PAY AGILITY: THE SUSTAINABLE DESTINATION OF SALARY STRATEGY
To get day 2 presentation deck, please click HERE
October 16, 2024, during the second day of The Makeover 2024, the "Asia-Pacific Total Rewards Trends" and the "Vietnam Total Salary Report 2024" were released by Talentnet and its partner, Mercer. These reports provided participating enterprises with valuable data to optimize their compensation policies and make informed, innovative decisions aligned with market trends.
I. KEY TALKING NUMBERS?
II. ASIA-PACIFIC TOTAL REWARDS TRENDS
The keynote on the “Asia-Pacific Total Rewards Trends” was led by Ms. Godelieve van Dooren - CEO, Marsh McLennan South East Asia, who highlighted the growing influence of sustainability on all aspects of business operations. The report also detailed how this trend is shaping companies' rewards programs.
1. Sustainability impacts all aspects of business
Ms. Godelieve van Dooren - CEO, Marsh McLennan South East Asia, shared that "sustainability" is becoming a key term influencing every aspect of business operations:
2. Reputation and Sustainability Efforts Are Key Reasons for Employees to Join a New Company
Never before has a company's reputation been as crucial as it is today for attracting talent. In a survey regarding reasons for joining a company, brand reputation ranked as the second most important factor, with 39% agreement, just behind job security at 50%.
In addition to enhancing reputation, the pursuit of sustainability in the workplace is another aspect that companies need to focus on:
By concentrating on these two key points, companies can enhance their ability to attract and retain talent, ensuring long-term success.
3. The biggest risks from the perspective of HR and Risk Managers are increasing health and benefits costs, along with concerns about disparities in executive/worker rewards
Ms. Godelieve van Dooren presented a global risk ranking that reflects the assessments of HR and risk managers regarding factors likely to have a significant impact on businesses in the next one to two years. The top risk identified is the increase in health and benefits costs, primarily due to the likelihood of this risk occurring rather than its severity. From an HR perspective, employers anticipate that they will need to allocate more resources to manage this risk, making it challenging to maintain competitive benefits compared to other companies.
Another factor that both HR and risk managers agree on is the disparity in wages and compensation relative to employee value. This situation arises from an economic downturn and rising inflation, which requires leaders to effectively manage employee expectations on salary increases.
4. 03 key elements of a sustainable rewards strategy
According to Ms. Godelieve van Dooren, a sustainable rewards encompasses three essential elements:
5. New perspective on sustainable program development
?"Green efforts don’t have to be showcased in a specific program; they can be embedded within any business strategy", shared by Ms. Godelieve van Dooren.?
Applying this perspective, she stated that making responsible investments and designing options within benefits policies that prioritize sustainability are already significant green initiatives.
Ms. Godelieve van Dooren also provided specific examples to help companies better visualize how ESG efforts can be integrated into their benefits policies:
6. As lifespans increase, companies must redesign work environments and retirement plans for sustainable development
As life expectancy continues to rise, employees are likely to retire later. This trend leads to 2 significant changes that businesses need to consider in order to develop sustainable benefits policies:
Concluding the presentation on ASIA-PACIFIC TOTAL REWARDS TRENDS, Ms. Godelieve van Dooren advised companies: “Be proactive, predictive, and disciplined are the formulas for creating a sustainable rewards program”.
III. Panel | Building a Borderless Workforce in Asia
To foster growth in the face of volatility, not only in Vietnam but globally, businesses are constantly seeking new skills. To provide insights for developing a cross-border talent strategy,04 experts, including Mr. Kunal Malhotra – Country Manager (Vietnam and Korea), LinkedIn; Ms. Nguyen Tam Thanh – Group Chief HR Officer, Masan Group; Mr. Andree Mangels - Deputy CEO, Head Of Growth – Vietnam and International Market, Talentnet; and the moderator Mr. Puneet Swani – Former Senior Partner, Mercer, shared diverse perspectives on this topic.
Mr. Andree Mangels remarked: “On the first day, we discussed how the emergence of AI could create up to 97 million jobs by 2025. New jobs and new skills are exactly what companies will be looking for to seize sustainable growth opportunities in an unpredictable future”. He noted that this is also a reason why the search for talent is currently stronger than ever and will continue to intensify in the coming years.
