Salaries in Thailand will increase 5%, driven by strong economic performance in Asia-Pacific, says human resources consulting firm Mercer.
Mercer's compensation planning for 2018 study predicts salaries in Thailand will increase 5% across industries. Other than banking and insurance, most industries are forecast to increase pay in 2018.
The manufacturing sector is leading the recovery, driving higher functional wage premiums. However, hiring intentions and voluntary attrition would still be muted as companies attempt to rebalance workforce to address productivity challenges.
Asia has been leading the growth revival in the global economy for the past three years, said Mercer. For the first time in recent history, the OECD expects all of the 45 countries it tracks to grow in 2018, signalling a strong recovery.
But optimism would be tempered by a rise in inflation in some parts of Asia-Pacific, which Mercer counts as including India, the Philippines, Myanmar and Vietnam, which may be a cause for concern.
In 2018, the highest salary increases are forecast for Bangladesh (10%), India (9.8%) and Vietnam (9.1%). Financial hubs Hong Kong and Singapore are both predicted to see 3.9% increases. Japan is estimated to have the lowest increase at 2%, followed by New Zealand (3%) and Australia (3%).
Real wage growth (salary increase minus inflation rate) has been steadily rising in the region, reaching double digits in emerging markets. Forecasts vary across industries, but the strongest increases are likely to be in the chemical and life sciences industries, said Mercer.
Hiring in India, Vietnam and the Philippines is happening at a greater pace compared with other countries in the region. Hiring intentions are lower in developed countries like Singapore, Malaysia and Hong Kong.
The overall hiring outlook is positive: five out of 10 companies are looking to maintain headcount and hire replacements for turnover.
Attrition is higher in industries that have continued to outpace the slowdown of last year. Consumer and retail industries are facing the highest levels of attrition. In contrast, manufacturing has some of the lowest levels of attrition in the region.
There are several tiers of countries across the region, the study suggests. For example, in Australia, Japan and South Korea, starting salaries begin at US$30,000 (978,000 baht) per year, rising steeply as employees reach senior levels, often reaching $250,000–350,000.
Starting salaries are much lower, about $5,000 in low-cost manufacturing bases, but increase significantly at top management levels. In some countries, most notably China, the highest-ranking executives out-earn their peers in the US and UK.
Talent scarcity plays a major role in the high wages. There are large premiums to be gained by people with the right skills, and local language expertise, said the study.
Higher salaries for new joiners, recruitment costs and lost production, are adversely impacting the overall cost of operations and margins. Close to half of companies in Asia report having difficulty filling in vacant positions, compared with 38% of companies globally.
Puneet Swani, partner and growth markets career business leader at Mercer said: "Hiring, retaining and engaging skilled talent in Asia-Pacific will continue to be a top priority for companies looking to leverage the strong macroeconomic outlook for 2018. A high level of pay increases will continue to be used as a retention tool for high-performing talent."
This will become more critical, as cross-industry movement of talent in specialist roles such as sales and engineering becomes more common. Companies are deleveraging pay in the wake of increased regulatory scrutiny of bonus payouts, thereby reducing year-end bonuses and increasing base pay instead to reduce excessive risk-taking and discretion.
Getting base pay and benefits right is the foundation for an effective rewards programme, but differentiating on these elements alone can be expensive. Differentiation can be more engaging and cost-effective in the career opportunities and focus on well-being programmes for employees.
Employers are increasingly focusing on "experiential components" of rewards programmes, which deliver meaningful career experiences and arrangements, Mr Swani said.
Thailand has been facing some difficulties in maintaining GDP growth, but the recovery of exports including electronics, auto parts products and tourism services, have strengthen the country's economy and allowed it to remain competitive.
Assuming it maintains its momentum, the Thai economy is expected to grow 3.5% in 2017 and 3.7% in 2018. But the factors underpinning consumption are not stable yet, and there are several risks in domestic demand and external factors.
Overall salary increase in Thailand is estimated to be 5.2% in 2018. While salaries are expected to rise in most industries, salary increases will be especially strong in life sciences, high technology, automotive and consumer goods.
The industries like chemical, life sciences and consumer goods are considered to have the highest pay in terms of base salary and total cash for all levels. Within these, marketing, information technology and R&D are the top three compared with the highest pay in the management and professional level.
Talents in engineering and sales functions are still in demand across industries.
Thanita Chotikapanich, Mercer Thailand's career products expert, said Thailand's talent market are increasingly dynamic, affected by changes in socio-demographic structure like longevity, multicultural and multigenerational workforce, the rise of the free agent and digitisation.
She said organisations need to transform themselves in order to compete in this era by enhancing workforce productivity by understanding employees' needs and satisfactions, managing "pay for performance" models, and revisiting benefits to incentivise their employees.
Companies must keep in mind that employees' needs vary by age, gender, lifestyles. A number of organisations have implemented flexible benefits programmes aimed at addressing employees' diverse needs, she added.