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www.mercer.com
Building Rewards, Retaining Talent, Delivering Success
Compensation and Benefits Trends in High Tech Industry
Jan 25, 2011
Elley Cao
Mercer Shanghai
2Mercer
What we will cover…
Setting the scene: economic and labor market outlook
Compensation and benefits trends
Talent retention
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About Mercer
4Mercer
Colombia
Chile
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Venezuela
Canada
United StatesMexico
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SwedenDenmark
Netherlands
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Spain
PolandCezh Republic
Hungary ItalyTurkey
Austria
Switzerland
Ireland
Germany
India
New Zealand
Australia
South Korea
Japan
SingaporeThailandMalaysia
Indonesia
GreaterChina
Mercer started its operation in mainland China since 1995 and much earlier in Hong Kong and Taipei (over 20 years ago)In Greater China, Mercer operates 8 offices: Beijing Shanghai Guangzhou Hong Kong Dalian Nanjing Shenzhen Taipei Over 500 employees . About 3,000 clients.
Mercer has more than 20,000 employees serving clients from more than 180 cities and 40 countries and territories worldwide
5Mercer
More than 25,000 clients worldwide
Serving all regions, industries and sizes … and the world’s leading companies
9 of 10 FORTUNE 100 firms
3 of 4 FORTUNE 1000 firms
2 of 3 FTSE 100 firms
A majority of Nikkei 225 firms
Americas Asia/Pac Europe
6Mercer
Mercer Total Remuneration Surveys (TRS) The Strongest Database in Leading Industries and Geographies in China (26 Cities and 14 Industries)
Covered Cities• Beijing• Guangzhou• Shanghai• Shenzhen• Changchun • Changzhou • Chengdu• Chongqing• Dalian• Dongguan• Foshan• Fuzhou• Hangzhou
A step ahead to designing competitive pay packages around the world.
Covered Cities • Kunshan • Nanjing• Ningbo• Qingdao• Shenyang• Suzhou• Tianjin• Wuhan • Wuxi• Xi’an• Xiamen• Zhongshan• Zhuhai
Covered Industries• Auto• Chemical• Consumer• Energy• High tech• Insurance• Internet• Petroleum• Pharmaceutical & Medical Device• Real Estate• Research & Development• Retail• All Industries Office• All Industries Manufacturing
Mercer Total Remuneration Survey in China
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Economic and Labor Market Outlook
8Mercer
Global GDP growthIMF raised global GDP growth for 2010 to 4.8% and keep 4.2% growth forecast for 2011
Source: IMF World Economic Outlook (Oct)
Emerging and developing economies
2007 2008 2009 2010 20112006
World
Advanced economies
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
1 5 9 13 17 21-10
-8
-6
-4
-2
0
2
4
6
8
10
12
9Mercer
Euro Area1.7%
Economic predictions for a multi-speed recovery2010 GDP growth forecasts – emerging economies in the Lead
CEE 3.7%
Russia/CIS4.3%
China 10.3%
Japan 2.8%
India 9.7%
ASEAN6.6%
United States2.6%
LA5.7%
Brazil 7.5%
ME/North Africa4.1%
S.S. Africa5.0%
Source: IMF World Economic Outlook (Oct)
10Mercer
Asia: Leading the global recoveryAsia’s strong recovery from the global financial crisis continued in 2010
Source: IMF World Economic Outlook (Oct)
GDP Growth
-6
-3
0
3
6
9
12
15
Asia JP AU NZ HK SK SG TW CN IN MY ID PH TH VN
2009 2010 2011
11Mercer
Source : National Bureau of Statistics of Chinaww.EIU.com
Mercer Total Remuneration Survey
China replaced Japan as Asia’s biggest economy in 2010, which will also make it the world’s second biggest country after the US
9.1
10.3
8.89.18.0
8.0 7.3
10.1 10.4
11.6
13.0
9.0
15.6
11.9
4.43.3
-0.7
5.94.8
1.51.8
3.91.2
-0.80.70.4
8.8
7.46.98.78.68.2
8.27.37.47.68.38.5
11.3
13.4
14.613.5
11.2
12.812.2
9.3
-2
0
2
4
6
8
10
12
14
16
18
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(E)
Per
cen
tag
e
GDPCPI (Inflation Rate)Salary IncreaseStaff Voluntary Turnover
12Mercer
Rising of Chinese companies on a global scalePowerful state-owned enterprise becoming major global players
Chinese companies listed in the Fortune 500
Source: Fortune 500 2005-2010
54
43
3530
23
18
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010
13Mercer
Labor crisis
30 out of 31 provinces in China adjusted their minimum wage in 2010
10.3% turnover rate in the first half of 2010
2010 more than 1.46 million people will attend China's national examination for 2010 admissions to the civil service, 41% increase than 2009
State-owned overtake foreign companies in luring graduates
What happened in China in 2010?
