Hewitt Associates | September 2008



Hewitt’s 2008 Shanghai City
Compensation & Benefits Study
Agenda
The Big Picture
Study Background
Compensation Trends
Pay Practices
A Word on Dealing with Inflation
Benefit Trends
...
The Big Picture
Hot Topics in 2008/2009



                              Impact of
         Financial Markets Meltdown, slowing Global Eco...
The Big Picture                    Growth in China has slowed but still continues at a brisk pace


Developed World Outloo...
China Major Economic Indicators

Output, Employment                          2002        2003       2004      2005   2006 ...
Companies Still Expanding -
  Target Sales Revenue Growth in Shanghai in 2009

                                   Non-Manu...
Companies Still Expanding -
  Target Headcount Increase in Shanghai in 2009

                     Non-Manu                ...
What are the Implications?

Implications for Business                   Implications for HR
   Growth at any cost is no lo...
Study Background
2008 Participant Companies Information
  773 Participants                                     By Business Entity
         ...
Compensation Trends
Salaries in China Jump High in 2008
12.0%
                                                                                ...
Salaries in Shanghai Jump Higher Also
          12.0%

          10.0%

           8.0%

           6.0%

           4.0%
...
Pay Practices
Variable Pay is Highly Prevalent in China

                       120.0%

                       100.0%

                 ...
Shanghai Non-Manufacturers Pay Mix

                Shanghai Non-Manu Pay Mix - Non-Sales                                 ...
What is the impact of Inflation on Salary Increases?

Market Reaction:                                        Pay Attentio...
Benefit Trends
Benefit for Retention Purpose - The Key Differentiator!

HR Perspective:                                 Employee Perspect...
Employee Turnover
Big Jump in Employee Voluntary Turnover
    20.0%

    18.0%

    16.0%

    14.0%

    12.0%

    10.0%

     8.0%

     ...
Voluntary Employee Turnover Rate By City

        25.0%




        20.0%




        15.0%




        10.0%




        ...
2008 Voluntary Employee Turnover Rate By Industry
        35.0%



        30.0%



        25.0%



        20.0%



    ...
From Total “Compensation” to “Total Rewards”

 Companies are increasingly switching from benchmarking against Total Comp
 ...
Engaging Employees in China
Whilst Salaries and Benefits Continue to Rise, Employee
                                 Satisfaction Is Not Improving……

...
Pay Communication is Critical
What Employees in China Say                              Best       China
HR is effective in...
Focus on Positive Drivers of Engagement in China
                        Career Opportunities:
 Career Opportunities
 Care...
Questions
Thank You!
Should you have any questions, please contact us:
Email: peter.zhang@hewitt.com
Tel: Peter Zhang (86 21) 2306-6...
Appendix:
Hewitt Best Employers in China 2009
Study Introduction
Hewitt Best Employers Study Background

 The Hewitt Best Employers in Asia 2009 study represents the fifth regional
 study...
Methodology – Employee Engagement

  We see three key behaviours in an engaged employee:




                             ...
Engagement Studies Have Evolved from Satisfaction and
 Commitment Studies and Have a Positive Impact on Results



       ...
Engagement Framework – Drivers that Impact
Engagement
          People                              Work
             Lead...
By Increasing Engagement …

    Company                Desired Business Outcome       Relevant Result

        Large      ...
Best Employers in China 2009 Study Methodology

                                                     2
                   ...
Engagement Drivers by Market

 The factors that drive engagement around the region appear similar, yet vary in
 their expr...
Hewitt Best Employers in China 2007

        Rank   Organization Name

        1      Spansion (China) Ltd.

        2    ...
Four Complimentary Reports for Every Participant


Employee Positive Perception Report                                    ...
Best Employers in China 2009 Study Timeline


Register you participation online                      Now!

