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Www.mercer.com.hk Pay Trend & Compensation Overview in Hong Kong 28 February 2011 Connie Leung, Mercer Hong Kong.

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Presentation on theme: "Www.mercer.com.hk Pay Trend & Compensation Overview in Hong Kong 28 February 2011 Connie Leung, Mercer Hong Kong."— Presentation transcript:

1 Pay Trend & Compensation Overview in Hong Kong 28 February 2011 Connie Leung, Mercer Hong Kong

2 1 Mercer What do we hear from our clients as an employer? How to balance between market competitiveness and maintaining cost? How to attract/retain the employees? How can benefits motivate and engage employees? What should we do to response to employees request other than increasing salary?

3 2 Mercer Three key perspectives considered in a structured decision making process External Market Compliance to the government regulations and requirements Consider labor and related rewards environments where you compete for talent Determine how the environments influence or constrain rewards practices that you may wish to adopt Employer Determine workforce needs in terms of structure, behavior, capabilities and performance Design and deliver rewards programs to secure workforce outcomes Provide rewards programs to support the desired strategy at an affordable sustainable cost Employee Create a compelling place to work and differentiate the organization from its competitors Understand the value employees place on the current package as well as potential future total rewards

4 3 Mercer This presentation covers What is happening in the market? – Pay Increase trend – Staff turnover – Hiring intention and hot jobs – Annual base salary & annual total cash trend line – Year over year comparison on typical positions and starting salaries of graduates – Benefits practices and prevalence What do you think your employees pursue? – Attraction & retention – Different generations and life stages, different needs What do you think about yourself as an employer? Conclusions – Mercers Total rewards Approach – Key Takeaways Q & A About Mercer

5 An Overview of the Market

6 5 Mercer Mercers Total Remuneration Survey Database About 350 companies in 2010

7 6 Mercer Source: IMA Asia, January Hong Kong TRS All Industries & 2010 Q4 Hong Kong Market Flash Overview of Hong Kong Pay Trend Average salary increase for All Industries ( 3.4 if excluding salary freeze)

8 7 Mercer Source: IMA Asia Forecast, Q – 2010 TRS All Industries 2010 Q4 HK Market Flash Overview of Hong Kong Labour Market Note: 2010 staff turnover rate & retrenchment rate for All Industries are estimated based on the January to September figures of 2010

9 8 Mercer Hiring Intention & Hot Jobs Source: 2010 Q4 Hong Kong Market Flash & 2010 TRS All Industries Most Difficult in Recruiting 1. Sales – Professional Level 2. Sale – Managerial Level 3. Engineering – Professional Level Most Difficult in Retaining 1. Sales – Professional Level 2. Marketing – Professional Level 3. Marketing – Managerial Level Headcount Planning in the Next 12 Months

10 9 Mercer Comparison of Annual Base Salary (2008 – 2010) Source: TRS All Industries Annual Base SalaryStaffProfessionalManagementExecutive 2010 vs %2.5%4.3%5.9% 2010 vs %1.4%1.9%2.3%

11 10 Mercer Comparison of Annual Total Cash (2008 – 2010) Annual Total CashStaffProfessionalManagementExecutive 2010 vs %4.1%2.6%1.3% 2010 vs %3.2%1.8%0.6% Source: TRS All Industries

12 11 Mercer Compensation Mix (2008 – 2010) Source: TRS All Industries

13 12 Mercer Average Variable Pay (as a % of Annual Base Salary) Based on 2009, 2010 and 2011 performance Source: TRS All Industries

14 13 Mercer Year over Year Comparison for Annual Base Salary (2008 – 2010) Selected positions in typical job functions Source: TRS All Industries Job FunctionPosition 2010 Annual Base Salary (HK$) 2010 vs 2009 Deviation 2009 vs 2008 Deviation Administration Office Administration Manager483,0003%1% Office Administration officer232,0004%0% Finance Finance Manager616,0000%2% Finance Officer240,0003% Human Resources Human Resources Manager583,0004% Human Resources Officer267,0002% Information Technology IT Support Manager586,0000%1% IT Support Analyst241,0003%4% Marketing Marketing Manager643,0007%3% Marketing Executive234,0004%0% Sales Sales Manager510,000-1%4% Sales Representative202,0002%1%

15 14 Mercer Year over Year Comparison for Annual Base Salary (2008 – 2010) Starting salaries for new graduates 2010 Annual Base Salary (HK$) 2010 vs 2009 Deviation 2009 vs 2008 Deviation PhD195,000-25%+3% Master (Business Admin.)192,000-2%-6% Master (Science)163,800-15%-2% Bachelor (Social Science)150,000-4%+8% Bachelor (Business Admin.)144,000-8%+4% Bachelor (Computer Science)144,000-8%- Management Trainee (PhD)229,500-8%+4% Management Trainee (Master)199,000-4%- Management Trainee (Bachelor)156,000--1% Source: TRS All Industries

