Firms in Asia using benefits to compete for labour

SINGAPORE (Reuters) - Companies in Asia are being cautious on salary rises this year despite growing inflation across the region, since recent market turmoil risks a slowdown that could crimp revenues, a consultant said on Wednesday.

Su-Yen Wong, managing director for Mercer in southeast Asia, said in an interview that many firms will instead use flexible benefits to attract staff in a tight regional labour market, with the hottest sector being financial services.

"The biggest issue is that we're going through a period of tight labour supply. In the past, companies focused on improving manufacturing or marketing -- the last lever is how can I get as much as I can out of the workforce," Wong told Reuters.

"Companies are looking ahead and they're not sure what will happen -- salaries are a fixed cost so they're prepared to be conservative," she said. "Companies have to move beyond compensation alone -- it's no longer just about cash."

Wong, who advises a mixture of multinationals, large regional firms and public sector employers on issues from recruitment to pensions, said the benefits employees were looking for varied between ages and cultures.

Twenty-somethings might look for gym membership, while 30-somethings cared about pensions. In Indonesia, firms may give rice subsidies, while Singaporeans might get shopping benefits or dry cleaning bills paid. Healthcare and housing were key issues.

But full expatriate benefits for foreign workers were becoming increasingly rare, she said. "People actually want the opportunity to work abroad -- there's a far greater number of expats now than five years ago."

The investment pouring into Asia and driving growth is leading to an acceleration of compensation costs and more frequent salary reviews in countries such as China, India and Vietnam, compared to more stable markets like Europe.

This meant the cost gap between hiring a skilled local and an expatriate was narrowing. Countries around Asia are seeing rising living costs, with inflation at an 11-year high in China and a 27-year high in Japan.

"What we're seeing in India and China is becoming difficult to sustain," she said, pointing to worries over the labour pool in 20 years' time as corporate growth combined with ageing regional populations.