However, having skills alone does not guarantee success in international companies. The factors of corporate culture and national culture also deserve attention. Ms. Nguyen Tam Thanh provided an example, to avoid conflict, Vietnamese workers often refrain from expressing their personal opinions during discussions. This can become a barrier that diminishes the critical thinking abilities that are highly valued in international work environments.
When faced with the decision to choose candidates who possess the necessary skills but do not align with the cultural fit, Mr. Puneet Swani suggested adopting short-term working methods to optimize this talent pool.
Wrapping up the discussion, Mr. Kunal Malhotra encouraged employees to take greater initiative in their integration process and seek opportunities in international companies. Not only should they strive to adapt to corporate and national cultures, but employees should also proactively identify and suggest the skills they need to develop, rather than waiting for their companies to guide them. This approach not only empowers employees to steer their careers toward their aspirations but also provides valuable insights for companies to enhance their talent strategies.
IV. TOTAL REMUNERATION SURVEY REPORT 2024
The "Vietnam Total Salary Report" involved the participation of 594 MNC companies and 59 local companies, covering 3,481 positions from over 551,380 employees across Vietnam. This survey marks the fifth consecutive year of growth in the number of participating companies, demonstrating an increasing investment interest from businesses in their human resource strategies.
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In terms of context, Vietnam's economic growth is projected to reach 5.8% in 2024, up from 5.1% in 2023. However, inflation is also expected to rise correspondingly from 3.3% in 2023 to 3.7% in 2024. The bleak economic situation has significantly impacted the labor market, leading employees to adopt a mindset focused on job stability. Conversely, companies must implement measures such as limiting salary increases and reducing staff to balance their budgets.
The report was presented by Ms. Nguyen Thi Quynh Phuong, Head of Human Capital Solutions, Talentnet.
1. Gen Z will make up over 1/4 of the workforce by 2025
The report begins with an overview of the labor market. Within a year, Gen Z will account for 28.4% of the workforce. In five more years, this generation will become the core of the labor market. In 10 years, they will emerge as the new management force. Within 15 years, they will ascend to senior management roles.
Given this data, companies can strategically plan their training and development initiatives to ensure that Gen Z is prepared to assume important positions within the organization in the near future.
2. The Emergence of "Expert Inflation" Across Various Industries
This phenomenon occurs when companies use the title "expert" as a form of promotion to retain experienced employees who possess industry knowledge but are either not capable or not interested in becoming managers. For instance, in the Trading sector, the percentage of experts rose sharply from 7% in 2023 to 15% in 2024.
Ms. Quynh Phuong stated, "The title “expert” has traditionally been associated with departments requiring deep knowledge, such as Research and Development or Legal. However, in 2024, this title is rapidly increasing in fields like trading, supply chain, and financial services - insurance. Companies should establish clear regulations to prevent the inflation of “expert” positions."
3. The Paradox of Management Ratios
Some industries have a high percentage of management relative to the total workforce, yet manage relatively few employees, and vice versa. For instance, in the Real Estate sector, while 31% of the workforce holds management positions, on average, each manager supervises only two employees. In contrast, the Retail sector has only 8% of its workforce in management roles, but each manager oversees 13 employees.
Based on the report, companies can leverage industry-specific data to consider more effective management allocations according to their sector.
4. Voluntary turnover rate in Vietnamese companies: 19.4% in 2023 and 9.6% in the first half of 2024
The voluntary turnover rate in Vietnamese businesses in the first half of 2024 was 9.6%. As the economy slows down, employees tend to seek job stability. In multinational companies, the voluntary turnover rate in the first half of 2024 was 6.5%.
5. Retail continues to lead in employee turnover rates
The top 3 industries with the highest and lowest voluntary staff turnover rates have not changed significantly compared to 2023, with the exception of the Consumer Goods sector replacing Manufacturing as the third highest in voluntary turnover.
The Oil & Mining, Chemicals, and Sourcing industries, which require specialized recruitment and high expertise, also offer competitive salaries. With attractive compensation packages, employees in these three sectors have little incentive to leave.
6. 7.3% of companies plan to reduce their workforce in 2025?