2010 top 10 best employers ranked by university graduates
14Mercer
What is happening in high-tech industry?
M&A becomes a hot topic in High-Tech industry.
- SAP acquired Sybase- IBM acquired SPSS- Oracle acquired Sun- Intel acquired McAfee- NSN acquired Motorola
telecommunication network business
Some local high-tech companies also strengthen business by M&A, e.g. Asiainfo & Linkage
Internet industry (including game sector) is very booming in China.
15.1% turnover rate in the first three quarter in high tech industry of 2010
15Mercer
Employee Voluntary Turnover Rate by Location—high-tech industryV
olu
nta
ry T
urn
ov
er
Ra
te i
n
Ye
ar
20
10
From January to September, all locations encountered rising staff turnover as economy continues to recover. Turnover Rate in 2nd tier cities is at a high level.
Source: 2010 China Hi-Tech Industry Snapshot survey--Oct
15.1%16.1%
13.5%
20.0%
0%
5%
10%
15%
20%
China Beijing Shanghai 2nd Tier Cities
16Mercer
Hottest positionsTop three positions most difficult to fill in/retain
Industry Most Difficult Positions to Fill In Most Difficult Positions to Retain
All Industries--Office
Sales Representative - Technical Sales Sales Representative - Technical Sales
Sales Manager Sales Manager
Application Engineer Technical Service Engineer
All Industries--Manufacturing
R&D Engineer Operator
Process Engineer Process Engineer
Supplier Quality Engineer R&D Engineer
Chemical
Chemical Sales Chemical Sales
Sales Manager Sales Manager
Scientist/ Chemist Scientist/ Chemist
Consumer
Sales Supervisor Sales Representative
Brand / Product Manager Brand / Product Manager
R & D Engineer Financial Analyst
Hi-Tech
Sr. Account Manager Sr. Account Manager
Sr. Application Engineer Sr. Application Engineer
Application Engineer Field Technical Suport
Auto
Test Engineer Quality Engineer
Sales Manager Design Engineer
Senior Buyer Operator
Pharmaceutical & Medical Device
Product Manager Sales Representative
Sales Representative Product Manager
Clinical Research Associate Clinical Research Associate
Source: 2010 Mercer China Total Remuneration Survey
17Mercer
Hottest positionsTop three positions most difficult to fill in/retain
Industry Most Difficult Positions to Fill In Most Difficult Positions to Retain
All Industries--Office
Sales Representative - Technical Sales Sales Representative - Technical Sales
Sales Manager Sales Manager
Application Engineer Technical Service Engineer
All Industries--Manufacturing
R&D Engineer Operator
Process Engineer Process Engineer
Supplier Quality Engineer R&D Engineer
Chemical
Chemical Sales Chemical Sales
Sales Manager Sales Manager
Scientist/ Chemist Scientist/ Chemist
Consumer
Sales Supervisor Sales Representative
Brand / Product Manager Brand / Product Manager
R & D Engineer Financial Analyst
Hi-Tech
Sr. Account Manager Sr. Account Manager
Sr. Application Engineer Sr. Application Engineer
Application Engineer Field Technical Support
Auto
Test Engineer Quality Engineer
Sales Manager Design Engineer
Senior Buyer Operator
Pharmaceutical & Medical Device
Product Manager Sales Representative
Sales Representative Product Manager
Clinical Research Associate Clinical Research Associate
Source: 2010 Mercer China Total Remuneration Survey
18Mercer
Conclusion
Opportunities in Asia and China are fantastic
Biggest risk is you do not have the talent to deliver
Talent development and retention must be prioritised
