Majority of Asia-Pacific employers fail to compensate staff fairly

Only less than half of companies in Asia Pacific are currently getting compensation right, according to a new survey by Willis Towers Watson.

The 2018 Getting Compensation Right Survey showed that less than half of the organisations in Asia Pacific reported that their base salary programs are effective at differentiating pay and driving higher individual performance.

Limited budgets (61%), manager capability (49%) and limited differentiation in base pay to drive performance (37%) were identified as top challenges in designing an effective pay-for-performance program.

The survey also found that many employers in the region may be using multiple factors to determine the base pay increment, Factors that are most likely to be considered by employers in the region include achievement of individual goals, year-end rating, criticality of the role, and possession of skills critical to future business success.

“Employers need to determine how they can better equip their managers to make appropriate base pay decisions, including the tools and technology that they need to be in place to support their decision making,” said Trey Davis, Regional Leader for Executive Compensation, Asia Pacific, Willis Towers Watson.

Prioritise fair pay

Fair pay is another essential element of an effective compensation program and an integral part of the employee experience.

The survey found that a majority of Asia Pacific employers give themselves high marks when it comes to having formal processes in place to prevent bias or inconsistency in their hiring and pay decisions.

About three quarters of respondents have established formal processes across a range of areas, including performance review (77%), hiring decisions (76%), starting salaries (74%) and base pay increases (74%).

Despite giving themselves high marks, only one in five organisations (22%) in this region have formally structured and managed Inclusion & Diversity (I&D) programs targeted at diverse employee populations. Japan, Australia and India are leading the region in this aspect, while the Greater China market is lagging behind.

When it comes to gender pay equality, for example, women are still paid significantly less than men on average.

In addition, only 13% of employers in Asia Pacific believe that addressing gender pay equality will become a more important factor in making base pay decisions over the next three years.

This varies significantly from companies in Europe (39%) and North America (41%). In addition, only 36% of Asia Pacific employers responded that they have or are intending to conduct a gender pay or pay equity diagnostic. This compares to almost 60% globally.

“Fair pay is a moral imperative, and also makes business sense for employers as it ensures that companies can have access to the best talent available in the market. This is critically important given the shrinking labour force and other demographic changes occurring in many markets in the region,” noted Davis.

It is suggested that employers conduct a thorough pay equity review to identify potential pay gaps and their underlying causes – and to then make fair pay an integral element in their compensation programs.