hk hudson report 2007 q1 eng

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The Hudson ReportEmployment and HR Trends

Hong Kong

J a n u a r y – M a r c h 2 0 0 7



Introduction

2

The Hudson Report is a quarterly survey of forward-

looking employer hiring expectations. The Report in

Asia covers Japan, Hong Kong, Shanghai and

Singapore and now combines the expectations of

over 2,200 key employment decision-makers in

these four markets.

Participants in this survey are primarily executives

at multi-national firms and were personally surveyed

by Hudson consultants familiar with them and their

industry sectors.

The Hudson Report receives extensive media

coverage and acknowledgment from politicians,

commentators, and business leaders. In the years

since its first release in Australia in 1995, The

Hudson Report has established a reputation as a

key business and economic indicator, based on the

premise that the expectation to increase or

decrease staffing levels is a key indicator ofemployers' optimism about their markets.

In total, The Hudson Report now combines the

expectations of almost 6,000 key employment

decision-makers in Asia Pacific from all major

industries across a range of organisational sizes.



Key Findings

3

“Employment expectations have increased slightly

from an already high level and the vast majority of

companies are very confident about the future. But

the buoyant job market means that employers must

boost salaries and bonuses substantially to attract the

talent they need.”

Gina McLellan, Country Manager, Hudson, Hong

Kong

Employment expectations have risen slightly this

quarter. In this survey of 514 executives in key

business sectors 54% plan to increase headcount in

Quarter One (Q1) 2007.

Year-on-year, expectations have remained

steady. The 54% planning to grow headcount

this quarter is at the same level as Q1 2006,

though there are some variations between the

sectors surveyed;

The Legal sector has the highest expectations,with 73% of respondents planning to hire more

staff, up from an already high 71% in Q4;

The steepest rise in hiring expectations is

reported by the Media/PR/Advertising sector,

where 58% of firms plan to increase headcount,

compared with 41% in the previous quarter;

Companies in all sectors are very positive about

the next six months, with 95% forecasting

excellent or good performance;

Salaries are rising significantly as companies

struggle to recruit the talent they need: 50%

expect to increase new managers’ salaries by

more than 10%, up from just 31% a year earlier;

Companies in all sectors are planning to pay

higher bonuses than last year, with 54% saying

they will pay more than 10%, the highest figure

for all the markets surveyed in Asia;

Staff turnover in Hong Kong is higher than in any

other market surveyed in Asia, with the Media/

PR/Advertising and Consumer sectors

experiencing the highest levels;

Staff poaching, perceptions of limited careerprogression and dissatisfaction with salary and

bonuses are the main causes of staff turnover.



4

Expectations Show Slight Increase

Employment expectations have risen slightly. Across

all sectors 54% of respondents say they will increase

headcount in Q1, compared with 53% the previous

quarter.

Legal

The Legal sector again has the highest expectations,

with 73% of respondents planning to hire more staff.

This is a further increase from an already high 71% in

Q4. Candidates are being sought for both private

practice and in-house roles and there is a severe

shortage of bi-lingual lawyers.

Media/PR/Advertising

This sector reports by far the greatest rise in hiring

expectations: 58% of firms forecast increased

headcount, up from 41%. Candidates for both

executive and administrative roles are sought after.

There is a growing preference among candidates for

in-house rather than agency roles, due to thegenerally better benefits and work life balance.

Banking & Professional Services

Expectations are still high among banks, with 58%

saying they will grow headcount. This represents a

slight dip from 61% in Q4. This quarter is generally

less busy as most employees defer job-hunting until

after the payment of bonuses in Q1. Since the WTO

agreement took effect in December 2006, enabling

foreign banks to operate Renmimbi businesses, there

has been a growing movement of talent to China.

Consumer

Companies in the Consumer sector are increasingly

optimistic. The proportion of respondents planning to

hire more staff has risen to 44% from a relatively low37% in Q4, when substantial retail rent increases had

a major impact. There is strong demand for front-line

retail staff.

Manufacturing

Expectations have fallen slightly among

Manufacturing companies, from 46% in Q4 to 42%

this quarter. Demand for manufacturing specialists is

strong and growing in southern China, particularly in

the Huizhou area. Plant managers are especially

sought after.

IT & Telecommunications

In the IT&T sector, 32% of respondents say they will

hire more staff in Q1. Demand for staff remains high

in certain areas, notably banking IT. Some jobs in

this sector are moving to China and Singapore.

