Projections for 2021 are more optimistic as companies expect pay rises to bounce back to almost pre-COVID-19 levels in most markets
SINGAPORE, 11 August 2020 — Asia Pacific employers have reduced pay rise budgets in 2020 in response to the economic implications of the COVID-19 crisis, according to Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.
Its latest Salary Budget Planning Report, covering 3,800 employers across 22 markets in Asia Pacific, shows that one-third of companies (34%) have made changes to their employees’ salaries in response to the COVID-19 crisis. Another 29% of employers are planning or considering actions to manage labour costs or incentivise those who are required to work.
Among those companies that have reviewed salaries, the proportion of those planning a salary freeze this year is six times higher than before the pandemic (23.5% in 2020 vs 5.1% in 2019), while the proportion of companies postponing a salary increase is almost five times higher (13.4% in 2020 vs 2.4% in 2019). Compared to last year, 62% of companies plan to continue with their regular review of salary increases for their employees this year (vs 91.4% in 2019).
“It is no surprise to see that many companies have reduced their salary budgets. Most businesses around the world are in cash preservation and cost optimisation mode. Here in Asia Pacific, 49% of companies have already taken hiring or restructuring actions. Although companies are now stabilising their businesses, the full extent of the economic impact of the pandemic is yet to play out. Companies are extremely cautious and have rapidly adopted various strategies to protect their business as the sustained recovery will be gradual and slow in most markets.
The pandemic is also forcing employers to rethink virtually every aspect of how work is being done, the type of talent they need and how to reward this work as they transform their businesses. Companies should review their business priorities and talent requirements to prepare for next year, especially if they need to re-allocate resources and salary budgets to the changing business environment and objectives,” said Edward Hsu, Business Leader, Rewards Data & Software, Asia Pacific, Willis Towers Watson.
Pay rise projections for 2021 are more optimistic as employers in Asia Pacific anticipate that salary budgets will bounce back closer to pre-COVID-19 levels, at an average of 5.8% next year. Emerging markets such as Bangladesh, India, Indonesia, Myanmar, Sri Lanka and Vietnam are projecting a stronger rebound of salary increases, indicating a strong confidence in the recovery of their economies.
The survey also found that companies in the Fintech, High Tech, Pharmaceutical and Healthcare sectors are planning to increase their salary budgets next year due to the brighter business outlook in these industries
| Salary increase by industry | 2020 (actual) | 2021 (projected) |
|---|---|---|
| Fintech | 5.6% | 5.6% |
| High Tech | 5.3% | 5.6% |
| Pharmaceutical and Health Sciences | 5.3% | 5.4% |
| Healthcare | 4.6% | 4.8% |
In recent years, the Fintech industry has been leading the transformation of traditional Financial Services companies. From enabling financial transactions to be carried out remotely to facilitating contactless payment and the distribution of government aid during the pandemic, Fintech companies have been crucial in supporting the battle to curb COVID-19 infections in many countries. This has kept the sector’s salary increases ahead in most markets.
On the other hand, the report shows a decreasing salary budget in the Energy and Natural Resources industry. The outbreak of the coronavirus, coupled with the oil price crash and the economic recession present an enormous challenge for the sector, which leads to a lower projected salary budget for next year (3.7% in 2021 vs 4.4% in 2020).
“In the next 12 months, organisations are likely to create more jobs in functions such as Sales, Engineering and Information Technology. Compared to last year, job opportunities in IT functions have exceeded technical skilled trades, a reflection of the increased digital transformation of businesses. In addition, we are seeing more companies putting a greater emphasis on their IT resources and departments. This could be due to the increased focus on their IT infrastructure caused by the prevalence of remote working adopted by companies as a result of the pandemic, leading to a rise in demand for more jobs in this function,” added Edward.
Close to two-thirds of companies in Singapore expect their business performance to be below target this year. Employers in Singapore have cut their pay budgets for 2020 by a 0.3% margin (from 4.0% to 3.7%), before recovering back to 4.0% in 2021.
Companies in Retail, Media, and Oil & Gas industries report the lowest salary increase budgets at 0%, 2% and 2.8% respectively for 2020. Industries such as Insurance, High Tech, and Pharmaceutical and Health Sciences indicate the highest salary budget increments with employers projecting growth at about 4.0%.
The proportion of companies implementing a salary freeze in Singapore is nine times higher than before the pandemic (18% vs 2%), while the proportion of companies postponing a salary review has increased by 13 times (13% vs 1%). However, employers expect the pay increase review to resume to normal next year.
Overall, companies remain conservative about recruitment plans for 2021. The majority of companies surveyed plan to maintain their headcount (71%), with 17% planning to reduce headcount and only 12% planning to add headcount. The top three functions for recruitment by Singapore employers in the next 12 months are Sales, Engineering and IT, similar to most countries in Asia Pacific.
The Salary Budget Planning Report is compiled by Willis Towers Watson’s Data Services Practice. The survey was conducted in May and June 2020. Approximately 3,800 sets of responses from 847 companies across 22 markets in Asia Pacific. The report summarises the findings of Willis Towers Watson’s bi-annual survey on salary movement and reviews practices as a means of helping companies with their compensation planning for 2020 and beyond.
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.
