rate among junior managers should warn employers in Thailand to think about their compensation policies in the context of their overall talent retention strategy. While the pay for performance model has its merits, employers must also embrace their responsibility to equip junior managers as they transition from individual contributor roles. With ‘better external opportunities’ and ‘limited growth opportunity’ among the top three reasons for attrition, a focus on learning and development will help employers in Thailand build a strong leadership pipeline from within while still compensating high performers attractively.”
Other key findings of the Thailand TCM Study and Benefit Survey 2016 for Thailand include:
• The average bonus rate stands at 22% of the annual base salary in 2016, compared to 17.62% in 2015.
• Retail and life sciences offer 6% salary increase in 2016, the highest across all industries.
• Travel industry has the lowest salary increase, at just 4.7%.
• The rate of variable pay ranges from 15% at support level to 18% at individual contributor and management level, and 20% at executive level.
• 72.2% of employers offer individual performance awards while 38.9% offer special recognition as short-term incentives to retain employees.
• 43% of organisations provide financial wellness advisory as a benefit to employees at all levels.
• Employers invest an average of 11% of annual base salaries on employee benefits, with medical outpatient costs making up a significant portion.
The Aon Hewitt Total Compensation Measurement™ Study and Benefit Survey involves more than 715 participating organisations across 180 countries around the world. This year, there were 174 participating organisations across all key industries in Thailand.
China Posts an Average Salary Increase Rate of 6.7% and Turnover Rate of 20.8% in 2016
14 November 2016, Shanghai – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), releases the Human Capital Intelligence (HCI) study, including the all-industry rewards survey. This year, the annual salary increase rate for employees in China averages 6.7%. The average turnover rate is 20.8%, with voluntary turnover rate at 14.9% and involuntary turnover rate at 5.9%. The HCI study covers over 3000 enterprises in first-tier cities such as Beijing, Shanghai, Guangzhou, Shenzhen and major second-tier and third-tier cities, spanning across a number of industries including hi-tech, Internet, real estate, finance, healthcare, auto, machinery and industrial manufacturing, consumer goods, retail, chemical, logistics, engineering and hotel.
Salary increases of industries vary; turnover rate remains high
Salary increase rate decreases to 6.7% (excluding promotion) this year, equal to China’s GDP growth rate posted by the National Statics Bureau. Salary is expected to grow at 6.9% (excluding promotion) in 2017. However, this year, salary increases of different industries vary. The Internet industry tops the chart (10.3%), followed by real estate (8.0%), hi-tech (7.9%), and medical device (7.6%). Salary increases in pharmaceutical Foreign Invested Enterprises（FIE）(7.0%) and retail (6.8%) are above the national average. Salary increases in engineering (5.3%) and hotel (4.5%) remain low.
This year, the employee turnover rate in China remains high at 20.8%. Ms. Zhang Zhuolei, head of Rewards and Performance Consulting in Eastern China, Aon Hewitt, says: “This highlights the long-standing lack of talent and the imbalanced talent supply.”
Industry-wide, turnover rate in the hotel industry (43.4%) is the highest, followed by the Internet (36%). Turnover rates in real estate, retail, logistics and consumer goods are also higher than the national average. Ms. Zhang continues: “Enterprises in the Internet industry, especially Internet start-ups, are still appealing to talents (millennials in particular) because of a flatter organizational structure, faster career progression path, as well as an open and innovative corporate culture. However, Internet startups feature immature management and business models, which pose risks of uncertainty, so the employee turnover rate is relatively high.”
Labour costs keep rising, and employee productivity is yet to improve
According to the Aon Hewitt HCI study, the proportion of compensation and benefits (C&B) costs to revenue keeps rising year on year. For example, C&B costs in the engineering industry accounted for 32.1% in 2015, up 1.2 percentage points from 30.9% in 2014. C&B costs in the logistics industry accounted for 16.1%, up 1.1 percentage points compared with 2014 (15.0%).
Ms. Zhang says, “Although enterprises tend to tighten or even freeze headcount, the number of employees still rises slowly in general. Also, this year’s national salary increase rate falls to 6.7%, though it is still relatively high compared with other countries. Apparently, the increase of employees and the minimum wage, as well as salary increases, constitute the major factors to rising labour costs. Labour costs would be higher if we take into account costs incurred by employee turnover, training, and other invisible costs, which squeezes corporate profit margins.”
To address the ever-increasing labour costs, enterprises are in urgent need to improve productivity of employees. The Aon Hewitt HCI study reveals that this year, the per capita C&B cost of full time employees (FTEs) in foreign pharmaceutical in China is around 313,620 RMB, rising by 12 percent compared with the previous year; while executive compensation for senior management in China approximates to that of their counterparts in the US. In leading foreign pharmaceutical enterprises, per capita revenue of FTEs in China is around 1,568,000 RMB, while the per capita revenue of global workforce of these enterprises reaches about 3,216,000 RMB, almost twice the productivity of Chinese employees.