Permanent employment

expectations



5

Positive Outlook Over Longer Term

Employment expectations have remained steady

over the past year. At 54%, the number of

respondents across all sectors planning to grow

headcount is at the same level as Q1 2006.

However, there are some significant variations

between the sectors surveyed.

Media/PR/Advertising firms report the highest year-

on-year rise. The proportion of respondentsforecasting headcount growth has risen from 34% in

Q1 2006 to 58% now. There is significant shortage

of talent in key areas such as advertising and

aggressive hiring is anticipated in 2007. Bi-lingual

creative specialists with an effective cultural fit are

highly sought after.

Expectations in the Legal sector have also risen

significantly: 73% of firms say they will increase

hiring, up from 62% a year ago. Merger and

acquisition work and an increasing number of China-

related IPOs are creating strong demand for qualified

and experienced lawyers.

The proportion of Manufacturing planning to hire

more staff has fallen from 52% to 42% over the past

year. There appears to be a significant shift in this

sector as companies continue to move productionfacilities to China. Many manufacturing companies

are now placing a greater emphasis on managers

with a strategic focus rather than on operations

specialists.


expectations over time



6

Demand For Finance Professionals StillVery Strong

Demand for professionals in a wide range of financial

sector roles remains extremely buoyant. Together,

Banking Operations/Middle Office and

Accounting/Finance make up 29% of demand by job

category – 17% and 12% respectively. This reflects

the continuing high level of activity in this area.

Sales roles again account for a large proportion of

vacancies, with 30% of recruitment forecast for this

area. Much of the sales-related recruitment is for

front office roles in banking. Relationship managers

with experience in product control, compliance and

risk are also highly sought after, as are experienced

IT sales professionals.

Demand for Legal professionals remains high, at 8%

of all vacancies. There is a serious shortage of

lawyers with skills and experience in corporate

finance.


expectations by job roles



7

Very Positive Outlook

Companies are extremely confident about how they

will perform in the next six months. Across all

sectors, 95% of respondents forecast that their

company’s performance will be excellent or good in

the first half of 2007, up from 85% a year ago. Every

sector surveyed expresses a higher level of business

confidence than they did in Q1 2006.

The Banking sector is the most optimistic, with 69%forecasting that performance will be good and a

further 28% excellent. This sector also reports the

greatest rise in confidence: the combined

‘excellent/good’ figure of 97% compares with 84% a

year ago.

Respondents in the Legal sector are also very

optimistic: 26% say that performance will be excellent

and 67% good. Confidence in this sector is boosted

by the high level of activity in corporate finance and

capital markets.

Among Manufacturing companies, 28% forecast

excellent performance – more than in any othersector other than Banking.

Anticipated company performance

Each quarter, apart from asking about hiring expectations, we select survey topics that indicate how

businesses expect to cope with their environment. This quarter we asked about anticipated company

performance, pay increases to attract managerial staff, year-end bonus payments, staff turnover and

reasons for staff turnover.



8

Substantial Salary Rises

Companies in all sectors report that they are having

to increase salaries to attract the managers they

need, in some cases by a significant amount. Across

all sectors, 50% of respondents expect to increase

salaries for new managerial hires by more than 10%.

This compares with just 31% when the same

question was asked in Q1 2006. Thirteen percent

say they will increase starting salaries by more than

20%.

The high level of the planned salary increases

reflects the fact that many employers continue to

experience severe difficulties in recruiting the talent

they need.

Banks expect to pay the highest increases, with 69%

saying that salaries will rise by more than 10%. Of

these, 21% forecast rises of more than 20%. The

revenue-generating abilities of experienced

candidates justify banks’ willingness to pay large

increases.

There has been a steep rise in the salaries that IT&T

companies expect to pay to attract new hires: 54% of

respondents forecast rises of more than 10%. No-

one forecasted rises of more than 10% in Q1 2006.

High demand means that banking IT special ists can

command substantial rises.

Legal firms also report large increases in starting

salaries, with 30% saying they will pay over 10%.

However, 23% of respondents in this sector state

they will not increase salaries at all. The high

increases are specifically targeted at candidates with

experience in such areas as corporate finance.

