The results of Korn Ferry’s Global Rewards Pulse Survey for 2022 can be summed up in one word: more. Last year’s compensation projections have proven irrelevant in the face of constantly shifting business conditions, talent scarcity and rising inflation – and Asia-Pacific organisations are scrambling to satisfy demands.
On the surface, the projected median salary increases look relatively modest, though higher, than predicted last year. In Australia, for example, pay rise plans in September 2021 budgeted for a 2.4% increase. Now that number is 3.0%.
But these numbers might be misleading. Many organisations say their forecasts exclude promotions or market adjustments – which means these forecasted increases are potentially understated.
Pay rise forecasts are just the tip of the iceberg - there’s a lot going on beneath the surface.
Anecdotally, it’s the outliers that grab the headlines. In Australia, we hear of IT professionals moving from an $80,000 role to a $140,000 role. And in Hong Kong, where stringent COVID restrictions are causing one of the city’s biggest emigration waves, finance workers are getting a ‘walking across the street’ 20-30% pay increase for changing employers.
These exceptions tell the bigger story of the labour supply and demand imbalance. And compensation is only part of the solution.
Technical talent still in short supply
Global movement restrictions may now be easing, but we’re yet to see a return to pre-COVID norms for international recruitment. If anything, in a world where we can now work from anywhere, some people may be more interested in moving back to their home country to be closer to family.
And this means critical skills are still in short supply – and high-turnover roles will continue to attract higher salary increases. Some organisations around the world maintain a separate salary increase budget for different functions or jobs, primarily focusing on in-demand talent:
- Information technology (39% of organisations)
- Engineering (36%)
- Analytics and Data Science (26%)
- Sales (23%)
If IT professionals are getting an outsized pay bump year on year, it paints a very different picture for those top-level forecasts. For example, if organisations say they’re planning a 6% pay bump, that might mean 10% for IT roles, and 2% for everyone else.
We are also seeing senior executives demand a salary review, after two years of making do with less or foregoing performance bonuses while working under intense pressure. And organisations that are ready to capture new markets or launch transformation programs will need to find a way to financially reward those leading the charge.
Incentives going from special to standard
Cash incentives are becoming increasingly popular for talent management – from sign-on bonuses to retention packages. For example, 18% of respondents expect to use sign-on bonuses more than before the pandemic.
What is emerging is the ‘special’ incentive, with 22% of organisations globally planning to use this more than before the pandemic. Throwing cash at the war for talent is not a new strategy. However, you shouldn’t be running a rewards program by exception. In other words, if ‘special’ incentives are becoming the standard, it may be time to embed them into underlying policies and structures.
18% of global respondents also plan to use retention rewards (such as deferred compensation or time-vested equity) more. However, we’re already seeing people ask their new employers to compensate them for losing their previous long-term incentives – diluting the effectiveness of these deferred or time-vested perks.
Despite these post-pandemic shifts, top-level pay forecasts are relatively similar to pre-COVID. For example, in our 2020 forecasts Indian companies told us they expected to grow salaries by 9.2%. For 2022, it’s 9.7%. Vietnam forecast 7.7% in 2020, and 7.3% in 2022. Japan forecast 2% in 2020, and 2.1% in 2022.
Perhaps these projections have become local norms. They also tend to mirror local cost of living concerns: in India, inflation hit 6% in January, while in Japan it’s expected to average around 2.5% this year.
It’s not all about the money
Cash rewards may help get people in the door, but non-financial rewards tend to keep them. And many organisations are supplementing pay increases for priority roles with non-financial benefits for all.
After two years of relative isolation working from home, it’s interesting to see 40% of organisations planning to focus more on ‘building manager and leader effectiveness to build connection and inclusivity within their teams’. Over one-third (36%) plan to use more programs to engage employees with change priorities, and 30% to connect their work with mission, vision and values.
Importantly, given the main reason people quit is lack of career opportunities, 31% also plan to focus more on communicating employee growth and career development opportunities than before the pandemic.
What seems to be missing here is flexibility. There is no mention of work-life balance in the non-financial rewards cited – yet flexible work options has emerged as one of the most important priorities for employees.
After two years of pay and bonus freezes, it seems Asia Pacific organisations are feeling the pressure of meeting employee demands for more. And when budgets are limited, the most important thing you can do in the year ahead is focus.
You cannot give everyone more. Identify the critical skills and top performers, and adjust compensation increases to match that value. And be prepared to offer outstanding talent around 1.5 times the norm – in line with global pay benchmarks.
To learn more about projected compensation changes in your country, download Korn Ferry’s 2022 Global Rewards Pulse Survey.