Recruiting in China

A survey by accountants Grant Thornton says that businesses are seeing rapidly rising staff costs, particularly in emerging economies.

As the cost and availability of funding becomes an increasing problem for businesses, the cost of attracting and retaining staff is also increasing. This is leading to a cash squeeze on businesses.

The staff costs are most acutely felt in countries which have historically had low salary costs. Skilled and executive workers are demanding, and getting, more as companies grow. Alex MacBeath, global leader for privately held businesses at Grant Thornton International says, "Significantly, it is the emerging economies that are being hardest hit by increased staff costs. This is real evidence that the era of downward pressure on inflation in emerging economies is coming to an end."

The survey found that 59 per cent of privately held businesses (Grant Thornton calls them PHBs) are more focused on finding and retaining employees than they were a year ago. Emerging economies were most focused with Vietnam top with 84 per cent of businesses more focused, followed closely by mainland China (81 per cent).

Laurie Kalman, executive director, HR strategy for Grant Thornton International adds, "Retaining the right employees is important to the long term success of any business but is particularly critical for PHBs. Recruitment is an expensive process and an organisation that continuously hires while losing talent internally will not be able to prosper and grow."

It is these privately held businesses - where staff may see their prospects as limited compared to public and / or multinational companies - that are seeing the pressures most, says Grant Thornton.

So, why do staff leave? The most common reason, the firm says in its report, is staff who are resistant to increased workload. 41% of companies in the global survey gave this as a reason.

The issue leaves PHBs in a cleft stick - unable to retain and recruit the best staff companies face "increased operating costs, loss of business and a drop in customer service standards."

This leads to companies focussing more of their time and resources on recruiting and retaining staff. Also, culture appears to play a part. Where mobility of labour is traditionally low, companies place a lower priority on these strategies.

There is a correlation of sorts with the countries that reported increased staff costs. 91% of respondents in Mainland China said they were seeing increases, whilst just 17% did in Japan.

The survey does not, however, correlate these figures with inflation and interest rates and, in those, China and Japan are also at opposite ends of the scale.

Perhaps surprisingly, New Zealand comes very high in the list with 79% but the really big surprise is Botswana with 86%.

At the other end of the scale are the US and the UK with 48 and 47% respectively. Both of these economies are expected to suffer from recessionary pressures and already in the US, there are reports of people having trouble finding work in the professional and commercial sectors. Sitting at the middway point in the table are Germany, Hong Kong, the Philippines and Russia. Almost alone amongst south east Asian economies in reporing a low figure (45%) was Thailand.