The Hudson Report

January – March 2007

Employment and HR Trends

Hong Kong
 Introduction
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 of
employers' 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.
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Key Findings

“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.”
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;

Gina McLellan, Country Manager, Hudson, Hong Salaries are rising significantly as companies
Kong 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;
Employment expectations have risen slightly this
quarter. In this survey of 514 executives in key
Companies in all sectors are planning to pay
business sectors 54% plan to increase headcount in
higher bonuses than last year, with 54% saying
Quarter One (Q1) 2007.
they will pay more than 10%, the highest figure
for all the markets surveyed in Asia;
Year-on-year, expectations have remained
steady. The 54% planning to grow headcount
Staff turnover in Hong Kong is higher than in any
this quarter is at the same level as Q1 2006,
other market surveyed in Asia, with the Media/
though there are some variations between the
PR/Advertising and Consumer sectors
sectors surveyed;
experiencing the highest levels;

The Legal sector has the highest expectations,

Staff poaching, perceptions of limited career
with 73% of respondents planning to hire more
progression and dissatisfaction with salary and
staff, up from an already high 71% in Q4;
bonuses are the main causes of staff turnover.

The steepest rise in hiring expectations is

reported by the Media/PR/Advertising sector,

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Permanent employment
expectations
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 the
generally 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 low
37% 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.
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Permanent employment
expectations over time
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 respondents
forecasting 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 production
facilities to China. Many manufacturing companies
are now placing a greater emphasis on managers
with a strategic focus rather than on operations
specialists.
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Permanent employment
expectations by job roles
Demand For Finance Professionals Still
Very 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.
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 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.

Anticipated company performance

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 other
sector other than Banking.

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Pay increases to attract managerial
staff
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 specialists 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.
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Year-end bonus payments
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 pay
bonuses 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&T
companies 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%.
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Staff turnover
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 than
20%. 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.
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Reasons for staff turnover
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 Banking
sector, 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 may
have 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.
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Contacts

Asia Japan
Gary Lazzarotto Stefanie Cross-Wilson
Tel: (852) 2528 1191 Tel: (65) 6339 0355
gary.lazzarotto@hudson.com stefanie.cross-wilson@hudson.com

China Singapore
Angie Eagan Mark Sparrow
Tel: (86 21) 6375 8922 Tel: (65) 6339 0355
angie.eagan@hudson.com mark.sparrow@hudson.com

Hong Kong
Gina McLellan
Tel: (852) 2528 1191
gina.mclellan@hudson.com

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