Radford, a business unit of Aon Hewitt, shows in recent research that in the Internet industry, the per capita C&B cost of FTEs (around 536,000 RMB) in developed countries is 1.5 times that of Chinese employees (around 348,400 RMB), while the per capita revenue of FTEs (around 5,762,000 RMB) in developed countries is almost 1.9 times that of Chinese employees (around 3,015,000 RMB). Ms. Zhang concludes, “It is no doubt that enterprises in China desperately need to improve employee productivity.”
High-performance culture building in industries differ, and private enterprises outshine
Linking pay to performance has been a mantra of business leaders and HR for decades, yet the enterprises that walk the talk are not as many as Aon Hewitt has expected. According to the Aon Hewitt HCI study, enterprises in most industries declare that they pay for performance. For example, in the consumer goods industry, which has an average salary increase of 6.7%, top performers enjoy an average salary increase of 13.9%, while poor performers have an average salary increase of only 4.4%. Similarly, in the automotive industry whose average salary increase is below the national average, top performers boast an average salary increase of 13%, while poor performers have an average salary increase of only 4%.
However, when it comes to bonus distribution, proportions of different performers vary from industry to industry. The bonus distribution curves of consumer goods and foreign pharmaceutical companies accord most with the standard distribution curve simulated by Aon Hewitt, showing that these two industries have a strong performance-oriented culture. Nevertheless, the chemical industry features very few top and high performers and a vast majority of standard performers, which showcases the smooth and moderate performance management that the industry adheres to as always. For most businesses, there is still a long way to go towards developing a high-performance culture where there is a clear linkage between pay and performance.
In recent years, private enterprises are outstanding in developing a high-performance culture, which can be seem from the ratio of bonus to total rewards and bonus distribution. Compared with FIEs, private enterprises pay much more bonuses to top and high performers. More and more, in the internet era, private enterprises are innovating on variable pay by increasing the levels of variability, and offering more approaches and flexibility in Long Term Incentives (LTIs). Mr. Ni Baijian, principal consultant and head of Executive Compensation and Corporate Governance consulting, Aon Hewitt, says: “Leading private enterprises are more aggressive in LTIs than state-owned enterprises and FIEs. In addition, private enterprises have been exploring richer and more diverse approaches regarding stock option incentives. Besides, the partnership that is catching on in private enterprises is more than enabling key talents to have stock options, and it also entails more voice and a self-realization platform, coupled with flat and equal corporate culture, so that partners can so-share created value with shareholders.”
Retaining talent and improving productivity are top priorities for enterprises
Confronted with challenges of rising labour costs and declining salary increase budgets, enterprises should adopt the following approaches to retain and engage top talents:
- Encourage a high-performance culture — enterprises should create a fair and transparent high-performance culture, and stick to the sharp differentiation while paying for performance.
- Cultivate engaging leaders — while relentlessly developing leadership of junior to middle-level management, enterprises should also cultivate engaging leaders who can motivate and engage their subordinates.
- Pay attention to Total Rewards Statement (TRS) communication — enterprises should provide differentiated, diversified, and personalized benefits, while enhancing TRS communication with employees.
- Develop a compelling culture and Employee Value Proposition (EVP) — Enterprises should persistently shape a constructive corporate culture, and create a positive and healthy EVP.
• Median voluntary employee turnover at technology companies in Singapore is now at 11.7% on a trailing 12-month basis.
• In 2017, technology sector salaries in Singapore are projected to increase by 4.4%, ahead of the 4.2% increase observed in 2016.
• Approximately two-thirds of technology sector companies in all major Asia-Pacific markets, including Singapore, are currently pursuing normal or aggressive hiring plans.
Singapore, 9 November 2016 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has released new data on talent and rewards trends at technology sector companies in Asia-Pacific via the Radford Trends Report. Radford is part of Aon Hewitt and focuses on delivering rewards insights to technology and life sciences companies.
According to Radford, technology sector companies across Asia-Pacific continue to face high levels of employee turnover despite ongoing economic uncertainty around the globe. Outside of Japan and South Korea, annualized voluntary turnover rates now exceed 10% in all major Asia-Pacific markets. India leads the region with a trailing 12-month voluntary turnover rate of 13.6%, followed by Malaysia at 13.0%, Australia at 12.4%, Singapore at 11.7%, Hong Kong at 11.3% and China at 10.8%.
