Recruiting in China

SALARIES are soaring for top executives in China's listed companies, especially in the financial sector, according to recently released annual reports.

Shenzhen-based China Ping An insurance company pays the most of all A-share companies to its top executives, according to the Shenzhen Daily.

Ping An augmented its top executives' paychecks by 122 percent, to 282 million yuan (US$40 million), or 1.47 percent of the company's net profit last year.

At the same time, the company posted a 140 percent rise in net profits.

As a result, Ma Mingzhe, chairman of Ping An; Louis Cheung, Ping An's president and CFO; and Dominic Leung, Ping An's CEO, each earned more than 25 million yuan after taxes in 2007.

The average income of Chinese citizens is rising too, although not as fast.

According to the National Bureau of Statistics, the disposable income per capita for Chinese urbanites was 13,796 yuan in 2007, an increase of 17.2 percent over 2006, the biggest rise in six years.

If the current rate of increase continues, salaries in cities will double in four to five years.

Salaries increased 9.6 percent for managers and 9.1 percent for supervisor/senior professionals in the non-manufacturing sector in Shanghai in 2007, in contrast to 8.2 percent and 8.1 percent respectively in 2006. That's according to the 2007 Shanghai Local Compensation and Benefits Total Compensation Measurement Report, conducted by Hewitt Associates on mainly Shanghai-area foreign-invested firms.

Another trend is the salary increase in second-tier cities in the Yangtze River Delta, with Shanghai manufacturing at 8.5 percent, Suzhou 8.8 percent, Wuxi 9.2 percent and Changzhou 10.2 percent.

In an interview with China Knowledge@Wharton, Michael Song, head of Hewitt's compensation and benefits consulting practice, said the average salary increase in Hewitt-surveyed companies was 8.7 percent across China.

Companies were also asked how they were reacting to the ever-climbing CPI. Fifty percent of the 300 surveyed companies said they have factored CPI into their 2008 budgets.

A human resource manager at a US Fortune 500 company, who asked not to be named, said the salary increase rate at his company closely follows that of similar Fortune 500 companies.

"If our pay is above the market level, that will impose big pressures on labor costs. And ... even if you are above the average level, your turnover rate will not necessarily come down. However, if your pay rise is lower than the market level, even by a few percentage points, you will see the turnover rate going up. "

Song acknowledged that the pay increase rate varies atn different levels within the same company. "The higher the level goes, the faster the pay grows," he said.

The cited Hewitt survey says in the Shanghai city manufacturing sector over the last three years the compound growth rate of salaries has increased to 54.5 percent for the top management level while it is only at 14.1 percent for manual workers.

Meanwhile, Song pointed out the entry level salary for new college graduates has recently stabilized at around 3,000 yuan per month in Shanghai, although some outstanding graduates from top universities in China could earn 5,000-7,000 yuan.

Oversupply might account for the stagnant entry-level salary. There are too many fresh graduates every year, and most likely, they don't possess the right skills that companies seek, Song noted.

High turnover rates

The biggest salary increase last year was in the finance and investment sector, especially the funds industry, said Song.

Increasing labor costs are posing challenges to companies' margins.

However, even if companies continuously improve compensation and benefits levels, employee turnover rate shows no sign of decline.

The Hewitt study confirmed that turnover rates are still rising across most sectors, with average rates increasing from 8.3 percent in 2001 to 14.7 percent in 2007.

Some cities and industries see even higher turnover rates, said Song. The main reason is the gap between supply and demand, he said, pointing to the fast-growing economy in China as the fundamental cause of the gap.

"Most enterprises are continuously expanding. Last year, there was an average 10-20 percent increase (in company work forces). When companies are expanding, the whole market is recruiting but supply is not catching up fast enough. Demand for certain functions, like sales and marketing, is even bigger."

Kang Lan, client partner in the Shanghai office of Korn Ferry, the international executive search company, said: "For a function like marketing, which is relatively new in China, there was not much talent accumulation."

Ever-increasing pay hikes pose a significant problem for most organizations.

SINGAPORE: The top reason why employees in Asia quit is unhappiness with their pay, a study by a human resources firm said on Saturday.

It found 70 percent of the best employers see a large connection between improved performance and higher salaries.

While Asian employers have "increased investment" in compensation, they are not yet getting the "strategic and financial results"; The Business Times quoted Hewitt Associates principal Nishchae Suri as saying.

In China, 71 percent of employees are unhappy with their pay, 51 percent are unsatisfied in Hong Kong, 44 percent in India, 73 percent in Japan and 42 percent in Singapore, the published survey said.

SAMSUNG Group has announced its largest ever investment plan, saying it will increase hiring just a week after the conglomerate's long-serving chief announced his resignation.

Samsung said yesterday that it will boost investment 24 percent to 27.8 trillion won (US$27.9 billion) in 2008 in everything from semiconductor production to shipbuilding.

The investment will account for about 30 percent of the combined total of the 600 largest South Korean corporations this year, it said.

Exports by Samsung Group companies account for up to one-fifth of South Korea's exports, according to some estimates. Key investments under the plan include 8 trillion won for semiconductors, 5.3 trillion won for flat panel displays and 1 trillion won for shipbuilding.