Pay increases to attract managerial

staff



9

Bigger Bonuses This Year

Many companies are planning to make significantly

higher bonus payments this year. Overall, 54% of

respondents say they will pay bonuses of more than

10%, compared with 39% in Q1 2006. Companies in

every sector are paying higher bonuses than last

year.

In some cases bonuses are substantially higher: 28%

of respondents in all sectors say that they will paybonuses of more than 20%. This is more than twice

as many as the 13% paying this level in 2006 and is

higher than any other market surveyed in Asia.

The Banking sector is again paying the highest

bonuses, with 73% planning to pay more than 10%.

Of these, 45% say they will pay more than 20% -

almost twice as many as the 23% who said this in Q1

2006. Fourteen percent plan to pay bonuses of more

than 40%.

Bonuses have traditionally made up a large part of

the remuneration of banking sales and front office

staff but now there is an increasing trend towards

substantial bonuses for those in middle and back

office roles.

Bonuses have also risen substantially in the Legal

sector, where 40% plan to pay more than 10%. This

compares with just 3% a year ago.

Although the overall level of bonus paid by IT&Tcompanies is not particularly high, some specialists

are receiving substantial sums: 22% of respondents

say they will pay more than 10% and a further 6%

more than 20%. Professionals with skills in areas of

technology convergence, e.g. internet and mobile

telephony, are receiving the highest bonuses.

The Media/PR/Advertising sector generally offers the

lowest bonuses. More than a third of respondents –

34% do not plan to pay any bonuses, while only 21%

say they will pay more than 10%.

Year-end bonus payments



10

Staff Turnover Is A Significant Issue

Respondents in Hong Kong report higher levels of

staff turnover than in any other market surveyed in

Asia. Across all sectors, 37% say that turnover in the

last twelve months has exceeded 10% while 10% say

it has been more than 20%.

The Media/PR/Advertising sector has the highest

level of staff turnover, with 46% saying that it is more

than 10%. Of these, 21% report a level of more than20%. These figures reflect the relatively low salary

increases and bonuses paid in this sector.

Consumer companies are also experiencing high

levels of turnover: 44% report rates of more than

10%. The retail sector has been buoyant over the

past year and new store openings have created

many opportunities for staff to move.

In the Banking sector 36% of respondents report

turnover levels of more than 10%. This industry

makes considerable efforts to retain top talent, with

retention planning and internal job rotations.

However, the banking boom has created many

attractive opportunities and it is easy for good

candidates to find new positions. Staff poaching is

increasingly prevalent in this sector.

Among IT&T companies, 35% are experiencing

turnover of more than 10%. As the economy has

strengthened demand has grown for IT specialists

with specific skills, particularly in banking IT.

Staff turnover



11

Poaching Is A Key Cause Of Turnover

Respondents were asked to identify the principal

reasons for staff turnover. Across all the sectors

surveyed the three most significant reasons are staff

being poached by other companies, limited career

progression and dissatisfaction with salary and/or

bonuses. These three factors are mentioned by

28%, 21% and 19% of respondents respectively.

Poaching is particularly significant in the Bankingsector, where it is cited by more than a third – 34% of

respondents. Rapid growth in a number of areas

means that many banks are facing severe problems

in recruiting the talent they need. Also, when a

senior banker moves, they often try to take members

of their team with them.

Other sectors experiencing high levels of poaching

are Manufacturing and Legal, at 28% and 27%

respectively.

A perception of limited career progression is a major

cause of staff turnover in the Consumer and

Manufacturing sectors, where it is mentioned by 28%

and 26% respectively. A number of new Consumer

brands have entered the market, providing

opportunities for dissatisfied employees to move. In

Manufacturing, the shift of many jobs to China mayhave reduced opportunities for career progression.

Dissatisfaction with salary or bonuses is most marked

in the Banking sector: 20% of respondents say it is a

cause of turnover. A rapid rise in salaries and

bonuses means that perceptions of attractive

remuneration are changing quickly.

Reasons for staff turnover



Contacts

12

AsiaGary Lazzarotto

Tel: (852) 2528 1191

[email protected]

ChinaAngie Eagan

Tel: (86 21) 6375 8922

[email protected]

Hong KongGina McLellan

Tel: (852) 2528 1191

[email protected]

JapanStefanie Cross-Wilson

Tel: (65) 6339 0355

[email protected]

SingaporeMark Sparrow

Tel: (65) 6339 0355

[email protected]

hk hudson report 2007 q1 eng

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