AmCham Salary&RewardsOutlook201210Feb

The War for Talent:
Salary & Rewards Outlook for 2012

A Presentation to AmCham Singapore
by Sean Paul Darilay

10 February 2012
towerswatson.com
1
2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Todays Agenda
Economic Highlights & ECN Asia Business Outlook for 2012
The impact of changing economic cycles on employee behaviour
Salary Outlook for 2012
Thought starters on differentiating Pay / Rewards in Asia
towerswatson.com
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Asia Pacific Economic Highlights
2012 Towers Watson. All rights reserved.
Asia Pacific will continue to grow, albeit at a slower pace
Asian economies are expected to

continue benign slowdown from a
period of above-trend growth
GDP
8.0%
6.9%
Economies that remain highly

dependent on trade (export-driven) with
Western countries remain at higher risk
China will continue its rise as the
regions growth engine, followed by
India, and Indonesia
3.9%
4.9%
4.8%
2011
2012
1.7%
2007
2008
2009
2010
CPI
Rising wages in China is seen to benefit

other low-wage Asian countries as
companies seek alternative low-cost
production bases
Regions GDP is seen to grow steady
but inflation will rise almost 2% in 2011
before slowing down again in 2012
7.6%
5.8%
4.5%
4.2%
3.6%
2.5%
2007
2008
2009
2010
2011
2012
Source: EIU Country Briefing Report, January 2012

towerswatson.com
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2012 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only
Asia Pacific will continue to grow, albeit at a slower pace

2011
GDP
2012
9.2%
8.1%
7.1%
6.3%
6.5%
5.9%
6.0%
4.8%
4.8%
4.3%
4.0%
4.0%
3.8%
2.8%
5.1%
4.0%
6.0%6.0%
4.4%
3.8%
3.4%
3.0%
2.1%
1.6%
1.2%
-0.2%
AUS
CHI
HKG
IND
INA
JAP
MAL
PHI
SIN
SKR
TAI
THA
VIE
China is expected to post the highest GDP growths for both 2011 and 2012, followed by India, Indonesia and
Vietnam
The rest of the region is expected to experience steady growth
Source: EIU Country Briefing Report, January 2012
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Asia Business Outlook 2012

Economist Corporate Network
Rising Above the Storm
Slowdown? What slowdown?

CHINA. By 2018, China will become the
biggest economy in the world.
o 54% of respondents expect their sales in
China to grow by 10% or more this year
INDIA. Some 46% of respondents expect

sales to grow by 10% or more in 2012.
SOUTH-EAST ASIA. Indonesia is ranked

as Asias most improved investment
destination, both as a market and as a
centre for manufacturing.
Source: Economist Corporate Network, Asia Business Outlook Survey 2012
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If it all goes wrong
70% of firms are prioritizing profitable growth

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If it all goes wrong
The most common responses centre on reducing travel expenses (reducing business class
travel, slashing travel budgets, and increasing the use of videoconferencing).
40% of firms say they would not lay off staff, even during a severe downturn
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Investment Priorities in 2012: Markets
Indonesia is quickly rising to join China and India as key investment destinations
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Investment Priorities in 2012: Technology
Technology is helping companies in Asia to grow revenue while keeping costs flat
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Asias Growing Gravity
Just under 19% of MNCs

global revenues came from
Asia in 2011.
By 2016,
respondents expect Asia to
contribute 28% of their global
revenues.
Mining, metals & minerals sector has by
far the largest share of global revenues
coming from Asia (50%)
Lowest is in healthcare, financial services

and consumer goods.
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Asias Senior Citizens
At present, 46% of non-Asia companies say they already have the head of global business
unit living and working in Asia. By 2016, that figure will rise to 64%.
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Operational Insights: Human Capital Management
Raising salaries at faster than market rates and hiring from competitors are not
effective strategies
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Driving Growth via Product/ Service expansion & Entry

into New markets are at the Top of the agenda in Asia
Which three actions are most important for your organization to focus on to drive growth in Asia?
63%
51%
44%
37%
24%
20%
20%
15%
13%
5%
4%
4%
Most important
Source: Towers Watson, Strategies for Growth Survey, Asia-Pacific data
towerswatson.com
Second most important
Third most important

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Talent Management is cited as the top Workforce

challenge towards Asia realizing its Growth potential
Top workforce challenges as you implement your growth-focused initiative in Asia
54%
50%
48%
33%
29%
27%
18%
17%
12%
9%
5%
Most important
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Second most important
Third most important