Compared to 2024, the percentage of companies intending to decrease their workforce has increased by over 6% from the previous year. The proportion of companies expecting no changes in their staffing levels rose from 39% in 2023 to 45.9% in 2024, while the number of companies that have not made a decision dropped from 23% last year to just 5.4% this year. This indicates a growing certainty among businesses regarding their hiring plans for the upcoming year, amidst expectations of continued economic downturn. On a positive note, the percentage of companies planning to hire more staff has increased from 37% in 2023 to 41.4% in 2024.
7. Annual base salary across all regions in the country have decreased?
Compared to 2023, the base salary across all regions nationwide has declined, reflecting the overall market trend of an economic downturn. Although the median base salary in Ho Chi Minh City has decreased slightly by 2%, it remains the region with the highest figure. Ho Chi Minh City’s base salary levels are 17% higher than those in Hanoi and 25% higher than in Da Nang. When considering total cash actual, this gap narrows to 16% and 21%, respectively.
Notably, other regions in the North and Centre areas have experienced significant reductions in basic salaries compared to 2023, with Northern regions declining by 7% and Central regions by 9%.
8. Salary growth in Vietnamese companies declines, but bonus growth increases?
For multinational companies, the projected salary increase rate for 2025 is 6.7%. In comparison, the rate for Vietnamese companies is expected to be 6.6%.
Ms. Quynh Phuong noted: "Although salary growth has decreased, considering that overall national wage levels have also dropped, the fact that the decline in salary growth is only marginal demonstrates that companies are still making great efforts to support employees during difficult economic times."
These efforts are further reflected in bonus growth. Vietnamese companies are expected to see a 0.9% increase in bonuses, while multinational companies may witness a 0.7% increase. Bonus increases serve as a means for companies to motivate employees and drive performance.??
9. Renewable Energy industry saw the highest salary increases, while Oil & Mining had the lowest
The list of industries with the highest and lowest salary increases saw significant changes between 2023 and 2024. The percentage increase in salaries was also lower compared to the previous year.
In 2023, the top three industries with the highest salary growth were High Tech (8.3%), Trading (7.7%), and Renewable Energy (7.7%). However, in 2024, the top three shifted to Renewable Energy (7.2%), Chemicals (7.0%), and Sourcing (7.0%). The salary increase rate in the High Tech sector declined due to challenges in balancing compensation budgets following the rapid development of AI.
For the industries with the lowest salary growth, FS - Banking (5.9%) replaced Real Estate in the Top 03 for 2024, alongside FS - Non Banking (5.6%) and Oil & Mining (4.8%).
10. Hiring at junior levels helps companies save on salary budgets?
As HR professionals, it is customary to focus on maintaining employee satisfaction to retain talent. However, now may be the time for HR to reassess whether it is necessary to put effort into retaining every employee.
According to the report, when hiring for junior positions, the salaries offered by companies are lower compared to those of existing employees. This opens up opportunities for businesses to improve the quality of new talent at the entry level. On the other hand, HR must make every effort to retain management-level staff, as the general trend shows that hiring new candidates for these roles usually requires offering a higher salary.
11. The number of jobs related to Artificial Intelligence and Machine Learning has multiplied over the past 4 years
According to Mercer's survey, from 2020 to 2024, the number of jobs related to Artificial Intelligence and Machine Learning increased 4.5 times in China, 6.1 times in Japan, 3.1 times in South Korea, and 2.5 times in Singapore. In terms of salary comparison, the compensation for AI and Machine Learning jobs is also higher than that for Information Technology jobs in all four countries mentioned.
Throughout the presentation, Ms. Quynh Phuong also relied on data to provide a closer look at pay agility models. Accordingly, pay agility, which is still a new concept in the Vietnamese market, need to be aligned with four key factors:
IV. FURTHER INSIGHTS FROM TOTAL REMUNERATION SURVEY REPORT 2024
The Talentnet – Mercer survey is the largest pay and benefits survey in Vietnam and is regarded as the most detailed and standardized report on the state of compensation and benefits in Vietnamese businesses for over 15 years.
The survey provides a large and reliable salary database, conducted using Mercer's international standard methodology - applied across 200 countries. With the latest global insights and real-world pay and benefits data from Vietnam, this report will help both local and international companies make informed decisions to shape sustainable rewards programs.