Data Collection...
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2008 Shanghai Compensation and Benefits Study

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Transcript of "2008 Shanghai Compensation and Benefits Study"

  1. 1. Hewitt Associates | September 2008 Hewitt’s 2008 Shanghai City Compensation & Benefits Study
  2. 2. Agenda The Big Picture Study Background Compensation Trends Pay Practices A Word on Dealing with Inflation Benefit Trends Employee Turnover in Shanghai Engaging Employees in China In Closing 2
  3. 3. The Big Picture
  4. 4. Hot Topics in 2008/2009 Impact of Financial Markets Meltdown, slowing Global Economy Impact of Inflation on Salary Increase Impact of High Employment Costs on Employee Retention & Development 4
  5. 5. The Big Picture Growth in China has slowed but still continues at a brisk pace Developed World Outlook China Outlook Near Term Outlook Near Term Outlook Slowing growth Growth slowing from 11.4 to 10.1% in last quarter an expected 9.9% in 2008 High energy prices and 8.9% for 2009 Global financial crunch Exports are still growing but at a slower rate of 21.1%, import growth also slower at 23.1% Export sector resilient (US) FDI climbed 41.6% in 2008 Inflation high Export oriented businesses, non banking financial Consumer confidence low institutions, auto and real estate lowering growth projections Long Term Trends Long Term Trends Moving from export lead and capital intensive growth to Aging population and shrinking workforce domestic consumption lead growth Continued offshoring of manufacturing and service Continued rapid urbanization work Rapid globalization of domestic companies increase of Need to move up the value chain - next big thing - outbound investment Life sciences and green energy? Continued high levels of FDI focused on domestic market Healthcare and related services expected to grow Ongoing geographic expansion and consolidation of many industries 5
  6. 6. China Major Economic Indicators Output, Employment 2002 2003 2004 2005 2006 2007 2008 Jan to 2008 and Price (Forecast) Jun GDP 9.1 10 10.1 10.4 10.7 11.4 10.4% 9.9% (% change previous year) 4.0% Unemployment rate 4 4.3 4.2 4.2 4.1 4.0 (Till 4.5% (%) May) Consumer price index -0.8 1.2 3.9 1.8 1.5 4.8 7.9% 7.0% (% change, previous year ) FDI 12.5 1.4 13.3 -0.5 4.5 13.6 41.6% -- (%) *Data sources: 1. National Bureau of Statistics, PRC 2. National Bureau of Statistics, Shanghai 3. Ministry of Foreign Trade and Economic Cooperation, PRC 4.. 2008 forecast data is provided by World Bank website in June, 2008 6
  7. 7. Companies Still Expanding - Target Sales Revenue Growth in Shanghai in 2009 Non-Manu Manu 75%ile 31.2% 29.4% 50%ile 20.0% 20.0% 25%ile 14.3% 10.0% Avg. 27.3% 22.6% 7 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  8. 8. Companies Still Expanding - Target Headcount Increase in Shanghai in 2009 Non-Manu Manu 30.0% 30.0% 30.0% 25.0% 25.0% 25.0% 21.6% 20.4% 20.0% 18.0% 20.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 5.0% 5.0% 0.0% 0.0% Avg. 25%ile 50%ile 75%ile Avg. 25%ile 50%ile 75%ile 8 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  9. 9. What are the Implications? Implications for Business Implications for HR Growth at any cost is no longer Show a return on Human Capital feasible investment Limited resources but rising Get the right data to support your human expectations, have to do more with capital initiatives. less Understanding the business is critical Global slowdown putting additional pressure on China to be the Execute well around the basics company’s high performer Target your people investments to get Maintain a sustainable model for the highest leverage growth 9
  10. 10. Study Background
  11. 11. 2008 Participant Companies Information 773 Participants By Business Entity FIE - Rep Office FIE - Joint Venture Manu Non-Manu FIE - Wholly Owned Other 100% 0.7% 8.1% 90% 80% 262 70% 67.6% 60% 72.2% 50% 40% 30% 20% 511 31.7% 16.0% 10% 3.7% 0% Non-manu Manu 11 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  12. 12. Compensation Trends