16
Employers in Asia continue having difficulty Attracting

and Retaining top talent
% age of employers in Asia
reporting
Critical-skill employees
- problems attracting
81%
- problems retaining
75%
Top-performing employees
74%
70%
High potential employees

69%
67%
All employees
39%
42%
Source: Towers Watson TM&R Survey Report

towerswatson.com
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Performance Management Systems to drive Business

results and improve ROIs from Talent in Asia
How much emphasis do you expect your organization to place on the following areas this
year compared to last year? (excluding Not Sure / Not Applicable)
Much/Somewhat higher priority

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Unchanged
Somewhat/Much lower priority

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The impact of changing economic cycles

on employee behaviour
Understanding differences across Asia
Attraction drivers vary across the region with emphasis

on Competitive base pay and Challenging work
Top Drivers of Attraction
Global
Overall
Australia
China
Hong
Kong
India
Japan
Korea
Malaysia
Singapore
Competitive base pay
Challenging work
10
10
Convenient work location
Career advancement opportunities
Vacation/paid time off
Organizations reputation as a good

employer
Flexible schedule
Learning and development opportunities
Competitive benefits
10
Organizations financial health
10
10
10
Reasonable workload
Innovative work environment
Organizations industry
Organizations products/services
10
Organizations mission/vision
10
Competitive health care benefits
Competitive retirement benefits
Caliber of co-workers
10
Source: Towers Watson 2010 Global Workforce Study

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While Career Development and Leadership are the Top

drivers of Retention
Top Drivers of Retention
Global
Overall
Australia
China
Hong
Kong
India
Japan
Korea
Malaysia
Singapore
Career Development
Leadership
Pay & Rewards
Empowerment
Supervision
10
Stress, Balance & Workload
10
Performance Appraisals
10
Benefits
10
Image
Operating Efficiency
10
Working Relationships
Quality
Work Tools & Conditions
10
Customer Focus
Training
Employment Security
10
Diversity
Communication
Strategy & Directions
Goals & Objectives

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10
8
8
7
8
8
10
9
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Drivers of Engagement across Asia, recognize the need

for Quality Leadership
Top Drivers of Engagement
Global
Overall
Australia
China
Hong
Kong
India
Japan
Korea
Malaysia
Singapore
Leadership
Image
Career Development
Empowerment
Goals & Objectives
Customer Focus
Values
10
Strategy & Direction
10
Pay & Rewards
Quality
10
Competitiveness
Performance Appraisals
10
Communications
Efficiency
Working Relationships
Diversity
Work Tools & Conditions
Employment Security
Stress Balance & Workload

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10
2
9
10
6
7
10
10
8
7
10
6
9
5
7
22
Employees in Asia are continuously looking to Move The preferred Career model is one of Mobility
Career Model
Global Overall
Australia
China
33%
29%
Malaysia
Singapore
44%
32%
36%
19%
44%
32%
31%
17%
39%
22%
25%
Korea
35%
38%
34%
Japan
33%
35%
23%
Honk Kong
India
34%
36%
36%
32%
28%
51%
30%
51%
Working for one organization

Working for 2 3 organizations
Following opportunity as it
arises
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Will The War for Talent continue in 2012?
2011 Employee Turnover
Professionals/Supervisory
level post the highest for staff
turnover with average rate at
17.8%
CHI
HKG
IND
INA
JAP
MAL
PHI
SIN
SKR
TAI
THA
VIE
All Levels
26.3%
18.8%
20.0%
15.1%
7.0%
23.6%
14.3%
15.6%
12.3%
15.1%
12.8%
13.0%
Management
19.6%
12.2%
15.0%
14.9%
19.0%
16.6%
14.0%
9.1%
16.2%
11.0%
Professional/
Supervisory
29.4%
17.8%
15.0%
13.5%
29.0%
16.0%
16.0%
16.3%
11.6%
13.0%
Source: Towers Watson 2011 General Industry Surveys

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Salary growth expectations look flat, with downward bias
Salary Increases 2011 - 2012

12.0%
12.0%
12.0%
11.5%
8.0%
9.5%
9.0%
8.3%
7.0%
7.0%
5.5%
5.5%
4.0%
4.0%
4.0%
4.5%
4.0%
4.0%
2.5%
AUS
CHI
HKG
IND
INA
2011
4.0%
8.0%
4.0%
11.5%
9.0%
2012
4.0%
8.3%
4.0%
12.0%
9.5%
5.5%
5.5%
6.0%
5.5%
3.9%
4.0%
2.5%
JAP
M AL
PHI
SIN
SKR
TAI
THA
VIE
2.5%
5.5%
7.0%
4.0%
5.5%
3.9%
5.5%
12.0%
2.5%
5.5%
7.0%
4.5%
5.5%
4.0%
6.0%
12.0%
Source: Towers Watson Global Compensation Planning Report (September 2011)