Talent acquisition becomes more difficult than ever in China– Win talents from competitions against MNCs and local players, across all
industries– Special attentions need to be paid to talents from Sales, Marketing, R&D
functions and etc– Review talent strategy of fresh graduates attraction
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Compensation and Benefits Trends
– Compensation Trends– Benefits Trends
20Mercer
Average merit salary increases — high-tech industry A comparison across cities (July)
Source: July 2010 China Hi-Tech Industry Total Remuneration Survey
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Pe
rce
nta
ge
Shanghai 5.2% 2.7% 6.5% 7.1%
Beijing 5.0% 2.7% 6.5% 7.0%
Guangzhou 5.7% 2.9% 6.4% 7.1%
2009 (Excluding salaryfreeze)
2009 (Including salaryfreeze)
2010 2011
21Mercer
Special Salary Adjustment in Year 2010 — high-tech industrySnapshot survey result in Oct
36% of 151 responses did not have special salary adjustment in year 2010.
One company plans to do special salary adjustment in the rest two months of this year.
Among companies had additional special salary adjustment in year 2010, majority chose to focus on key staff and high performers.
36.4%
0.7%
9.9%
53.0%62.9%
NoPlan to do in Y2010Yes, to all staff
Yes, only to key staff / high performers
22Mercer
2011 Salary Increase Plan — high-tech industry Snapshot survey result in Oct
Only 1% of 154 responses plan to freeze salary in year 2011.
5% are not sure about salary increase plan so far.
Among those who have salary increase budget for the next year, about one third have got Global/Headquarters’ approval already.
1%
29%
65%
5% 94%
Plan to freeze salaryApproved salary increase budgetPropose for Global approvalNot sure yet
23Mercer
Merit Increase for Year 2011 by Location — high-tech industry (Exclude Salary Freeze)
Me
rit I
ncr
ea
se f
or
Ye
ar
20
11
2nd Tier Cities salary increase percentage is more aggressive than 1st Tier Cities.
7.4%
8.1%8.6% 9.1%
4.0%
6.0%
8.0%
10.0%
12.0%
Beijing Guangzhou/Shenzhen
P25-P50 P50-P75 Mean
Shanghai 2nd Tier Cities
24Mercer
Overall Salary Increase for Year 2011 by Location — high-tech industry (Exclude Salary Freeze)
Ove
rall
Sa
lary
In
cre
ase
fo
r Y
ea
r 2
01
1
2nd Tier Cities salary increase percentage is more aggressive than 1st Tier Cities.
Note: overall salary increase includes merit increase, promotion increase and etc.
8.6% 9.4%9.3%
10.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Beijing Shanghai Guangzhou/Shenzhen 2nd Tier Cities
P25-P50 P50-P75 Mean
25Mercer
Salary Increase for Year 2011 by Industry Segment — high-tech industry (Exclude Salary Freeze)
Av
era
ge
Sa
lary
In
cre
as
e
for
Ye
ar
20
11
From industry segment perspective, Hardware and Software have the highest salary increase budget for year 2011.
0%
2%
4%
6%
8%
10%
12%
14%
Overall Increase 10.7% 9.0% 9.0% 10.5% 9.1% 9.6%
Merit Increase 9.6% 7.6% 7.3% 8.6% 7.7% 8.4%
Hareware Semiconductor Services SoftwareTelecommunicat
ionOthers
26Mercer
Average variable pay — high-tech industry High-tech industry
Source: July 2010 China Hi-Tech Industry Total Remuneration Survey
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Pe
rce
nta
ge
of
An
nu
al
Ba
se
Sa
lary
2009 30.9% 18.8% 32.8% 13.6% 13.0% 11.3% 18.8%
2010 35.8% 20.4% 36.2% 16.8% 16.3% 14.1% 21.6%
2011 40.3% 20.4% 42.0% 17.7% 16.1% 11.7% 22.8%
Management -Sales
Management -Non Sales
Professional -Sales
Professional -Non Sales
Para-Professional -White Collar
Para-Professional -
Blue CollarOverall
27Mercer
RM
B P
.A.
