Salaries in Hong Kong expected to rise in 2022 with recovering economy and stabilizing pandemic situation 

• Overall median salary increments projected to hit 3.5% in Hong Kong next year, up from 3% in 2021
  
• More workforce stability expected in 2022, with only 1.4% of employers reducing their headcount 
• Greater emphasis on skills to build a sustainable, future-ready workforce

Salary increments in Hong Kong are on the rebound to pre-pandemic levels, with median pay increases forecasted to hit 3.5% in 2022, compared to 3% in 2021 and 4% in 2019. This is according to the annual Total Remuneration Survey (TRS) 2021 by Mercer that polled 534 organizations across 13 industries in Hong Kong between April and June this year.

The projected salary increments reflect a positive outlook with a recovering economy and stabilizing pandemic situation in Hong Kong with Gross Domestic Product (GDP) expected to grow by 6.4%^[1] this year before moderating to 3.5% in 2022. Hong Kong’s median pay increase is below the Asia Pacific average of 5.4% and shows a divergence in pay progression between emerging and developed economies, with salary increases as high as 9% in Pakistan to 2.3% in Japan, the lowest in the region.

Brian Sy, Mercer’s Career Products and Total Rewards Consulting Leader for Hong Kong, said, “With rising inflationary pressures, businesses might see relatively flat to moderate growth next year and this has only intensified the race for companies to retain talent in a hot labor market. Turning to financial incentives could be a quick fix but employers need to factor other considerations such as flexible work and skills-based talent practices into total rewards packages that would set them apart from their competitors for the longer term.”

Salaries set to rise with recovering economy

Across all the industries surveyed, the Energy industry is expected to see the highest median salary increment of 4.2%^[2] in 2022, followed by the High Tech and Insurance sectors (both 4%), and Life Sciences (3.9%). Businesses in the Consumer Goods and Transportation Equipment sector are likely to maintain their pay increases next year while Logistics is the only sector that is expecting a slight dip from 3% this year to 2.9% in 2022.

Commenting on the industry salary trends, Mr Sy said, “With the pandemic situation stabilizing, the rebound in pay increases is a good indication that business is getting better for companies overall. Industries that are dependent on consumer spending like Consumer Goods, as well as labor-intensive ones such as Transportation Equipment and Logistics, are more likely to see smaller increments due to the virtually frozen inbound tourism as well as the threat of more infectious variants that could hinder production and trading activities in Hong Kong.”

More workforce stability and less salary freezes

Employment recovery is likely to continue in 2022 as economic activity resumes and businesses shift their attention from reducing staff to hiring more. According to a recent study conducted by Mercer, three in five companies^[3] in Hong Kong said they would maintain the same headcount next year, with 8% intending to add headcount whereas only 1.4% of employers specified they will reduce their headcount in 2022.

Mr Sy added, “The financial outlook looks increasingly optimistic for the coming year, improved by the fact that Hong Kong’s unemployment rate has dropped significantly in recent months  and a much lower percentage of companies are expecting to enact salary freezes next year – down to 6.3% compared with 9.2% this year and 23.5% in 2020.”

Greater emphasis on flexible work and skills

Organizations are putting greater emphasis on flexible work and skills-based rewards in a bid to attract new talent and retain critical skills. With minimal impact on productivity, collaboration or employee development, Mercer’s 2021 Flexible Working Policies & Practices Report indicate that 64% of companies in Asia Pacific have implemented full-time remote work while one in three plan to offer long-term remote working arrangements as part of their future of work policy.

Employers also need to recognize the value of applying skills-based talent and rewards strategies. As skills begin to overshadow education or experience, 62%^[4] of companies in the Asia Pacific region cite an inability to find candidates with the right skills as a key recruitment challenge. However, only 9% of them formally monitor the market demand or availability of skills, which underscores a say-do gap in organizations on building a skills-based, future-ready workforce.

Vicki Fan, Mercer’s CEO for Hong Kong said, “Skills will become increasingly key in decisions for both new hires and ongoing rewards for existing employees. By shifting towards rewards as a sum of prized skills in the workforce, companies can be on the front foot in planning salary movements, payroll budgets and talent needs. Instead of an incremental increase for all employees, employers can identify critical skills and talent to ensure the right people are incentivized by the right premiums, across the full employee lifecycle. This will drive positive change and future-proof workforces as we move beyond the pandemic.”

^[1] IMF, World Economic Outlook

^[2] 2021 Mercer E3 Salary Movement Snapshot Survey

^[3] Mercer’s 2021 Flexible Working Policies & Practices Report

^[4] Mercer Skills Survey

About Mercer’s Total Remuneration Survey

The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.

For more data and insights from Mercer’s Hong Kong Total Remuneration Survey 2021, please see here.