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Thought starters on differentiating Pay /

Rewards in Asia
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#1 : Articulate a For Asia Rewards Philosophy

Employer perspective:
Increasing shareholder value
Strategy
Employee perspective:
Meaningful, rewarding work
Organization
capabilities
Competencies
Demographics
For
ForAsia
Asia
Rewards
Rewards
Philosophy
Philosophy
Organization
values
Values
Implication For Total Rewards

Pay
Learning
and
Development
Benefits
Work
Environment
Aligned
Alignedemployee
employeebehaviors
behaviorsthat
thatyield
yieldimproved
improvedbusiness
businessresults
results
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#2 : Be prepared to differentiate Pay Positioning in Fast

Growing Markets
For Illustration Only
Top/ Senior
Management
Middle
Management
Junior
Management
Talent Market
Prominent local & MNCsTop Local & Foreign

Financial institutions
Prominent local
employers & Financial
institutions
General Business
Community (local
employers)
Fixed Pay (Base Pay + Allowances)

Positioning
Median to 67th percentile
Median
Median
200%+
200-150%+
150%
Total Annual Cash (Fixed Pay + Annual

Incentive Pay) Positioning
67th to 75th percentile
Median to 67th
percentile
Median
Ratio of Fixed Pay to Annual Incentive

Compensation
70:30
80:20
90:10
Yes
Yes
None
Categories
Pay range spreads
Long Term Incentive Compensation

Benefits
As Per Market Practice
Perquisites
As Per Market Practice
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#3 : Define clearly, the Role of each item of Reward

Delivery
Base
Salary
Drivers
Base
Salary
Increases
Allowances
Merit
Pay
Increase
Bonuses
ESOP
Benefits
Market Competitiveness
Inflation
Location Specific
Considerations
Job Size / Responsibility
Individual Perf. KPIs /
Competencies
Business Unit Performance
Corporate Performance
Shareholder Value Creation
Retention (Key Talent)
Agree
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Somewhat agree
29
#4 : Enable better Pay for Performance Leverage

through Short Term Incentives
PGOI
50% of the Super

Growth PGOI to be
shared amongst Super
Performers
Yr 1
Yr 2
Yr 3
Growth Plan
Super - Growth Plan
PGOI (Pre Global Operating Income) = Operating Income before Global Allocations
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#5 : Enable better Line of Sight in delivery of Long

Term Incentives
Alternative 1
Stock Options
Summary Description
Potential Performance
Measures
(others available)
Award Stock options to Asia based

executives when one or more of Asian
subsidiaries is spun of/ or newly set up.
Share price
Alternative 2
Phantom Stock
Award of cash units whose value is based
on measured valuation of Asia business
Major Advantages
Major Disadvantages
towerswatson.com
Award size
Link to Asia focus and IPO

Attractive to executives both current and
potential
Award of cash units whose value is

based on Asia s performance vs.
pre-determined financial measures
(e.g., profit)
3rd party valuation
Revenue
Book value (conservative approach)
EBITDA
EBIT
Net Profit
ROE
ROI (to be determined)
Adjustment for
Individual/NonFinancial Performance
Alternative 3
Performance Units / Performance
Cash
Multiple of earnings (with fixed or

variable multiples)
Initial award and final payout levels can be adjusted by individual and financial
performance factors
Link to value of business
Book value and fixed multiple of
earnings plans tend to provide more
predictable / stable payout levels
Link to drivers of financial value

Easy to modify year-to-year
reflecting business performance
Accounting treatment
Dilution to Shareholders
Uncertainties of IPO
Valuation may be black box
Targets difficult to set
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#6 : Make a Stronger link between Individual

Performance/ Potential and Rewards
Rising Stars (15%)
Top Tier (5%)
Base Salary: Market Competitive between 50th and up to 75th Base Salary: Market Competitive at 75th percentile and above
percentile
Annual Bonus: Above average payout range for business unit
Annual Bonus: Average to above average payout for
LTIP: Major Participation
business unit
Career Path: Ready for next responsibility with enhanced job
scope or skill set
LTIP: Selective participation
POTENTIAL
Career Path: To be monitored closely for future enhancements

in job skills and responsibility; provide stretch opportunities
Consistent Performers (50%)
Significant Assets (25%)
Base Salary: Market Competitive between 50th and 75th

percentile
Base Salary: Market Competitive around 75th percentile
Annual Bonus: Average payout for business unit
Annual Bonus: Above average payout for business unit