  13. 13. Salaries in China Jump High in 2008 12.0% 11.4% 10.9% 10.6% 10.2% 9.5% 9.6% 10.0% 10.2% 9.1% 8.4% 8.8% 8.0% 8.0% 7.6% 8.2% 7.1% 8.1% 7.3% 7.6% 7.3% 7.6% 7.4% 8.3% 8.0% 6.0% 4.8% 4.5% 3.9% 4.0% 1.8% 2.0% 1.3% 1.2% 0.7% 0.4% 0.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 *Data sources: CPI GDP Salary Increases 1. National Bureau of Statistics, PRC 2. Ministry of Foreign Trade and Economic Cooperation, PRC 3. Hewitt China Salary Increase Survey 1995-2007 4. 2007 GDP and CPI figures are data of full year 13
  14. 14. Salaries in Shanghai Jump Higher Also 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2009 2006 2007 2008 (Projection) Manu 7.8% 8.5% 10.1% 9.9% Non-Manu 8.2% 9.4% 11.2% 10.4% 14 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  15. 15. Pay Practices
  16. 16. Variable Pay is Highly Prevalent in China 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Variable Pay Prevalence 2007 Non-Manu 94.1% 2008 Non-Manu 95.5% 2007 Manu 84.4% 2008 Manu 93.8% 16 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  17. 17. Shanghai Non-Manufacturers Pay Mix Shanghai Non-Manu Pay Mix - Non-Sales Shanghai Non-Manu Pay Mix - Sales 100% 100% 12% 12% 13% 15% 16% 18% 90% 20% 90% 23% 23% 22% 22% 20% 5% 5% 5% 5% 5% 80% 80% 5% 4% 3% 3% 5% 4% 3% 4% 4% 4% 3% 5% 4% 4% 3% 3% 3% 3% 70% 70% 5% 60% 60% 50% 50% 40% 78% 79% 79% 78% 40% 76% 72% 74% 73% 70% 71% 71% 68% 30% 30% 20% 20% 10% 10% 0% 0% General Professional Supervisorl Middle Sr.Manager Director General Staff Professional Supervisorl Middle Sr.Manager Director Staff Manager Manager Base Salary Guaranteed Bonus Cash Allow ance Target Variable Pay Base Salary Guaranteed Bonus Cash Allow ance Target Variable Pay 17 Data Source: 2008 Hewitt TCM Shanghai Study Findings
  18. 18. What is the impact of Inflation on Salary Increases? Market Reaction: Pay Attention To: More than half of the respondent CPI should be taken into consideration companies have taken action or will when making salary adjustment. take action to react to the CPI However, if salary increase is directly linked to CPI, it might intensify inflation. inflation. Higher impact of CPI on lower level One third of total respondents workers adopted a “wait-and-see” approach. Increasing labor costs might deteriorate Among those who have taken action, China’s investment environment, and there are two strategies: employees could be negatively impacted. – Allocate this budget to special groups of employees most affected by inflation. – Allocate this budget across the broad population. 18
  19. 19. Benefit Trends
  20. 20. Benefit for Retention Purpose - The Key Differentiator! HR Perspective: Employee Perspectrive Housing benefits remain the most Cash is king popular supplemental benefits but often times built into payroll and Employees also keenly aware of viewed as cash healthcare benefits – Coverage (dental, vision, critical illness, Market appreciation for pension plans etc.) increasing especially with an aging workforce – Level of service (quality, access, etc.) Interest on Savings plan more – Increasing interest in flexible choices. obvious for its flexibility to accommodate diversified employee Additional benefit interests: needs AND the retention properties – Education assistance, Car benefits, EAP program, Additional Leave, etc. 20
  21. 21. Employee Turnover
  22. 22. Big Jump in Employee Voluntary Turnover 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 Average 8.3% 12.1% 11.7% 11.3% 14.0% 13.8% 14.7% 17.4% Median 7.3% 9.8% 9.3% 9.8% 11.6% 11.3% 12.7% 14.9% 22 Data Source: Hewitt TCM Study 2001 – 2008(PRC)
  23. 23. Voluntary Employee Turnover Rate By City 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Shanghai Changzhou Wuxi Suzhou Nanjing Wuhan Turnover Rate 17.3% 19.6% 15.9% 20.7% 8.7% 11.8% 23 Data Source: 2008 Hewitt TCM Study Findings
  24. 24. 2008 Voluntary Employee Turnover Rate By Industry 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Hi-tech - Pharmace Engineeri Auto - Auto - Medical Hi-Tech - Chemical - Retail Insurance FMCG Logistics Sourcing Funds NM utical ng Parts Manu Dev ice Manu Manu Turnov er Rate 29.4% 26.2% 19.7% 16.4% 16.0% 15.2% 15.2% 15.1% 14.8% 14.4% 14.4% 13.6% 13.4% 10.2% * NM: Non Manu 24 Data Source: 2008 Hewitt TCM Study Findings
