'If employment costs climb too high, it reduces Hong Kong's competitiveness as a business hub'
Businesses across Hong Kong are being warned against using financial incentives to attract and retain employees amid a sinking talent pool, citing their effects on employment costs.
"No industry was unaffected by the shrinking of the candidate pool in Hong Kong. Financial incentives are an immediate way to address the issue, but it is not sustainable in the long term," said John Mullally, Managing Director – Southern China and Hong Kong, Robert Walters.
"If employment costs climb too high, it also reduces Hong Kong's competitiveness as a business hub. Ultimately the business community and the government must work together to market Hong Kong to the world."
What employers are doing
Retention will be a key strategy in 2023 amid the talent shortage, according to the Robert Walters report. It revealed that 65% of organisations have already put measures in place to retain employees. Strategies include:
- hybrid work policies (60%)
- improved learning and development (50%)
- wellbeing initiatives (48%)
- promotion outside of the normal cycle (45%)
- pay reviews outside of the normal cycle (38%)
Hiring contractors has also become appealing to employers to address the candidate shortage, and will likely increase across tech, financial services, and commerce sectors, according to the report.
"To ease the skills gap and expand the talent pool, companies are advised to adapt their talent strategy to 'skills first' to ensure they find, develop, and retain qualified talent; this contrasts with the traditional practice of hiring managers focusing on candidates' experience and education background," said Robert Walters in its release.
'Challenging' recruitment year
Mullaly's warning came as Hong Kong sees a "challenging year" for its recruitment market, a situation that has made more 80% of employers concerned about a skill or talent shortage.
The sinking talent pool is an effect of the pandemic to the business hub, made worse by higher demand for tech talent, global competition, and exodus of talent over the last few years, according to the digital Salary Survey 2023 by Robert Walters.
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Shifting employee expectations also drove these concerns, as 43% of job candidates in Hong Kong said they will find a new job if their employer does not offer a pay raise above inflation in the coming year.
As a result, employers have been increasing compensation packages, inflating titles, and making counteroffers to retain talent.
Hiring bright spots
Despite the challenge of recruitment for many roles, demand for tech talent will remain "very strong" across all sectors as companies establish security operations centres in Hong Kong.
According to the report, tech professionals can expect a 10 to 20% of salary increase when they switch employers. This could go as high as 40% for senior high movers with in-demand skills.
Hiring will also increase for senior positions related to ESG And D&I-related departments, according to the report, indicating improving commitment from Hong Kong businesses on ESG.
Hong Kong's unemployment rate is at 3.8% during the period from August to October, according to its Census and Statistics Department.
"The short-term outlook for the labour market will depend on the performance of domestic economic activities," said Labour Secretary Chris Sun. "Nonetheless, as long as the epidemic remains under control and anti-epidemic measures are suitably relaxed, coupled with the help of the Consumption Voucher Scheme, economic activities should gradually return to normal."