Special Topic: Finding and Keeping Jobs in China

Summer may just be around the corner, but the Chinese HR market is still in the middle of a big freeze. This chill was brought on by the onset of the global financial crisis. And, one of the coldest aspects of this has been the way in which companies compensate their staff. The mercury on salaries and bonuses plunged dramatically as HR departments began to realize they could no longer afford the outlandish packages they once lavished on key employees.

In the good times, before the global economy went metaphorically south, salaries in China were rising dramatically. Between 2007 and 2008, when China was in the midst of its war for talent (which I have explained at length in previous articles), companies were happy to raise salaries to (a) steal talented employees away from other organizations or (b) as a way of retaining employees who would be attractive to competitors. For example, a survey by the Municipal Bureau of Statistics revealed that in 2008 the average salary of city workers in Beijing was 44,717RMB, a 12% increase on 2007. In Shanghai, the HR bull-market was even more intense with salaries rising by almost 14%. However, this has all changed.

Several recent surveys have revealed that both salaries and bonuses have been on the wane since before the turn of the year. For example, HR consultants Mercer recently outlined the findings of a survey which revealed that 23% of companies would be freezing compensation packages for their senior managers. And, they see more of the same happening in the future. Managing Director Zhang Wei commented that, “Considering the deferred impact on China's market, we predicted that more companies in China will take similar measures to limit the senior executives' salaries in 2009.” According to the Ministry of Finance, several State Owned Enterprises will take similar measures with their top brass, bonuses to be paid in 2009 will not be permitted to exceed 2007 levels and companies who are operating at a loss will slash a further 10% from salary expenditure on senior management.

And, it is not just at the top of the corporate tree that compensation will be affected by the bonus and salary slowdown. A survey by top HR website 51job revealed that only 9% of companies plan to maintain their existing bonus plans. It also found that 23% of companies intend to significantly reduce the bonuses on offer. And, the number of companies that are offering no bonus at all to their employees increased by 13% from 2008. A second survey, by Zhilian Recruiting, found that 40% of employees in Beijing were not expecting to receive any form of bonus in 2009.

With such changes in salary, we are likely to see two or three major trends. The first will be a decrease in the bonuses and salaries of top management. Many companies will do this not only as a way of saving money and avoiding job-losses, but also to avoid the dreaded salary gap between senior management and the rest of the team that would, in such tight financial times, create disharmony within a company. An example of this would be Ma Mingzhe of Ping An, CEO of Ping An Insurance, who took home 66million RMB in salary and bonuses in 2008 despite incurring a 28million RMB loss by investing in Belgian-Dutch bank Fortis. This year, Ma has agreed to waive his salary. Other examples include China Eastern Airlines (Senior Management will take home 10-30% less in salary) and Lenovo (Senior Management will take home 30-50% less in salary).

The second trend will be an overall reduction in bonuses across the board. However, even though these measures are likely to affect the majority of employees, many organizations will pay special attention to their most talented employees, who may well

be affected less, as Shi Zhijie, Managing Editor of 800hr.com pointed out in China Daily, “talented and irreplaceable" employees will be rewarded with bonuses and opportunities no matter how terrible the economic situation might be.” For some companies this is likely to mean salary and bonuses will be increasingly performance-related, which will ensure those employees who are bringing their company cold hard results will be rewarded.

 

For other companies, that are increasingly feeling the pinch, there is likely to be a change of compensatory tack. They may need to be more innovative in the way they reward employees. If, for example, finances are too tight to pay large bonuses in cash, they might look in other directions. At Spring Festival this year, many cash-strapped companies replaced the traditional red envelope (filled with cash in case you were wondering) with other alternatives: training, extra holidays, company products.

Special Topic: Finding and Keeping Jobs in China

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