Starting salary trend — high-tech industry Result in July
Source: July 2010 China Hi-Tech Industry Total Remuneration Survey
Annual Base Salary
0
20,000
40,000
60,000
80,000
100,000
120,000
140,0002008 2009 2010
2008 34,916 54,552 81,127 87,341 130,144
2009 31,795 54,640 79,178 88,187 128,320
2010 39,000 57,053 89,050 90,000 131,520
Fresh DiplomaHolder
Fresh UniversityGraduates
Master -Business Admin
Master - Science PhD
28Mercer
RM
B P
.A.
Annual base salary for fresh graduates — high-tech industry 1st tier cities (snapshot survey in Oct)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Application Development 36,905 67,270 93,845 130,218
R&D 35,589 68,038 99,039 138,810
Sales 39,842 60,781 93,915 139,114
Technical Support 36,643 57,231 87,794 129,365
Supporting Function 35,133 48,723 72,647 128,775
Diploma Bachelor Master PhD
29Mercer
RM
B P
.A.
Annual base salary for fresh graduates — high-tech industry 2nd tier cities (snapshot survey in Oct)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Application Deveopment 31,200 48,542 72,947 116,711
R&D 32,820 49,653 70,686 119,973
Sales 36,328 45,458 70,425 -
Technical Support 26,797 44,464 73,264 -
Supporting Function 25,498 38,564 59,908 -
Diploma Bachelor Master PhD
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Compensation and Benefits Trends
– Compensation Trends– Benefits Trends
31Mercer
China’s employee benefits system and trend at a glance Statutory benefits vs. Supplementary Benefits
Statutory Benefits
(Mandatory)
Statutory Benefits
(Mandatory)
Social Security (including Pension Insurance, Medical Insurance, Maternity Insurance, Work-related Injury Insurance, Unemployment Insurance, Housing Fund)
Public Holidays Other Legal Holidays (e.g.,
Medical Treatment Period, Marriage Leave, Maternity Leave, etc.)
Severance and Termination Benefits
Employer Sponsored Benefits
(Optional)
Employer Sponsored Benefits
(Optional)
Supplementary Pension Plan/ Supplementary Medical Plan
Life Insurance AD&D Insurance Supplementary Housing Plan Stock Plan Cars Training and Education
Assistance Work/Life Balance Plan Perquisites ….
Employee Employee
Benefits Benefits
System System
in Chinain China
32Mercer
Cross Industry ComparisonBenefit prevalence
Source: 2010 Benefits Survey – 1st tier cities
0
10
20
30
40
50
60
70
80
90
100
Pe
rce
nta
ge
Chemical 79 77 94 83 59 34 59
Consumer 85 75 88 73 62 30 29
Hi-tech 88 81 95 81 30 19 27
Parmaceutical&Medical Device 87 70 96 79 42 27 25
All Industries 86 74 90 73 44 25 21
PersonalAccident
Insurance
LifeInsurance
Suppl.Medical forEmployee
Suppl.Medical forDependent
CompanyCar
CarAllowance
Personal CarAssistance
33Mercer
Cross Industry Comparison (Cont’d)Benefit prevalence
Source: 2010 Benefits Survey – 1st tier cities
0
10
20
30
40
50
60
70
80
90
100
Pe
rce
nta
ge
Chemical 66 41 56 23 69 23
Consumer 58 49 33 16 49 23
Hi-tech 47 59 51 12 72 8
Parmaceutical&Medical Device 66 53 34 11 47 23
All Industries 52 49 42 18 60 3
TransportationLong TermIncentives
Suppl. HousingBenefits
Suppl.Retirement
Benefits
EducationAssistance for
Employee
EducationAssistance for
Children
34Mercer
Benefits that companies are considering changing in 2011
Only 3 companies don’t plan to review or change the following benefits program.
