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Gaping pay differentials across the spectrum of job levels reflect workforce imbalances and pressure for talent in the Asia Pacific region. Striking differences exist between the region's two biggest labour forces-India and China.
The Asia Pacific section of Towers Watson's 2013/2014 Global 50 Remuneration Planning Report findings found that labour costs for senior executives and top management is lower in India. At senior level, executive pay in China is more than twice that in India (US $94k).
For international companies, the sharp fall in the value of the Indian rupee against the US dollar in 2013 contributed to reducing labour costs in India. It contrasts with China where the renminbi appreciated against the dollar.
"The large influx of Indian returnees following the global financial crisis helped India to get more CEO talent," said Clare Muhiudeen, Managing Director, Talent & Rewards, Asia Pacific at Towers Watson. "But with higher rates of inflation in India than in China, that gap will narrow. We expect average salary increases in India to be higher than China's 8.5%. That said, India clearly has more affordable labour than China and that's the way it'll be for the foreseeable future."
Other fundamentals have a bearing too. China's labour force is expected to fall for the second year running to 795 million in 2014 from 798 million in 2013, while unemployment is forecast to be 6.1% (6.4% in 2013). In India, however, while unemployment is expected to fall to 8.4% from 8.8% in 2013, it remains well above that of China. Meanwhile its work force is set to reach 492 million this year, up from 487 million in 2013.
"The net addition to the working population is reflected in India's abundant entry level talent. In people-intensive sectors like technology and retail, the entry level wages are stagnant. Adjusted for inflation, they may actually be reducing every year" said Subeer Bakshi, Director, Talent & Rewards, India at Towers Watson. Flat wages at the entry level and rising wages at senior levels are leading to considerable inequity and employers are under significant pressure to provide fast and vertical career growth in a moribund market.
Rest of Asia
The survey also found that executives in Singapore were the best paid. Pay levels there at senior management outstrip those of Japan and, more so, Hong Kong. Indeed, across the board, remuneration levels in Singapore exceed those of Hong Kong - by 14% at senior executive level to 34% for top management.
"Growth in private banking in Singapore and its development - or regeneration - as a regional hub for international companies has drawn a lot of high-level talent to the city and that's reflected in the C-suite compensation," said Sambhav Rakyan, Data Services practice leader, Asia Pacific at Towers Watson. "That said, we're looking at pre-tax remuneration in this survey - and, when that's taken into account, Hong Kong's attractive tax rates do go some way towards offsetting the differential."
The cities have similar sized labour populations, while Towers Watson forecasts average salary increases in both centres to be 4.5% this year. However, Hong Kong's top marginal tax rate on personal income is more favorable at 15%, compared to Singapore's 20%.
