Increasing Salary Levels
Indeed, salaries have risen over the past 18 months, says Mr. James Carss, Executive General Manager, Hudson Hong Kong. "Currently there is a certain amount of uncertainty in both the economic and recruitment market, which is very much linked to global events. This is likely to show that there will be increment for the rest of 2011 until the market settles with more stability. Having said that, there is still a decent amount of recruitment being undertaken in Hong Kong where high calibre candidates with niche skill sets are still heavily in demand.”

What Causes Pay Rises?
As salary levels rose steadily during 2010 and is expected to be a trend that will continue this year, there is more competition between employers for talented candidates who receive multiple offers. And organisationswill face issues such as rising salaries, bidding wars, poaching and staff retention this year. Speaking of the increasing salary levels, what are the reasons behind? We have figured out four possible reasons for salary rises and let us see what the experts say:

1. Shortage of top-tier talent?
   "There's been a shortage of toptier candidates in the marketplace. In fact, the talent war has been happening since 2009 and 2010 as everybody is looking for the same pool of people. With this talent shortage, we have seen people move from one job to another this year for, say, 15-20 percent of pay increase, and I would say this trend will continue for the next 6-12 months,” says Mr. Matthew Bennett, Managing Director, Robert Walters.
   
   Mr. Carss says, "Organisations were looking to recoup profits and achieve growth and of course need good people to achieve these goals. This created a shorter pool of available talent and it became highly competitive to secure new high caliber hires. This also created salary rises through organisations competing for the same individuals and battling with their own retention strategies."
   
   
2. Economic recovery?
   Mr. Carss believes that one of the main reasons for pay rises are a steep recovery after the recession in 2009 in which many organisations in Hong Kong were extremely active in their hiring of talent.
   
   "The current economic problems are mainly in the US and Europe. Asia is beginning to become self-reliant and contain its economic uncertainties within itself, therefore becoming slightly buffered from the recession in the US and Europe. This will obviously protect and maintain current salary levels," says Mr. Bennett.
   
   
3. Inflation?
   With the inflation rate climbing high in the city, will this be a key factor that contributes to salary rises? "In the banks, I don't think there will be a huge amount of pay rises. On the non-banking side I think pay rises will be 3-5 percent which is below inflation. Pay rises will only be given to middle to top performers. To retain the top performers of our businesses, we have to keep the payroll cost in line with the market," says Mr. Bennett.
   
   
4. Minimum wage?
   As the Minimum Wage Ordinance came into effect in May 2011, some wonder whether this will greatly affect the salary levels across industries. Mr. Carss does not think this is the case. He says, "The minimum wage policy doesn't have great impact as the employers are willing to pay higher salaries to attract people to join their organisations with the rapid growth of business in the market. The Food & Beverage sector would be more affected by implementing the minimum wage policy."

Key Trends by Sector
As for the key salary and hiring trends in the fourth quarter of 2011 and the next year, we have divided industries into two groups – Financial services and non-financial services, whilst the non-financial services area is being subdivided into sectors including Information Technology, Retail & FMCG, ospitality & Tourism, Human Resources and Legal.

Financial Services
On the financial services side, Mr. Bennett reveals there wasn't a huge change in people-base salary in 2011. This is due to big changes in 2010 in the financial services area during which employees' compensations were geared to their base salaries rather than their bonuses, with their base salaries increasing significantly in 2010.

"I believe that the industry will probably remain stagnant as a number of banks have not reported right profits, or they haven't met their expectations this year, so I think the salary level in the banks remain stable. We might see increases from anywhere to 3-5 percent on payroll, which is just to keep up with inflation," he continues.

Dr. Raymond Lee, Executive Chairman, Hong Kong Financial Services Professionals Association also expects that the salary level of the financial services industry will be growing with stability, but he anticipates that there will be higher increases in payroll.

"We can see a shortage of talent in the sector where banks compete for talent with higher salaries. I believe that this trend will continue. For general positions, I expect that the increase of salaries would be 8-10 percent on average. As for sales positions, it would be around 10-20 percent," says Dr. Lee.

Non-financial Services
Commenting on latest trends in the non-financial services sector, Mr. Bennett says, "I would expect payroll to increase from 3-5 percent across the board. We did see increases in 2011 and this has to do with the market's rebounding from the economic downturn."