16 15 Mercer Retirement Benefit in HK HK Statutory Requirement – Mandatory Provident Fund (DC) 5% of MPF Relevant Income and monthly contribution capped at HK$1,000 for both employer and employee contribution Immediate 100% vesting to employee on both employer and employee contribution Withdrawal of benefits upon retirement age at 65 (early retirement at 60) Upon resignation, employee need to transfer their benefits in a preserved account of a MPF service provider Typical Market Practice – ORSO (DC) – MPF Top Up (DC) Typically, no cap on contribution amount Employee contribution is not necessary required Vesting scale is usually made according to years of services and normally be fully vested since 10 years of services Withdrawal of benefits is allowed for those benefits above the Minimum MPF Benefits (MMB) upon resignation MMB should be transferred to a preserved MPF account and be withdrawn upon retirement Source: 2009/2010 HK Benefits Survey

17 16 Mercer Disability and Death Benefit in HK HK Statutory Requirement Disability Benefits – Injury at work – Occupational Disease Death – 36 – 84 times of monthly earnings according to age of employee Permanent Total / Partial Incapacity – 48 – 96 times of monthly earnings according to age of employee # monthly earnings are subject to a maximum of HK$21,000 for calculation of compensation Typical Market Practice Disability Benefits – Group Term Life Insurance – Group Personal Accident Insurance The coverage is typically made at 36 months base salary (without capped at HK$21,000) Source: 2009/2010 HK Benefits Survey

18 17 Mercer Holiday and Vacation Benefit in HK HK Statutory Requirement 12 statutory holidays Progressive annual leave entitlement from 7 days to a maximum of 14 days according to years of services 4/5 paid sick leave accumulated up to 120 days according to years of services 4/5 paid maternity leave for 10 weeks Typical Market Practice 12 statutory holidays plus 5 days public holidays Progressive annual leave entitlement from 12 days to 24 days (varies by employee category) Full paid sick leave Full paid maternity leave 2 days paternity leave 3 days marriage leave 3 days compassionate leave Source: 2009/2010 HK Benefits Survey

19 18 Mercer Benefit Prevalence in HK- Insurance and medical benefits High (above 75%) Moderate (25% - 75%) Low (below 25%) Group Life Insurance Group Personal Accident Insurance Hospitalization Insurance + Major Medical Benefits Out Patient Clinical Expenses Check-up and wellness Maternity Benefits Dental Care Vision Care Critical Illness / Long-term disability Insurance Source: 2009/2010 HK Benefits Survey

20 19 Mercer Benefit Prevalence in HK - LTI, perquisites and housing High (above 75%) Moderate (25% - 75%) Low (below 25%) Long Term Incentive (typical: Stock Purchase Plan) Training Sponsorship Overtime Compensation Congratulations and condolences Long Service Award Vehicle (Sales/Non-sales) Loans Allowance (Shift/Standby/Transportation/Meal/ Position/Laundry/mobile phone) Housing Club Membership Source: 2009/2010 HK Benefits Survey

21 About the Employees

22 21 Mercer Employee groups with the highest turnover By job function Among the 12 job functions listed, sales function was mostly ranked (68%) as one of the top 3 functions with the highest turnover rate in the past two years Human resources function was relatively stable with only 11% of respondents reported it as one of the top 3 functions with the highest turnover rate Source:2010 Q2 Hong Kong Market Flash

23 22 Mercer Employee groups with the highest turnover By years of service, age group and employee category Our survey participants indicated that the following employee groups had the highest turnover in the past two years: – Employees who have joined their company for 1 to 2 years – Employees aged between 26 and 35 – Individual professional employees Source:2010 Q2 Hong Kong Market Flash

24 23 Mercer Attraction of Professional Staff Top 10 commonly used methods & top 10 most effective methods Competitive pay (94%), performance-based pay (89%), training and development program (87%) as well as promotion opportunity (87%) are the most prevalent methods used to attract professional staff Promotion opportunity (51%), harmonized work culture (46%) and effective leadership (43%) were ranked as the top 3 most effective methods to attract professional staff Source:2010 Q2 Hong Kong Market Flash

25 24 Mercer Retention of Professional Staff Top 10 commonly used methods & top 10 most effective methods Performance-based pay (90%), training and development program (82%) as well as effective leadership (77%) are the top 3 most prevalent methods used to retain professional staff Harmonized work culture (57%) and promotion opportunity (53%) were ranked as the top 2 most effective methods to retain professional staff Source:2010 Q2 Hong Kong Market Flash

