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Thailand: ECA upbeat on local corporate salaries

Real salary increases provided by multinational companies in Thailand are expected to be among the best in the world in 2021 despite the weak outlook for the economy, according to a survey by ECA International.

The survey suggests that local employees of multinational companies in Thailand can expect to see an average real salary increase (after inflation) of 2.7% in 2021, which is the same rate forecast for Singapore. The two countries are tied in second place in Asia Pacific and worldwide behind Indonesia, where a 3.8% increase is forecast in 2021 in the annual Salary Trends Survey conducted by ECA International, a company which advises multinationals on assignment and compensation for international staff.

The survey was based on information gathered between Aug 24 and Sept 25 this year on the subject of salary increases for local employees of over 370 multinational employers in 68 countries. The sectors covered included energy, mining and petrochemicals; chemicals and pharmaceuticals; transport and logistics; manufacturing and consumer goods; legal and professional services; engineering and technology; retail, leisure and other services; financial services; and non-profit entities.

Not surprisingly, all locations in Asia Pacific experienced lower rates of salary growth in 2020, with an average salary increase (before inflation) of 3.2%, although the reported figure for Thailand was 4.1%. However, companies anticipate a recovery in 2021, with the average increase (before inflation) in the region forecast to jump to 4.3%.

In terms of real salary increases, eight of the top 10 countries in the global rankings are in the Asia Pacific region.

The average real salary increase across Asia Pacific is forecast to be 1.7%, which is significantly higher than the global average of 0.5%. However, the average level of inflation in the region is forecast at 2.4%, which is close to the global average.

“The real driver for higher real salary increases in Asia Pacific can be attributed to the sustained increase in productivity in many Asian nations, thus resulting in higher salary increases for workers,” said Lee Quane, regional director for Asia with ECA International.

Leading the way in the 2021 Asia Pacific rankings, the 3.8% real salary increase forecast for Indonesia is a significant improvement on the 2.6% increase forecast for this year.

“While inflation in Indonesia is expected to continue falling, repeating the trend we have seen in recent years, fewer companies in the country intend to freeze salaries — implying that nominal salary increases would have risen,” said Mr Quane.

“In fact, our data shows that although 42% of the companies surveyed in Indonesia implemented a salary freeze this year, only 24% of these will do so in 2021 — contributing to the rise in average salary increases in the country.”

The story in Singapore is similar, he said, with only 22% of those surveyed saying they would continue to freeze salaries into 2021, compared with 36% this year.

Workers in Hong Kong experienced a reduction in salary growth in 2020 as businesses were adversely affected by both political unrest and the impact of the pandemic.

“Hong Kong’s expected rebound to 3.0% in 2021 shows that employers are cautiously optimistic about the prospects for recovery next year,” said Mr Quane. “However, the fact that these rates remain lower than in 2019 reveals that any recovery is likely to be gradual.”

Additionally, real salary increases will be relatively low in Hong Kong in 2021, at just 0.6% after taking into account the inflation forecast of 2.4%.

“Real salaries for Hong Kong residents will be among the lowest in the region. This compares unfavourably with expected rates of real salary increases across other parts of Asia Pacific, and may hinder the extent to which the Hong Kong economy may recover from the current recession,” said Mr Quane.

Workers in China will also experience a recovery, with a 5.0% salary increase on average forecast for 2021 and a real increase of 2.3%.

“China’s economy seems to have weathered the impact of the pandemic better than many other locations in the region, and this is reflected in the extent to which salaries are forecast to grow again in 2021,” said Mr Quane.

Outside of Asia Pacific, the outlook is very different as workers in many countries are expected to see decreases in real salaries. This includes major economies such as the United States and Saudi Arabia. Argentina is once again at the bottom of the rankings, with a forecast real salary decrease of 28.6%. This is because inflation is expected to stay at an alarmingly high level in 2021, reaching a whopping 43%.

“As the world struggles with the social and financial effects of the global pandemic, many countries continue to feel the impact on their economies, and therefore, their salaries,” said Mr Quane.

“Although many Asia Pacific countries are already seeing signs of recovery, companies based in other parts of the world such as the United States and Middle Eastern countries are approaching salary rises more conservatively. As such, when inflation returns to normal levels next year as we expect, workers based in these countries are not expected to see above-inflation salary increases.”

Source: https://www.bangkokpost.com/business/2029371/eca-upbeat-on-local-corporate-salaries