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

1. 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?

2. 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
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
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

3. 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
Mercer’s Total rewards Approach
Key Takeaways
Q & A
About Mercer

4. An Overview of the Market

5. Mercer’s Total Remuneration Survey Database About 350 companies in 2010

6. Overview of Hong Kong Pay Trend
( 3.4 if excluding salary freeze)
Average salary increase for All Industries
Source: IMA Asia, January 2011
Hong Kong TRS All Industries & 2010 Q4 Hong Kong Market Flash 6

7. 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
Source: IMA Asia Forecast, Q3 2010
2008 – TRS All Industries
2010 Q4 HK Market Flash

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

9. Comparison of Annual Base Salary (2008 – 2010)
2010 Specific industry Non-executive report – all functions regression table:
Hi-tech CG
Chemical
All Industries
PC 41 – 60
Comp2, Comp3 (A) & Comp3(T)
Annual Base Salary
Staff
Professional
Management
Executive
2010 vs 2009
0.2%
2.5%
4.3%
5.9%
2010 vs 2008
0.8%
1.4%
1.9%
2.3%
Source: TRS All Industries

10. Comparison of Annual Total Cash (2008 – 2010)
Staff
Professional
Management
Executive
2010 vs 2009
6.0%
4.1%
2.6%
1.3%
2010 vs 2008
5.0%
3.2%
1.8%
0.6%
Source: TRS All Industries

11. Source: 2008-2010 TRS All Industries
Compensation Mix (2008 – 2010)
2008
2009
2010
Source: TRS All Industries

12. Source: 2008-2010 TRS All Industries
Average Variable Pay (as a % of Annual Base Salary) Based on 2009, 2010 and 2011 performance
Source: TRS All Industries

13. Annual Base Salary (HK$)
Year over Year Comparison for Annual Base Salary (2008 – 2010) Selected positions in typical job functions
Job Function
Position
2010
Annual Base Salary (HK$)
2010 vs 2009 Deviation
2009 vs 2008 Deviation
Administration
Office Administration Manager
483,000 3% 1%
Office Administration officer
232,000 4% 0%
Finance
Finance Manager
616,000 2%
Finance Officer
240,000
Human Resources
Human Resources Manager
583,000
Human Resources Officer
267,000
Information Technology
IT Support Manager
586,000
IT Support Analyst
241,000
Marketing
Marketing Manager
643,000 7%
Marketing Executive
234,000
Sales
Sales Manager
510,000
-1%
Sales Representative
202,000
Source: TRS All Industries

14. Source: 2009-2010 TRS All Industries
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
PhD
195,000
-25%
+3%
Master (Business Admin.)
192,000
-2%
-6%
Master (Science)
163,800
-15%
Bachelor (Social Science)
150,000
-4%
+8%
Bachelor (Business Admin.)
144,000
-8%
+4%
Bachelor (Computer Science) -
Management Trainee (PhD)
229,500
Management Trainee (Master)
199,000
Management Trainee (Bachelor)
156,000
-1%
Source: TRS All Industries

15. 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

16. 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

17. 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

18. 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 18

19. 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 19

20. About the Employees

21. 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

22. Source:2010 Q2 Hong Kong Market Flash
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

23. Source:2010 Q2 Hong Kong Market Flash
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

24. Source:2010 Q2 Hong Kong Market Flash
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

25. Different Generations, Different Needs
Traditionalist
Boomer
Generation X
Generation Y
Hope about future
Collaboration
Social activism
Tolerance for diversity
Family centricity
Conformity
Stability
Upward mobility
Security
Economic success
Personal and social expression
Idealism
Health and wellness
Youth
Free agency and independence
Street-smarts
Friendship
Cynicism
Different values of the 4 generations affect engagement.
How do we provide a work experience that appeals to all generations? ..unique values, unique work styles, unique perspectives etc…
Four Generations Are Being Asked to Coexist – each with different values. The challenges from a generational perspective include, among other things, differences in values and work styles. Successful organizations of the future will learn how to effective transfer the strengths from one generation to the next. For example, what if we could transfer appropriate competitiveness from Boomers, combine with appropriate authority questioning from Gen X, throw in directed ambition from Millenials – and mix this all together with Cisco culture of collaboration? How do we do that? What would be the business impact on productivity and growth? How do we harness the strengths representative across our employee generations?
Born 1928–1945
Born 1946–1964
Born 1965–1980
Born 1980–2000
Source: International Labor Organization 2009
Mercer is not responsible for any opinion or statement made by third parties 25

26. Different Life Stages, Different Needs
Retirement
Enter Workforce
Children leave home
Marriage (dual coverage)
Parenthood
Start Family
So why is choice even important?
If you think about the different life stages of your diverse workforce, they have different benefits needs at different life stages:
For example, a Gen Y entering the workforce may think they’re invincible and not value insurance as much as training opportunities and looking good – going to the gym, contacts/fixing their teeth, the newest mobile phone or cool glasses
If they don’t look good, they won’t get to the next life stage of Marriage
Many married employees have duplicate coverage from their working spouse so could use those benefits dollars better elsewhere
Those starting a family would embrace maternity, extra medical coverage, childcare and more time off to spend with their newborns
And empty nesters would like to opportunity for additional medical coverage, especially if it’s portable, educational subsidies for their college-aged children and saving up for retirement.
Cash
Vacation
Car
Career - Training
Life & Medical
House
Career Progression
Work/Life Balance
Pension
Medical
Work/Life Balance
Children’s College

27. About the Employers

28. Understand Yourself as an Employer
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…..

29. Conclusions

30. Integrated Approach - Total Rewards

31. 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

32. Q & A

33. About Mercer

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

35. 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. Mercer’s investment services include global leadership in investment consulting and multi-manager investment management.
Mercer’s 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.

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

37. 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

38. About IPS - our offering
Surveys
Benefits
Tools
Global Mobility
Services
Software
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
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
MercerGOLD
MercerPRISM
Mercer Passport
PayMonitor
Survey Publisher
* 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