Facing robust competition for talent, roughly two-thirds of technology sector companies in all major Asia-Pacific markets are currently pursuing normal or aggressive hiring plans— again, India leads this trend, with 13.0% of companies reporting aggressive hiring plans.
||Overall Salary Increase Budgets
|| 2017 Planned
As we note in the highlights section above, Singapore is not immune to the larger talent and rewards trends observed across Asia-Pacific. Median voluntary turnover at technology firms in Singapore currently sits at 11.7%, above the 10% threshold where companies typically begin to consider special retention programs. As a result, technology companies in Singapore are responding with increased salary budgets for 2017.
• Hong Kong salary increase projected at 4.3% in 2017
Compensation budgets projected to increase by 4.9%
• Unemployment rate remains low at 3.4%
• Higher voluntary employee attrition
15% in July 2015-June 2016 vs. 12.6% over a year earlier
Hong Kong, 8 November, 2016 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has shared the latest trends in compensation and total rewards at its Aon Hewitt Annual Rewards Conference – 2016 Hong Kong.
The slowing of the global economy will have little effect on the unemployment rate in Hong Kong and the workforce will see a modest growth of 4.3% in their salaries in 2017 according to the Aon Hewitt 2016 Total Compensation Measurement (TCM) Study Hong Kong.
Key insights from the Aon Hewitt 2016 TCM Study Hong Kong are:
• Salary increases in Hong Kong have been trending down over the last few years.
• When observing salary budget allocations and bonuses, overall salary increase in 2017 is projected to remain relatively aligned across employee levels.
• Variable pay-outs (as a proportion of fixed pay) increased slightly over 2015, reflecting the superior business performance in 2016.
• Higher variable pay opportunities at higher levels cause greater differences in pay from one level to the next. This reflects the importance companies place on results-based compensation for strategic positions.
• Graduates entering the job market in 2017 can expect to earn a projected 4.3% more than those who entered the market in 2016. Those taking up entry level jobs in sales and marketing can expect a higher salary compared to administration and accounting, indicating a shortage of skills in these functions.
• 4.8% salary increase projected for construction / engineering and 4.6% projected for hi-tech higher than other industries. This is also indicative of the lack of talent in these industries.
• Professional services will see the biggest jump in salaries from 4% in 2016 to 4.5% in 2017.
• Triggered by the oil and gas crisis, the transportation sector will see a relatively lower salary increase rate from 3.5% to 3.2%.
• Base salary for Directors/Top Executives remains higher in Shanghai compared to Hong Kong over the past 3 years.
• Total compensation for local directors/top executives and senior management also continues to be higher in Shanghai compared to Hong Kong.
• Top talent attractions are competitive fixed compensation, career development, and work environment, including culture and flexible work and competitive variable compensation.
Stable employment market, higher attrition and increase in salaries projected to make it difficult for Hong Kong employers to attract and retain talent
The unemployment rate in Hong Kong remains stable with a seasonally adjusted unemployment rate at 3.4% in July-September 2016. However, this has led to a rise in voluntary turnover and higher employee attrition of 15% in June 2015-July 2016 period vs. 12.6% a year earlier.
Says Gary Chin, Aon Hewitt Rewards Practice Lead: “An increase in voluntary turnover amidst a stable job market signals that employees continue to explore better external opportunities and have high demands from their employers. Apart from meeting the talent’s needs and expectations, companies face the challenge to devise innovative people policies and programmes to differentiate themselves from competitors in the market and shape a positive employee experience, in order to sufficiently attract and retain critical talent. When such differentiators are in place, it is also important for organisations to clearly communicate them across the board, as employee understanding can essentially help foster a sense of adequacy and further enhance engagement.”
The total attrition rate of 17.7% and rise in voluntary resignation cautions companies to work harder to engage and retain their existing pool of talent. At 26.9%, the services industry has the highest attrition rate and retail employers will find it difficult to retain their talent.
Aon Hewitt 2016 TCM Study Hong Kong further reveals that employers perceive the same reasons for employee turnover over the past 3 years—better external opportunities, limited growth opportunities within the organisation, and external equity of compensation. To mitigate this, the study found that the top three retention measures, in order of importance, are:
1. Accelerated career development
2. Timely and meaningful feedback from managers
3. Improved work-life balance
Tzeitel Fernandes, Managing Director of Aon Hewitt Hong Kong, says: “Effective rewards management now requires firms to go beyond benchmarking and market trends. Firms are leveraging technology to increase efficiency and effectiveness of their human resources departments and relying more on predictive analytics to help decision making. For example, analytics can look at insurance claims histories to help design targeted Wellness programmes which will ultimately bring down the cost of the insurance plans as employees become more healthy.”
Despite the economic volatility, employers in Hong Kong need to revisit their total rewards and compensation approach, for while they may perceive increasing pay as the reason for employee turnover, employees are considering all aspects of their jobs and rewards as a whole when choosing to stay in an organisation or accepting a new offer of employment.