  25. 25. From Total “Compensation” to “Total Rewards” Companies are increasingly switching from benchmarking against Total Comp to Total Reward Compensation Benefits Transactional Guaranteed Pay Health & Welfare Rewards Bonus Plan Retirement Long-Term Incentives Paid Time Off Relational Development Environment Performance Management Culture & Climate Rewards Learning Work Design Career Opportunities Flexibility Direct Indirect 25
  26. 26. Engaging Employees in China
  27. 27. Whilst Salaries and Benefits Continue to Rise, Employee Satisfaction Is Not Improving…… 60% Employee Satisfaction with Pay Employee Positive Perceptions Employee Satisfaction with Benefits 50% 45% 39% 40% 35% 37% 35% 30% 28% 20% 2003 2005 2007 Study Year Data Source : 2007 Hewitt Best Employer in China Survey Findings 27
  28. 28. Pay Communication is Critical What Employees in China Say Best China HR is effective in providing adequate Employers Average information about our compensation strategies 71% 33% HR is effective in addressing questions concerning administration of pay and benefits 75% 38% As a Manager, I am well equipped to explain our reward structure to our employees 78% 42% As a Manager, our review and rewards systems give me all the autonomy I need to recognize both solid performers and high performers 76% 41% My performance has a significant impact on my pay 68% 37% If this organization does well, I will appropriately share in its financial success ` 73% 35% 28
  29. 29. Focus on Positive Drivers of Engagement in China Career Opportunities: Career Opportunities Career Opportunities • Only 42 percent of employees surveyed hold positive perceptions of their future growth and advancement opportunities in their organization. • The study revealed quite clearly, however, that The Best are much more successful in outlining future career opportunities to their employees, providing them with clear line of sight for future potential opportunities. Pay: Pay Pay • Only 28 percent of Chinese employees think they are being paid enough relative to their performance and contribution • Even The Best struggle with pay, where on average only 57 percent of employees are happy with what they’re getting. Performance Performance Performance Assessment: Assessment Assessment 1. On average, only 39 percent of employees hold positive perceptions of the organization’s formal performance management process 2. In contrast to The Rest, The Best excel in this area, with 71 percent of employees holding positive perceptions of performance management. 29
  30. 30. Questions
  31. 31. Thank You! Should you have any questions, please contact us: Email: peter.zhang@hewitt.com Tel: Peter Zhang (86 21) 2306-6797 Fax: (86 21) 6391-6018
  32. 32. Appendix: Hewitt Best Employers in China 2009 Study Introduction
  33. 33. Hewitt Best Employers Study Background The Hewitt Best Employers in Asia 2009 study represents the fifth regional study conducted by Hewitt It will be conducted in the key markets of Australia/New Zealand, China, Hong Kong, India, Korea, Malaysia, Singapore and Thailand With close to 750 organizations registering in our last study in 2007, the Hewitt Best Employers in Asia study has become the largest employee research project and market practice audit in Asia Pacific 33
  34. 34. Methodology – Employee Engagement We see three key behaviours in an engaged employee: Stay + Strive Strive Say Say + Stay Exert extra effort and Have an intense engage in work that desire to be a contributes to business Consistently speak positively member of the success about the organization to co– organization workers, potential employees and most critically, customers (current and potential) 34
  35. 35. Engagement Studies Have Evolved from Satisfaction and Commitment Studies and Have a Positive Impact on Results How much people WANT Higher and actually DO — Engagement improve business results Business How much people WANT to Impact Commitment improve business results How much people like it Satisfaction Lower here Employee Research Over Time 35