Samsung Electronics, South Korea's biggest company, said on Friday that its first-quarter net profit rose 37 percent on strength in displays and mobile phones. It is the world's second-biggest handset manufacturer after Finland's Nokia Corp.

Samsung Heavy Industries Co, meanwhile, is the world's second-largest shipbuilder after South Korea's Hyundai Heavy Industries Co.

Samsung also said that group companies plan to hire 20,500 employees this year, an increase of 28 percent from last year.

Separately, Lee Kun-hee, who led the conglomerate for two decades, officially resigned yesterday from his position on the board of directors of Samsung Electronics, the company said.

Lee announced last week he was stepping down following his indictment on tax evasion and other charges.

Shares in Samsung Electronics rose 3.8 percent Monday to close at 716,000 won.

The explosive rate of growth in India has created a phenomenal demand for talent leading to higher salaries. Salaries are forecast to rise by 14.4 per cent during the year 2008, says a latest report.
"Wages are forecast to rise by 14.4 per cent during 2008, the fifth successive year of double-digit growth. This far outstrips wage inflation in China (8.6 per cent in 2007) and is second only to Sri Lanka, where wage growth has been driven by high inflation," global management consultancy firm HayGroup said.

The high level of demand for experienced employees is driving wage inflation and creating a culture of job-hopping. Staff turnover of 20 per cent or more is not unusual in high-demand sectors such as the service industry, as talented workers jump from employer to employer, following the promise of even higher wages.

"Reward programs of companies are in crisis as wage inflation is witnessing an upward spiralling and staff turnover rates hit new highs," the HR consultancy firm said.

"In an environment where employees can achieve a pay rise of between 40 per cent and 50 per cent by moving to a competitor, they are unlikely to stay put," HayGroup added.

In the year 2007, the middle management level witnessed the maximum increase in average annual base salary (16 per cent), while supervisory, senior management and the executive level had an average annual increase of 14 per cent in their base salaries.

The least percentage of increase was witnessed in case of the clerical staff which saw an increase of only 12 per cent in their base salaries, the report added.

India which has earned a reputation as a source of keen, talented, educated and English-speaking employees, particularly in the IT and service sectors is rapidly witnessing a change in its perception.

"While there is no shortage of graduates in India, there is real concern about the quality of new recruits," the report said, adding that the country's universities produce three million graduates a year but only a fraction are considered suitable for employment in the business processing and IT outsourcing industries. One of the main reason behind this wage inflation is the faulty education system prevailing in the country.

According to the National Association of Software and Service Companies (Nasscom), only around 25 per cent of engineering graduates and 15 per cent of general college graduates are considered employable.

Nasscom believes that the IT sector would face a talent shortfall of 5,00,000 by 2010, which would seriously compromise India's position in the offshore IT services industry.

The education system in India is fragmented. For example, all Indian engineering schools are not uniformly endowed with infrastructure or faculty, the report said.

On one hand world class institutions like the Indian Institute of Technologies (IITs) and National Institute of Technologies (NITs) have a global brand image for the kind of people they produce but at the same time they co-exist with private-run engineering colleges which are devoid of both proper equipment and trained faculty, the report added.

Unhappiness over salary is the most important reason for an employee to switch jobs in Asia, a study by a global human resources firm, Hewitt, said on Saturday.

Hewitt Associates' principal Nishchae Suri said in a presentation on the subject that 70% employees of the best employers see a large correlation between improved performance and high salaries. He said companies are steadily increasing their competitive standing while giving compensation to retain and attract high quality talent.

Seventy three per cent of the employees in Japan, 71% in China, 51% in Hong Kong, 44% in India and 42% in Singapore are unhappy with their pay, the published survey said. Dissatisfaction with compensation averages 54% for Asia as a whole, it reveals.

Pay must not only be fair, but seen to be fair in terms of the job and compared to the pay of other employees, Suri says.

It won't be long before Chinese bank workers make more than their South Korean counterparts in terms of average annual salary.
The Beijing Times on Thursday released a report on the average annual salaries of employees in 14 Chinese banks in 2007. According to the report, China's best-paid bank employees work at Shanghai Pudong Development Bank, where the average annual salary is 366,700 yuan, or roughly W55 million (US$1=W997).

That's very close to the average annual salary of South Korean bank workers, which is W64 million. Even South Korea's best-paid bank workers -- at the Korea Development Bank -- make only W76 million per year on average.

And in terms of real purchasing power, Chinese bank workers make far more than their South Korean counterparts. According to the U.S. CIA Factbook, measured on a purchasing power parity (PPP) basis, Chinese workers actually earn about double the amount of their income as figured in U.S. dollars by the nominal yuan-dollar exchange rate.

According to this standard, the average annual salary of Shanghai Pudong Development Bank employees in 2007 was more than W110 million, much more than that of South Korea's KDB employees.

According to the Beijing Times report, China's next best-paying bank was CITIC Bank (average annual salary of 242,200 yuan, W36.33 million), followed by China Minsheng Bank (231,800 yuan, W34.77 million).