4
7
9
12
21
23
25
33
37
38
42
42
64
0 10 20 30 40 50 60 70
Savings plan
Supplementary retirement benefits
Flexible benefits
Supplementary housing benefits
Long term incentives
Annual leave
Car and transportation
Supplementary high-end medical benefits
Allowances and subsidies
Insurance
Supplementary medical benefits
Work/Life balance
Training and development
Percentage of Companies
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Talent Retention
36Mercer
Market prevalence of retention practice in 2010
Top 5 Market Prevalence of Retention Practice
54%
56%
61%
52%
50%
0% 20% 40% 60% 80% 100%
Car Benefit
Education Assistance Plan
Career Development Plan
Leadership Development Programs
Non-Monetary Reward and Recognition
Already implemented Plan to implement recently No plan to implement
37Mercer
Popularity of retention practice for different employee groups
Sr. Manager
1Non-monetary reward
& recognition
2 Car
3Education assistance
plan
Manager
1Leadership
development plan
2Education assistance
plan
3International assignment
Professional
1Non-monetary reward
& recognition
2Career development
plan
3Leadership
development plan
High performer
1Education assistance
plan
2 Housing
3Career development
plan
High potential
1Education assistance
plan
2Career development
plan
3 Job rotation
Key position holder
1Education assistance
plan
2 Retention bonus
3 Housing
38Mercer
Trend of popularities of different retention tools2008 vs. 2010
Rank 2008 2010
1Supplementary medical
planEducation assistance
plan
2 Education assistance plan Car
3 Perquisite Housing
Rank 2008 2010
1 Career development plan Career development plan
2 job rotation Job rotation
3 Mentorship International assignment
BenefitBenefit
CareerCareer
Rank 2008 2010
1 Team building Non-monetary reward
2 Satisfaction survey Leadership program
3 Flexible working time Flexible working time
Supporting Mechanism
Supporting Mechanism
39Mercer
Effectiveness of retention tools in 2010
According to the companies who exercised, some benefit plans were well recognized in terms of talent retention in 2010.
Rank Five Most Effective Retention Practices
1 International Assignment
2 Flexible Benefit Plan
3 High-end Medical Benefit
4 Job Rotation
5 Retention Bonus
40Mercer
Most Effective Period of Time for International Assignment
3%
21%
33%
43%
9%
6%
0%
15%
30%
45%
< 3 months 3 months-6 months
6 months-1 year
1- 2 years >2 years Others
The most acceptable time period for international assignment
41Mercer
Flexible Benefits’ Value in Talent Retention
1%
3%
34%
37%
48%
49%
75%
83%
0% 20% 40% 60% 80% 100%
Others
No relationship between flexible benefits and talent retention
Enhance employee communication through total rewards
Enhance employer brand
Use benefits to strengthen motivation
Differentiate benefit offerings from the competitors
Maximize benefit value while containing benefit costs
Meet the diverse employee needs
Flexible benefit & talent retention
42Mercer
The Biggest Challenges When Offering a High-end Medical Benefit Plan
5%
24%
30%
31%
67%
0% 20% 40% 60% 80%
Others
Difficult to measure the quality and service
The program is too complicated to do a comparison
The market is immature with less choices
The costs are too high
Challenges in high-end medical benefit practice
43Mercer
What’s working
The most suitable retention tools, rather than the most popular ones, are most effective to your organization.
Employee retention requires a holistic approach. Any tools should be applied in the holistic summation of things within a big equation.
The talent retention is a joint venture of employee, manager and
organization. Hence it’s also your responsibility.
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Q&A
45Mercer
Thank You!
For more information on the information presented, please contact us at:
Elley Cao 86 21 6103 5540 [email protected]
www.mercer.com