SINGAPORE (Sept 18): Over half the companies in Asia Pacific are failing to compensate their staff effectively and fairly, suggests a new study conducted by Willis Towers Watson.

According to findings from the firm’s 2018 Getting Compensation Right Survey, a third of the region’s employers are still paying incentives to employees who do not meet their expectations, while four-fifths reduce their payouts to top performers when their actual incentive funding levels fall below target.

In all, less than half of the organisations in Asia Pacific reported that their base salary programs are effective at differentiating pay and driving higher individual performance.

Limited budgets (61%), manager capability (49%), and limited differentiation in base pay to drive performance (37%) were identified as top challenges in designing an effective pay-for-performance program.

Although most Asia Pacific companies rate themselves highly for having formal processes – such as performance reviews and base pay increases – in place to prevent bias and inconsistency in hiring and pay decisions, only one in five organisations say they have a formal inclusion & diversity (I&D) program.  

Notably, only 13% of employers in Asia Pacific believe that addressing gender pay equality will become a more important factor in making base pay decisions over the next three years, even as the region’s women continue to be paid significantly less than men on average.

This varies significantly from the views of companies in Europe (39%) and North America (41%).

“The major factor affecting the pay gap between men and women is that there are fewer women taking senior roles in organisations. We observe that women represent less than a quarter of the top management roles within many organisations, and the biggest disparities are observed in India, Japan and South Korea,” says Maggy Fang, head of talent & rewards, Asia Pacific, Willis Towers Watson.

Further, only 36% of Asia Pacific employers responded that they have, or are, intending to conduct a gender pay or pay equity diagnostic – a stark contrast to almost 60% globally.

“Companies must be aware of the increasing potential for legal or reputational costs due to maintaining even unintentionally discriminatory pay policies and practices,” warns Fang.  

“All employers should conduct a thorough pay equity review to help them understand whether they have fair pay or gender gap issues, where gaps may exist and their underlying causes, and to make fair pay an integral element in their organisation’s compensation programs,” she adds.

Trey Davis, regional leader for executive compensation, Asia Pacific, Willis Towers Watsons, highlights fair pay as a “moral imperative” that ensures companies have access to the best talent available in the market.

This is a critically important factor given a shrinking labour force and ongoing demographic changes in many of the region’s markets, in his view.

“Employers need to determine how they can better equip their managers to make appropriate base pay decisions, including the tools and technology that they need to be in place to support their decision making,” comments Davis.