HONG KONG – The global economic crisis has organizations in Asia Pacific markets rethinking their approaches to compensation, hiring, and reward, according to two new surveys conducted by Hewitt Associates, a global human resources consulting and outsourcing company.

Hewitt undertakes an Asia-Pacific Salary Increase survey with data collected from June to September annually. This year, however, with the escalation of the economic crisis on a global scale, a special Economic Climate survey was also conducted in October to identify how the economic crisis was affecting company planning and HR programs.

Richard Kantor, regional Talent and Organization practice leader for Asia Pacific, said: "High quality talent continues to be a scarce and valued resource in this region. Smart organizations are using this time of turbulence to selectively recruit some of the very best talent. Sixty percent of survey participants across the region reported that they still have strategic hiring practices in place, even under current conditions."

According to study findings, organizations are counting on these talented people to help pull the organization through the difficult times ahead.

Kantor added: "Top performers require top rewards. Despite more conservative salary forecasts by companies in the past few months, organizations say that they continue to invest in top performers, and take greater measures to retain their best people."

According to study findings, top performers get almost four percent (3.8 percent) more on average (excluding Japan at 1.5 percent) across Asia Pacific, with China at 4.2 percent, the Philippines with the highest at 7.8 percent and Thailand at 5.8 percent.

On top of differentiated cash rewards, other retention approaches for top performers include companies granting discretionary restricted stock and/or stock options (cited as the most prevalent with 60 percent of surveyed companies offering this. The second most cited practice is providing additional learning and development opportunities (cited by 27 percent of respondents).

A majority of 59% surveyed companies (59 percent) said they will not reduce their promotions.

Stella Hou, Hewitt regional practice leader for Broad-Based Compensation in Asia Pacific, said: "We are on the threshold of what could be the beginning of a longer-term rebalancing of salaries following rapid increases year after year in many fast-growing developing markets.

"There is a large amount of uncertainty and rapidly changing circumstances that  continue to impact decision-making on a daily basis. We still see companies taking the position of 'wait and see', given this uncertainty. However, some leading companies plan to or already are taking actions now to prepare their organizations to weather the potential storm. No one knows at this stage how long, how deep, and even what markets or industries will be most affected."

Companies say they will continue to invest in Asia, and further expect relatively faster growth from this region, though growth is anticipated at a much slower pace. Hou added:

"Organizations will still need to keep their workforce at a reasonable size and continue to prepare for the turnaround. Many see this as an opportunity to consider acquisitions, to make their organizations leaner, and to re-skill workforces as companies focus on core business. Pay freezes and pay cuts are not being considered at this time by and large."

Only 5.6 percent of companies reported pay freezes, while 87 percent said they would not cut employee pay. Four out of five organizations (81 percent) also said they will not cut executive pay.

With the uncertainty around the possible impact of the economic crisis, many in the organizations are still waiting to see what strategic decisions business leaders will yet take.

When asked about possible economic impact, large numbers of respondents indicated 'don't know or unsure' when asked about hiring freezes (27 percent). This was also similar with 50 percent of respondents when asked about pay freeze, 40 percent of respondents when asked about lay-offs, and 17 percent of respondents when asked about strategic hiring.

Overall, a far more conservative approach is being taken in the past two months towards pay forecasts: 58 percent of companies are implementing changes or anticipate  changes, and 91 percent are implementing changes company-wide.

There has been an average one to two percent deduction from original pay forecasts.

Looking ahead, 67 percent of companies indicated that their bonus payouts will be impacted, while 40 percent said that their bonuses will be reduced slightly for  (less than 10 percent on payout). Almost half (45 percent) estimated that bonuses will be reduced significantly for 2008 (greater than 10 percent on payout).

Other economic impacts:

• 67 percent reported cutting back on travel
• 58 percent reported cutting back on training
• 55 percent reported cutting back on employee recreation
• 19 percent said they will consider layoffs or a reduction in staff
• 68 percent of the respondents said that they are placing extra emphasis on employee and internal communications.

