Decoding Compensation Packages in Asia: What Employers Need to Know

With the rise of remote hiring across Asia, many multinational companies are excited to expand their presence in these emerging markets. But without sufficient knowledge of each region’s labor laws, cultural norms, and talent expectations, many professionals fall short in their expansion strategies.  

Let’s face it. A one-size-fits-all approach to compensation isn’t the ideal way to go. Businesses will end up overpaying in some markets, underpaying in others, or accidentally overlook other aspects like employee benefits and local festive periods.

So what’s the solution?  

The answer lies in mastering salary benchmarking in Asia to attract and retain top talent. Here’s how:

Understanding the Nuances of Compensation in Asia

Offering a competitive base salary is often not enough. Employers must be prepared to provide a comprehensive package that adheres to all legal requirements, market norms, and includes strategic benefits.

Let’s break it down.

Salary Benchmarking in Asia

Before setting salaries, it’s crucial to have good understanding of the local market. Look into salary guides from reputable firms like Hays and Robert Walters, or research typical industry ranges on Glassdoor and Indeed.  

Beyond that, it’s important to explore what can be provided beyond a fixed salary and consider total remuneration, including bonuses and allowances, as these vary significantly by country and industry.

Performance-Based Pay

How should you and your business stand out in terms of hiring top talent across Asia? The answer lies in a granular approach, as reported by Aon; salaries in the region are expected to rise as businesses focus on rewarding high performance with targeted bonus pools.  

While this is a strategic way to retain top talent, it’s also one way that companies show that they are willing to invest in high performers.  

Power of Benefits

Employee benefits are a critical component of the total compensation package and a major factor in an employee's decision to join or stay with a company. For example, health insurance is a highly valued benefit across the region, particularly in markets where public healthcare systems may have limitations – offering a comprehensive medical plan, including family coverage, can be a significant draw.

Other popular benefits, as highlighted in a Mercer report, include retirement plans, flexible working options, and wellness programs like gym allowances, transport subsidies, and more.

Country-Specific Compensation Realities

Each country in Asia has unique compensation laws and market expectations. Let’s look at some popular destinations.  

• Singapore: Known for its highly skilled workforce, Singapore has a transparent and pro-business environment. However, employers must comply with mandatory contributions to the Central Provident Fund (CPF), which covers retirement, healthcare, and housing.

• Vietnam: With a young and growing workforce, Vietnam's labor laws are distinct, with regulations on minimum wage and social insurance contributions. The official Ministry of Labour, Invalids and Social Affairs of Vietnam provides comprehensive guidance on these regulations. The salary expectations of Vietnamese professionals, especially in the booming tech sector, are rapidly increasing, making accurate benchmarking crucial.

• Japan: The compensation structure in Japan is often more complex, with a strong emphasis on seniority and a variety of allowances (e.g., housing, commuting) that are common practice.

• China: A highly competitive market with regional differences in compensation, China's regulations require a deep understanding of mandatory social insurance and housing fund contributions, which vary by city. For more detailed information on these regulations, a guide from MSA Advisory is a valuable resource.

• Malaysia: Similar to Singapore, Malaysia is known for its diverse talent pool, with its capital city Kuala Lumpur being one of the most vibrant business hubs in the region. Employers looking to hire here must contribute to the Employees Provident Fund (EPF), which operates mainly as a retirement fund.

Challenges of Cross-Border Compensation

For multinational companies, managing compensation across multiple Asian countries presents a complex set of challenges:

• Compliance with Local Laws: Each country has different laws regarding minimum wage, overtime, mandatory benefits, and termination. Failure to comply can result in significant fines and legal action.

• Currency Fluctuations: Paying employees in different currencies can be a logistical and financial challenge, as exchange rates can impact the actual value of a salary from month to month.

• Administrative Burden: The process of setting up local payroll, managing tax remittances, and administering benefits in multiple countries is resource-intensive and requires specialized knowledge.

Strategic Support for Your Compensation Strategy

These complexities pose a challenge for any business trying to enter a new market, especially if it seems like the only solution is to establish a full legal entity – a time-consuming and costly expenditure.  

But what if we told you that there’s a more streamlined approach?

For businesses looking to quickly and compliantly hire and compensate talent across Asia, a partner with in-market resources is essential. AYP Group, for example, offers tailored solutions that handle the complexities of local payroll and administrative compliance.  

How so? By leveraging their team of in-country experts, you can focus on building a competitive and fair compensation structure while they ensure all administrative matters are managed correctly according to local standards. This strategic approach allows you to secure top talent and expand into new markets with confidence, knowing your compensation practices are both competitive and compliant.