Www.mercer.com Building Rewards, Retaining Talent, Delivering Success Compensation and Benefits...

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

Delete this text box to display the color square; you may also insert an image or client logo in this space.

To delete the text box, click within text, hit the Esc key and then the Delete key

About Mercer

4Mercer

Colombia

Chile

Argentina

Brazil

Venezuela

Canada

United StatesMexico

United Kingdom

Norway

SwedenDenmark

Netherlands

BelgiumFrancePortugal

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



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%


10Mercer

Asia: Leading the global recoveryAsia’s strong recovery from the global financial crisis continued in 2010


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


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


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


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



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


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


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



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



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


plan

3International assignment

Professional

1Non-monetary reward

& recognition

2Career development

plan

3Leadership

development plan

High performer


plan

2 Housing

3Career development

plan

High potential


plan

2Career development

plan

3 Job rotation

Key position holder


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.



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

Www.mercer.com Building Rewards, Retaining Talent, Delivering Success Compensation and Benefits...

Documents

Transcript of Www.mercer.com Building Rewards, Retaining Talent, Delivering Success Compensation and Benefits...