Recruiting in China

Release date- 03012013 - Aon Hewitt, the global human resource solutions business of Aon plc (NYSE:AON), recently released the research findings of its 2012 China Human Capital Intelligence Report that comprises indicators of remuneration trends by industry sectors and the latest developments in human resources.

The research involves more than 10 key industries, including real estate, financial, pharmaceutical and medical equipment, high technology, automobile, consumer products, retail, chemical products, logistics and manufacturing, covering over 4,000 foreign-invested and leading local enterprises in Beijing, Shanghai, Guangzhou and Shenzhen, as well as major second and third-tier cities.

Both the national average salary increase and turnover rate show increase trends

Aon Hewitt's research showed increased trends in both the national average salary increase and turnover rate in China for 2012. The 2012 national average salary increase was 9.1 percent, which was closely mirrored by a high turnover of 18.9 percent. In the four first-tier cities, the average salary increase in the manufacturing sector was 10.1 percent in Guangzhou, 9.8 percent in Shanghai, 9.8 percent in Beijing and 8.9 percent in Shenzhen. Average salary increases for the non-manufacturing sector were 9.5 percent in Beijing, 9.3 percent in Shanghai, 9.1 percent in Guangzhou and 8.9 percent in Shenzhen. Both the average annual salary increase and turnover rate in second and third-tier cities were higher than the national average. Aon Hewitt's research showed the gap between the inland and the coastal areas, where most investments are concentrated, is gradually narrowing. Salaries for front-line workers, for example, who are the object of an intense war for talent, saw less than a 5 percent differential between the second and third-tier cities inland and the second-tier cities in coastal regions.

Aon Hewitt's China 2012 Human Capital Intelligence Report showed an overall salary increase of 7.9 percent for the real estate industry, slightly lower than in 2009 and 2010 when the new regulation was not yet in effect, Salary increases in this industry are expected to slow down in 2013. In 2012, the job category witnessing the greatest expansion was 'Sales and Business Development,' which has increased by up to 42 percent only in Shanghai. According to Aon Hewitt, this is mostly due to new strict regulations that push residential real estate companies to transform into commercial real estate businesses. It can be expected that the demand for this job title will remain high in 2013.

Talent availability in the second and third-tier cities tightened and human resources risk index rose sharply

Aon Hewitt's research shows that the conventional talent pool in second and third-tier cities has been rapidly diluted by the high level of salary increases and turnover rates, resulting in continuously increasing risk affecting human resources. In Chongqing and Nanjing, for example, the voluntary turnover rate in 2012 was 22.3 percent and 19.4 percent respectively (up from 9.6 percent and 7.3 percent respectively in 2006). Another key industrial city, Wuhan, is highly coveted by investors due to the availability of abundant educational resources. However, with the war for talent intensifying, the turnover rate has climbed from 9.4 percent in 2004 to 14.2 percent in 2012. According to Aon Hewitt, such a high turnover rate leads to high recruitment and training costs for employers and stagnation of the talent supply chain, bringing new labor and business issues to enterprises invested in Wuhan.

According to Peter Zhang, Global Partner and Vice President of Aon Hewitt Greater China, 'High salary levels pushed up by high cost of living in coastal cities result in the relocation of a large number of manufacturing Research & Development units to the inland, causing shortage of talent supply. On the basis of a constant pool of talents, the intense war for talents has directly led to a remuneration escalation and high turnover of employees. However, with the eventual saving in personnel costs and operations, it will be an irresistible trend to move to the inland for closer connection to various partners and integration with the supply chain. Likewise, in the process of moving to the inland, new considerations related to the local hiring of mid-level management positions (versus importing them from coastal cities) must be taken into account to keep the costs of salary and benefits under control.'

The high turnover rate impacts the sectors of domestic consumption
Aon Hewitt's research shows that industries of domestic consumption, such as the retail and fast-moving consumer goods sectors are impacted by the high turnover rate in China. Turnover rates in 2012 were 31 percent in retail, 26.6 percent in high-tech/manufacturing, 19.5 percent in fast moving consumer goods and 19.2 percent in the health care industry. High salary increases keep in direct proportion to high turnover rates, at 9.1 percent, 9.6 percent, 9.65 percent and 9.5 percent respectively.

Peter Zhang said, 'Remuneration is always the barometer of a sector. Our figures clearly demonstrate that these four industries are bearing the brunt of the evolution in the human resources market caused by the industrial expansion. According to Zhang:

In the retail sector, the change in sales channel and consumption habits forces major traditional retail businesses to try to expand online with an imminent demand for talent transformation.

The high-tech/manufacturing sector is also experiencing the pain of industrial upgrading. The development from low value-added OEM (Original Equipment Manufacturer) processing to the manufacturing of products with independent design patents has generated a battle for high-quality talent extending from the research and development of products to packaging design, to skilled front-line workers.

Fast moving consumer goods are particularly sensitive to the right pricing. With the soaring cost of raw materials, a greater importance needs to be place on employee productivity and on a strong understanding of the demand for talents in the market.

The health care sector is known as one of the hottest sectors in China. However, according to Aon Hewitt's 2012 survey results, this trend is stabilizing. After years of rapid growth, the health care industry is looking at re-evaluating its structure and sales strategy. With the injection of more domestic and foreign funds in this industry, and the dependence of sales channels in the second and third-tier cities, the upgrading of sales means and localization of product development are bound to bring a new round of competition for talents.'

The generation born in 1980s (Gen Y) constitutes the main force of the talent market, while the demand for employees remains diversified

Aon Hewitt's 2012 China Human Capital Intelligence Report found that the generation born in 1980s (or Generation Y), which has been known as the new force of the workplace for many years, has become the main age component in the current talent market. Compared with 2007, the proportion of employees born in the 1980s is growing at a rate of almost 40 percent. Currently, the average proportion in various sectors has exceeded 65 percent. In some industries and functions, such as production of the high-tech manufacturing sector, the proportion has reached up to 80 percent. The new generation born in 1990s also has grown to be another large group in the workplace. At management level, the diversified age structure of employees has also created new demands. Aon Hewitt believes selecting the correct means of communications and incentives to improve these groups' engagement and optimize their performance has become an important area of concern for management.

Peter Zhang concluded, 'As China's economy has entered the stage of medium-speed development, the impact on the industry is also reflected in the slowdown in sales. For example, the health care sector which has always maintained a high growth in sales has seen its sales rate decrease by 5 percentage points in 2012 compared to 2009. However, enterprises will never stop seeking maximal profits. In the short-term with continuous increase in personnel costs, the improvement in productivity has become the only way to realize sustainable development in enterprises.'

About Aon Hewitt

Aon Hewitt is the global leader in human resources solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit www.aonhewitt.com/apac.

About Aon

Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 62,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit http://www.aon.com for more information on Aon and http://www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.