Rewarding performance

Across-the-board pay rises are a thing of the past in the Asia Pacific
region. Ed Peters looks at how employers are now rewarding only the best staff

Employees in the Asia Pacific region hoping for a bumper pay rise or bonus
in 2001 might do well to look for jobs elsewhere around the world. The hangover
from the economic crisis of the late 1990s continues to exercise its presence
in the form of single-digit salary increases.

With business still a way off from booming, Asia Pacific remains an
employers’ market. And now that the dot-com bubble has burped (rather than
burst), the previously voracious demand for high-tech, computer-related skills has
decreased significantly.

Hong Kong, one of the leading business players in the Asia Pacific region,
is a sure indicator of what is going on elsewhere, from mainland China to the
slower-developing countries such as Indonesia and the Philippines.

According to the findings of the Pay Trend Survey 2000 conducted by the Hong
Kong Institute of Human Resource Management (IHRM), the predicted increase for
2001 in the Special Administrative Region is less than 3%, although this
compares favourably to the overall increase of 0.8% in 2000.

The survey covered some 114 companies, with a total workforce of about
133,000. Roughly half promised a pay increase in 2001, one said there would be
a definite freeze and the remainder were still considering their options.
"Pay adjustments in 2000 picked up slightly from 1999," said IHRM
president P.O. Mak, noting that 73 companies (64%) gave an average pay rise of
1.9% and the number of companies who froze their salaries dropped by half, to
41. The overall average increase of all the companies surveyed in 2000 was
0.8%, compared to 0.3% in 1999.

The analysis by business sector showed that 50% or more of the companies in
banking, construction/property development, hotels, public utilities and the
retail sectors froze salaries in 2000.

"Workers in the insurance, trading and high-tech sectors got relatively
higher salary increases last year, possibly because these businesses were less
affected by the sluggish recovery of internal consumption," Mak explained.

However, the survey showed that even companies who gave pay rises, did not
give them to all staff. Nearly three-quarters of employees did not receive an
increase in 2000. Virtually no companies gave across-the-board pay rises.

The survey also asked employers for their budgeted pay adjustments for 2001.
"Initial indications were that about 50% of the companies in the survey
plan to give a positive salary increase in 2001," said survey chairman
Patrick Maule.

"Many companies have yet to decide on what to do, especially those whose
review dates fall in the second or third quarter of 2001."

Overall, the projections for 2001 are more upbeat, albeit still constrained.
Unless – and until – the economy shows more reliable signs of full recovery
this constraint is likely to continue. "Our forecast is less than 3%, with
several companies predicting less than 2%," added Maule.

The findings in Hong Kong were duplicated in other major industrial centres
in Asia Pacific. Analysts agreed that in the coming year, companies are almost
certain to give pay rises only to the better performers, so many staff may
experience another year of pay freeze. Non-contractual bonuses have also been
used more generally to reward the highest-performing staff.

The economic downturn has illustrated the advantage of moving away from the
traditional practice of having a 100% contractually guaranteed salary package,
as non-guaranteed bonuses provide the simplest method for flexing payroll costs
with business fortunes.

"In years gone by, staff simply expected to get a month’s bonus or
more," said Connie Wang, HR director of Kuala Lumpar-based chemicals
conglomerate Phortone Ltd. "But now we and other corporations right across
Asia are looking at rewarding just the best workers. This improves productivity
from top to bottom and is a natural cost saver for the company too."

Wang said possibly the greatest long-term benefit of the economic downturn
lay in the impact it had had on salary inflation, causing it to become more
realistic and more in line with regional competitors. Employers in Asia Pacific
are starting to realise they should focus on their best performers and restrict
the limited salary budget increase to them, citing good management based on
fair and objective measurement of performance as the best way of improving
effectiveness and enhancing the quality of work.

www.hkihrm.org

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