26 25 Mercer Traditionalist Conformity Stability Upward mobility Security Economic success Boomer Personal and social expression Idealism Health and wellness Youth Generation X Free agency and independence Street-smarts Friendship Cynicism Generation Y Hope about future Collaboration Social activism Tolerance for diversity Family centricity Born 1928–1945Born 1946–1964Born 1965–1980Born 1980–2000 Different Generations, Different Needs Source: International Labor Organization 2009 Mercer is not responsible for any opinion or statement made by third parties

27 26 Mercer = Enter Workforce Marriage (dual coverage) Parenthood Children leave home Retirement Start Family Cash Vacation Car Career - Training Life & Medical House Career Progression Work/Life Balance Pension Medical Work/Life Balance Childrens College Different Life Stages, Different Needs

28 About the Employers

29 28 Mercer Understand Yourself as an Employer Understand yourself – Your vision, mission, values, strategies and plans – Your workforce and talent strategies and plans – Your affordability and constraints….. As a SME, there could be some features: – Relatively small organization size Easy to change and adapt to new approaches Innovative ideas can be easier to promote But, limited resources….. – Relatively simple structure Efficient decision making process to get things done More direct communication with employees Employees can obtain broad knowledge and skills as they may have multiple roles and responsibilities But, career path is not likely to be defined, and Policy and procedures is likely to be non-standard…..

30 Conclusions

31 30 Mercer Integrated Approach - Total Rewards

32 31 Mercer Key Takeaways Quick economic recovery and business expansion increase the competition for talent Pressure on C&B costs in 2011 – Regular salary increase – Market catch up and special adjustment – Higher expectation of salary due to turnover – Accelerating benefit cost Cost constraints – Your reward strategies will need to be specific to your talent market – You need to get more information and do more analysis before making the right decision Adopt integrated approach to attract and retain your talents – Cash Compensation – Benefits – Career and Development – Work Lifestyle

33 Q & A

34 About Mercer

35 34 Mercer Mercer – a Member of Marsh & McLennan Companies OLIVER WYMAN Management Consulting and Advisory Services MARSH Risk and Insurance Services GUY CARPENTER Reinsurance Services MERCER Consulting, Outsourcing and Investments

36 35 Mercer Mercer – Our global network Mercer is a leading global provider of consulting, outsourcing and investment services, with more than 25,000 clients worldwide. Mercer consultants help clients design and manage health, retirement and other benefits and optimize human capital. The firm also provides customized administration, technology and total benefit outsourcing solutions. Mercers investment services include global leadership in investment consulting and multi-manager investment management. Mercers global network of more than 19,000 employees, based in over 40 countries, ensures integrated, worldwide solutions. Our consultants work with clients to develop solutions that address global and country-specific challenges and opportunities. Mercer is experienced in assisting both major and growing, mid-size companies. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges.

37 36 Mercer Our Core Capabilities Retirement Health and benefits Human capital Surveys and products Communication Investment consulting Investment management Outsourcing Mergers and acquisitions

38 37 Mercer About IPS - our strength Information Product Solutions (IPS) brings together Mercer's worldwide human resource information capabilities, providing clients with data products, services, and technology tools to support benchmarking and decision-making IPS produces a wide range of surveys and reports which provide data and intelligence on compensation, benefits, employee mobility, and other HR policies, practices and business issues It also provides proprietary and customized software solutions for data delivery and data manipulation, including job evaluation, salary analysis, and pay structure design For more information about IPS products and services, visit

39 38 Mercer SurveysBenefitsTools Global Mobility ServicesSoftware Compensation Planning US Custom Surveys Industry Surveys Mercer Benchmark Database (MBD) Policies and Practices Surveys Around the World Total Remuneration Surveys (TRS) US LTI & Equity Survey Benefits Reports Benefits Valuation Surveys Executive Remuneration International Car Policy Reports Mercer BenefitsMonitor Regional Product Information (for example, Spotlight on Benefits) Worldwide Benefits & Employee Guidelines (WBEG) Calculators* Comparators (Employment Conditions, Statutory Benefits) Geographic Salary Differential Mercer MarketPricer IPE / eIPE Cost of Living Employee Mobility & Mercer Passport ExpatMonitor Expatriate Housing Global HRMonitor Quality of Living Spendable Income Surveys Tax Compensation Management co- Sourcing (CMC) Exec Rem Center of Expertise (COE) Implementation Center of Expertise (Global Survey Tool, SurveyPublisher, PayMonitor) US Social Security Mercer Benefits Data Services (or RVS in the US) ePRISM MAX ePRISM PRO ExpatMonitor Global HRMonitor Mercer BenefitsMonitor MercerGOLD MercerPRISM Mercer Passport PayMonitor Survey Publisher About IPS - our offering * Calculators include Cost-of-living Allowance, Cost-of-living Index, Exchange Rates & Inflation, Expat Comp, Expat Accommodation, Intl Spendable Income, Quality of Living, Short Term Assignment Allowance, Spendable Income, Tax

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