  36. 36. Engagement Framework – Drivers that Impact Engagement People Work Leadership Work Tasks Manager Sense of Accomplishment Co-Workers Resources People Focus Work Processes Customers Total Rewards Opportunities Pay Career Aspiration Benefits Engagement Career Opportunities Recognition Learning and Development Company Practices People/HR Practices Managing Performance Quality of Life Brand Alignment Work/Life Balance Organization Reputation Corporate Responsibility Customer Focus Diversity 36
  37. 37. By Increasing Engagement … Company Desired Business Outcome Relevant Result Large Increased customer-oriented 5% engagement improvement = Transportation behavior/reduced freight 14% customer satisfaction Company damage improvement Global Financial Improved productivity and 7% engagement improvement = Services Company stronger attraction and 2% reduction in absenteeism; retention 4% reduction in turnover; 3% increase in customer satisfaction Global Package Improved service and quality 13% engagement improvement = Delivery Company record growth, profit and on-time performance 37
  38. 38. Best Employers in China 2009 Study Methodology 2 Analysis and Employee Judging CEO Engagement Process Perspective (Employee (Independent judges, (CEO Questionnaire) Opinion Survey ‘Blind data’, assessing [EOS]) Engagement Alignment) 1 3 People Practices Hewitt Best (People Practices Employers Inventory™ [PPI]) Announced (Further analysis into what makes the Hewitt Best Employers best) 38
  39. 39. Engagement Drivers by Market The factors that drive engagement around the region appear similar, yet vary in their expression and in their magnitude. Driver 1 Driver 2 Driver 3 Performance China Career Opportunities Pay Assessment HK Career Opportunities Work Processes Work Activities Singapore Career Opportunities Career Aspirations Work Activities India Career Opportunities Recognition Benefits Korea Performance Assessment Career Opportunities Policies & Practices Japan Performance Assessment Career Aspirations Policies & Practices Performance ANZ Career Opportunities Assessment Career Aspirations Source: Hewitt Best Employers in Asia Study 2007 39
  40. 40. Hewitt Best Employers in China 2007 Rank Organization Name 1 Spansion (China) Ltd. 2 Four Seasons Hotel Shanghai 3 Shanghai Johnson Limited 4 Three On the Bund 5 Federal Express—DTW Co., Ltd. 6 Intercontinental Pudong Shanghai 7 Nanfang Lee Kum Kee Co., Ltd. 8 Shangri-La’s Kerry Centre Hotel Beijing 9 Renaissance Beijing Hotel 10 Accenture (Shanghai) Co., Ltd. 40
  41. 41. Four Complimentary Reports for Every Participant Employee Positive Perception Report Employee Comments (EPPR) Verbatim employee comments from the EOS Engagement score for the organization overall as well as Available three weeks after survey completion (Standard positive perception responses to the items in the EOS Participation) or five weeks (Non-Standard Participation) Available three weeks after survey completion (Standard Participation) or five weeks (Non-Standard Participation) Benchmark Report Market and Regional Reports Comparing the information from the EPPR Your local market report and the regional report to that of The Best and The Rest in your market Available after the announcement of the Hewitt Best Available after the announcement of the Hewitt Best Employers in Asia Employers in China 41
  42. 42. Best Employers in China 2009 Study Timeline Register you participation online Now! Data Collection Starts (choose any four-week period) September 1, 2008 Data Collection Ends (choose any four-week period) November 21, 2008 Employee Positive Perception Available three weeks after survey completion (Standard) Reports (EPPR) Available Participation) or five weeks (Non-Standard Participation) Judging Period (local and regional) January and February 2009 Announcements of Hewitt From March 2009 Best Employers lists Other Reports Available Available after the announcement of the Hewitt Best Employers in China ENROLL ONLINE www.hewitt.com/bestemployerschina 42

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