Hou said: "Companies that take care of their workforces over time, take extra efforts to reward and keep top performers, and substantially increase the productivity of the 'rest' stand an even better chance of mitigating the downside while positioning for the upside. It also appears that employees are willing, generally, to stay with companies providing clear growth opportunities and a visible career path."

Economic Climate Survey

Of the over 700 responses received on-line from respondents in 12 markets, the majority (91 percent) of companies indicated that planning in response to the economic crisis was company-wide rather than regional or local.

When asked, 'Do you anticipate changes or have you implemented changes to salary planning budgets', approximately half (58 percent) of the respondents indicated that they were already implementing changes. In Japan, two-thirds of the respondents indicated that they were not making changes to salary planning at this time. The majority of organizations in the other markets surveyed all confirmed that they were anticipating or had already implemented changes to their salary planning budgets.

Impact on variable Compensation Payouts

A significant majority of survey participants (64 percent) said that their variable compensation payouts and budgets, such as annual bonus, will be impacted.

Respondents in Australia (57 percent), Korea (75 percent), the Philippines (67 percent), and Taiwan (67 percent) all said that the impact will be greater (10 percent or more) as a result of the economic crisis. Two-thirds (69 percent) of the respondents in New Zealand indicate little or no impact.

Hiring freezes Looming

Almost half (41 percent) of responding companies from markets including China, Hong Kong, Korea, Japan, and Singapore indicated that they are planning to implement a hiring freeze. China (63 percent), Hong Kong (58 percent), and Singapore (58 percent) had the highest percentages, followed by Korea (54 percent) and Japan (52 percent).

Very few companies are considering salary cuts: 4.1 percent at the executive level and 2.3 percent for all employees. Five percent of companies said they are considering pay freezes. Fifty nine percent of respondents said that they are not going to reduce promotions.

Key findings from the Salary Increase Survey

One of the most significant trends emerging from the Salary Increase Survey results focused on attrition and reasons for employees voluntarily leaving their jobs.

The average turnover on a regional basis was 12.1 percent, with Macau reporting the highest at 24.4 percent. Singapore witnessed the highest increase in attrition from 8.2 percent in 2007 to 15.2 percent in 2008 responses. Thailand also suffered from a 7.8 percent attrition rate in 2008, up from 4.1 percent in 2007.

Voluntary turnover in India, on the other hand, improved from 18.1 percent in 2007 to 12.5 percent in 2008. Malaysia also reported improvement from 13.6 percent to 9.3 percent in 2008.

Top Reasons for Why Employees Leave

'Better external opportunity' is cited consistently as the top reason for employees voluntarily leaving their positions across all markets. 'Limited growth opportunities' is the second most cited reason in most markets, except in Japan and the United Arab Emirates where "relationship with manager" was the second most often cited reason for employees leaving.

About Hewitt's Salary Increase Survey

Hewitt surveyed 2,200 foreign, locally-owned, and joint-venture companies in this 9th annual Asia-Pacific Salary Increase survey, making this the most comprehensive salary study in the region to date. The survey was conducted between June and September 2008, and covered 18 markets including Australia, Bahrain, China, Hong Kong, India, Japan, Korea, Kuwait, Macau, Malaysia, New Zealand, the Philippines, Qatar, Singapore, Sri Lanka, Taiwan, Thailand, and the United Arab Emirates.

It measured actual and projected salary increases, and compensation practices for six specific job categories, namely top executive, senior management, middle management, junior manager/supervisor/professional/, general staff, and manual workforce.

About Hewitt's Asia-Pacific Economic Survey

A special survey was conducted as a follow-up to the Asia-Pacific Salary Increase Survey this year as a result of the escalation of the economic crisis on a global scale. Over 700 responses identifying how the economic crisis was affecting company planning and HR programs were received in October.

Asia-Pacific Economic Survey results were obtained from 12 markets including Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, and Thailand.

About Hewitt Associates

For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with  more than 3,000 large and midsize companies around the globe to develop and implement HR business strategies covering retirement, financial and health management;  compensation and total rewards; and performance, talent, and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. For more information, please visit www.hewitt.com.