• Most comprehensive employer benchmarking study of its kind in the Middle East sees four organizations stand out across various markets
• Employee Engagement levels among Best Employers Middle East organizations continue to rise year on year
Dubai, 17 October 2016 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), announced the winners of the Best Employers Middle East awards 2016. Winners were selected based on achieving high levels of employee engagement, a culture of high performance, effective leadership and a compelling employer brand and included: DHL Express, Marriott International, McDonald’s UAE and Procter & Gamble Near East.
Achieving the award across multiple geographies, Marriott International was recognized as a Global Best Employer and DHL Express was awarded the accolade of Middle East Best Employer. New entrant McDonald’s took home a Best Employer UAE award while Procter & Gamble was recognized as Best Employer for the Near East – Egypt region.
Participating organizations were benchmarked against Aon Hewitt’s regional database consisting of more than 375 organizations and 130,000 employees, making Best Employers Middle East the most comprehensive study of its kind and placing Aon Hewitt at the forefront of employer benchmarking.
“The winning organizations have created a culture of engagement in which it is possible to identify a clear correlation between employee engagement levels and actual business performance including customer satisfaction, sales, operating margins and total shareholder returns. They have successfully created a workplace experience that does not just revolve around pay, but rather around a robust and comprehensive employee value proposition” said Elias Dib, Partner and Study Director from Aon Hewitt Middle East.
Key insights from this year’s study reveal that the average employee engagement for a Best Employer Middle East organization is 85%, significantly higher than the market average of 61%. A further 89% of employees from Best Employers believe their organization shows clear accountability for strategic goals, making employees aware of how they contribute to business success and recognizing employees for their performance compared to the market average of 56%. A further 86% of those surveyed from Best Employer organizations believe that their leadership has a clear vision of the future, values the people and strives for business excellence compared to the market average of 65%.
“At Aon Hewitt, we know that becoming a Best Employer is a journey in an organization's development and they do not get there overnight; but it is a journey that is worth the effort. Countless organizations are now investing in analytic tools to map talent indicators, and topics of employee engagement and organizational culture seem to weigh heavy on the minds of business leaders in the boardrooms. Best Employers in the Middle East fill in more job openings internally (49%) when compared to the rest of the market (37%). In addition, employees at Best Employer organizations (88%) are definitely motivated to contribute more than is normally required to do their job in comparison to the market average (60%).”
“We are seeing Middle East organizations increasingly identifying the Best Employer recognition award as a key indicator to business success and we take the research findings to offer a comprehensive roadmap for participants looking to improve their performance. Testament to how seriously regional organizations are taking such studies is the fact that we have already started receiving entries for Best Employers Middle East 2017,” Ray Everett, CEO Aon Hewitt Middle East.
Karim Yehia Kamel, Vice President of P&G Near East, said: We are honored to be recognized as one of the Best Employers in the Middle East for the fifth consecutive time. We believe that our people are our main competitive asset and have built robust systems to invest and continue developing P&G leaders across the globe. We stay true to our principle that it is the power of one and value for all that has distinguished us as a global leader in the industry and will drive to continue setting the benchmark in creating a collaborative and inclusive work environment to bring out the best in our team.”
Echoing a similar sentiment, first time winners McDonald’s UAE said that receiving such a prestigious award validates their leadership position as one of the best employers in the Middle East. “Through our ongoing commitment to our people, we look forward to continue forging great relationships and maintaining the trust and loyalty of our employees,” Walid Fakih, General Manager at McDonald’s UAE.
Henry Fares, Human Resources Vice President of repeat winners DHL Express Middle East added that “it is always great when hard work and dedication is recognized. Our values are built on a culture that promotes engaging our people, and creating a healthy environment that encourages recognition and transparency. We put our employees at the heart of everything we do because they are the centre of our business, it is our culture to support our people, and if that happens to result in an award, we are more than grateful for that. We are proud of our workforce, and of all the efforts they put into making DHL an employer of choice, and truly one that is considered a Best Employer.”
The winning organizations were presented with the prestigious Best Employer title during a high profile networking event held at The Oberoi Dubai on October 17. The event was attended by CEOs and HR leaders who gathered to celebrate the winners’ success. The occasion also provided a valuable platform to highlight the key attributes exemplified by the region’s Best Employers in helping other organizations identify areas in which they can develop their own people practices for the future.
Aon Hewitt’s Best Employers study is based on a wealth of data from an independent employee opinion survey and a detailed audit of people practices. The complete view of the organization’s employees, its leaders and HR practices ensured a contextual, unbiased and credible outcome of the study in line with Aon Hewitt’s global standards.
Launched globally 15 years ago, Aon Hewitt’s Best Employer Award has become an international benchmark for businesses, reflecting the opinions of an unprecedented number of employees and providing companies with a unique opportunity to assess and understand what needs to be done to accelerate people to the extraordinary.