Information Technology
Mr. Francis Fong, President, The Hong Kong Information Technology Federation Software shares his views on the salary trends in the IT industry. He says, "There has been pay rises in the industry which is mainly due to talent shortage. For software development positions, the monthly salary was around $8,000-$9,000, but now you have to pay more than $10,000."

According to Hudson's Salary Guide 2011 Hong Kong, in terms of salaries, increments for IT staff remaining in the same role are likely to be in the 3-5 percent range. Professionals moving to new roles will be able to command rises of 10-15 percent.

In fact, we do see a stronger demand for IT professionals in recent years, and the following two types of talent are very popular in the market:

a. IT security specialists
"As organisations have become increasingly aware of risk and compliance issues, this has created strong demand for IT specialists with professional skills and experience in IT security. For instance, large corporations l i k e Google and Facebook have been recruiting IT specialists in this area," says Mr. Fong.

b. IT generalists
"Today, IT professionals are expected to have a high level of commercial understanding like social media and marketing skills in addition to their technical knowledge. Talent who are able to develop apps for smartphones and integrate these apps into social media tools like Facebook is very much wanted," he adds.

Retail & FMCG
"The Retail market is still positive but the pace in growth has slowed slightly as compared to Q3 and Q2. It is anticipated that there will be salary increments in the retail sector especially in sales/retail operations positions as the market keeps demanding talent in thisarea," says Mr. Carss.

Based on Robert Walters' research statistics, Mr. Bennet shares, "Retail is booming by 29 percent year on year for the month of July. There has been more than 20 percent year on year growth in the past five months. Hong Kong is seen as a great marketing place for tourists and thus we've seen a huge demand for talent for store operation, product development, merchandising, etc. Pay rise will probably be between 10-15 percent."

Hospitality & Tourism
Tourism is being a record of 19 million visitors to Hong Kong in the first half of this year. The prosperity of the industry creates jobs to talent in the city. According to Hudson’s statistics, salary increases for candidates for senior level positions will be in the 15-20 percent range, whilst those at a lower level should receive up to 15 percent. In addition, hiring expectations look set to remain high during 2011.

Human Resources
Mr. Bennett reveals that HR is another area with a potential increase in demand for talent. Most organisations are shifting their focus to hiring, training and retaining the right people. "They are now looking to hire HR people that come from a strategic business background. More than ever in this marketplace, I believe it is people that differentiate a company from one another. That's why there's such a demand for strategic HR people at the moment."

Hudson's research also reflects high hiring expectations in the HR division throughout 2011, which means that staff retention will be a significant issue. HR managers with additional specific skills are highly sought after, and organisations are willing to provide talent with incentives to stay in post. Talented candidates moving to new companies are likely to command salary rises of more than 15 percent, whilst existing employees can expect increments in the 4-6 percent range.

Legal
As Robert Walters Salary Survey mentions, the Hong Kong and China markets continue to expand, therefore many multinationals, particularly American law firms are looking to bolster their legal teams in Hong Kong in 2011.

"There will be a lot of hiring in the legal sector where organisations will seek candidates possessing local experience and Mandarin language speaking skills. So we've seen a shortage in demand for legal professionals which is obviously an increase of the salary levels, which will be around 15-20 percent," says Mr. Bennett.

Suggestions to HR
Given the importance of a competitive remuneration package, Mr. Carss suggests that HR managers should also consider other measures to retain top-tier talent. He says, "In general HR managers should look beyond just the money as a way of attracting and retaining talent. People choose to work for organisations for a variety of reasons and money is just one of those."

Mr. Bennett suggests, "HR professionals are going to have to look at making sure the people they hire are very strong at what they do and can make an impact on the bottomline. So, the market will be all about rewarding the top performers, increasing productivity and ensuring efficiency in business. Sometimes cost makes companies forget about training and people’s careers. If we want to retain our top talent, we need to make sure that we are clear in communicating their future career path to employees and develop our people with a wide range of training. Focusing purely on generating revenue will very likely result in talent loss."

All in all, it takes more than a competitive remuneration package to engage and retain top talent. Besides monetary incentives, organisations should also look at other levers such as development opportunity, work/life balance, etc to design a more holistic talent retention strategy.