LTIP: Selective Participation
LTIP: No Participation
Career Path: To be coached in current job to grow skill or
responsibility
Career Path: Evaluate for enhancements in current job skills or

responsibilities
PERFORMANCE
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#7. Use of HR Technology to integrate all your HR

Philosophy and policy into reality
Talent|REWARD
Market Analysis
& Survey Admin
Create survey data warehouse

Load employee, job and pay data
Market price jobs
Compensation
Design
Create/model salary structures

Model costing scenarios
Job Leveling
Automated job leveling

Automated TW leveling methodology GGS & Career Map
Career Framework methodology
Compensation
Planning
Involve managers in pay decisions

Provide real-time budget control
Talent Management
Change
Management
towerswatson.com
Performance Management, Learning Management,

Career Development & Succession Planning, Recruiting
Compensation &
Talent Programs
Manager
Effectiveness
Total Rewards &

EVP Statements
33
Thank you!
Sean Darilay
Manager, Global Data Services, Singapore

135 Cecil Street, #09-01
Singapore 069536
sean.paul.darilay@towerswatson.com
towerswatson.com
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34
About Towers Watson
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Towers Watson: The Strongest Global

Network In the Human Capital Consulting Business
Our 14,000 associates in 34 countries work together to deliver

the perspectives that give your organization a clear path forward.
Its a new world, and were here to help you take it on
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Our Asia Pacific Consulting Offices

1,400 associates
S Korea
Japan
67
China
130
222
48
Hong Kong
India
130
Thailand 12
Vietnam
Malaysia
195
164
22
Philippines
48
93
Indonesia
Singapore
39
226
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Taiwan
Australia
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Our Expertise
Helping organizations improve performance through
effective people, risk and financial management
Benefits
Talent and Rewards
Risk and Financial Services
Retirement
Executive Compensation
Insurance Consulting
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Talent Management
Investment Services
Technology and
Administration Solutions
Rewards
Reinsurance Brokerage
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Change
Financial Modeling
Software
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The War for Talent:

Salary & Rewards Outlook for 2012

by Sean Paul Darilay

Economic Highlights & ECN Asia Business Outlook for 2012

The impact of changing economic cycles on employee behaviour

Salary Outlook for 2012

Thought starters on differentiating Pay / Rewards in Asia

Asia Pacific Economic Highlights

2012 Towers Watson. All rights reserved.

Asia Pacific will continue to grow, albeit at a slower pace

Asian economies are expected to

Economies that remain highly

Rising wages in China is seen to benefit

Source: EIU Country Briefing Report, January 2012

Asia Pacific will continue to grow, albeit at a slower pace

Asia Business Outlook 2012

2012 Towers Watson. All rights reserved.

Rising Above the Storm

Slowdown? What slowdown?

INDIA. Some 46% of respondents expect

SOUTH-EAST ASIA. Indonesia is ranked

Rising Above the Storm

If it all goes wrong

70% of firms are prioritizing profitable growth

Source: Economist Corporate Network, Asia Business Outlook Survey 2012

Rising Above the Storm

If it all goes wrong

Rising Above the Storm

Investment Priorities in 2012: Markets

Rising Above the Storm

Investment Priorities in 2012: Technology

Rising Above the Storm

Asias Growing Gravity

Just under 19% of MNCs

Lowest is in healthcare, financial services

Rising Above the Storm

Asias Senior Citizens

Rising Above the Storm

Operational Insights: Human Capital Management

Driving Growth via Product/ Service expansion & Entry

Second most important

Third most important

Talent Management is cited as the top Workforce

Second most important

Third most important

Employers in Asia continue having difficulty Attracting

High potential employees

Source: Towers Watson TM&R Survey Report

Performance Management Systems to drive Business

Much/Somewhat higher priority

Somewhat/Much lower priority

The impact of changing economic cycles

2012 Towers Watson. All rights reserved.

Attraction drivers vary across the region with emphasis

Competitive base pay

Convenient work location

Career advancement opportunities

Vacation/paid time off

Organizations reputation as a good

Learning and development opportunities

Organizations financial health

Innovative work environment

Competitive health care benefits

Competitive retirement benefits

AmCham Salary&RewardsOutlook201210Feb

AmCham Salary&RewardsOutlook201210Feb