New research shows that overseas banks will substantially raise remuneration next year in second-tier cities in order to recruit and retain staff in the face of strong local competition.
A survey of 52 foreign banks by HR consultancy Towers Watson reveals that average total compensation in China is expected to rise 9.4 per cent in 2011, a higher rate than this year’s 7.5 per cent, but still lower than in 2008 (11.4 per cent), before the financial crisis hit.
And as emerging cities become the centre of foreign banks’ growth, remuneration packages there are set to surge. In 2011, Qingdao and Chengdu will lead the league, with increases of as much as 12.3 per cent – far surpassing Beijing, Shanghai and Shenzhen.
Edward Hsu, head of China Data Services at Towers Watson, comments: “Foreign banks speeded up the expansion in second-tier cities after China’s WTO accession, but the talent gap in those areas has pushed up compensation costs as well.”
Although several banks posted poor Q3 global results this year, these compensation expectations don’t seem too high given the fierceness of China’s talent war and the urgent need to retain staff.
The China Banking Regulatory Commission limits bonus payments of top executives at Chinese commercial banks to no more than three times base salary and requires them to defer at least 40 per cent of the payment for three years. But despite these restrictions the competition from domestic rivals is still fierce.
Moreover, joint-share commercial banks and city commercial banks have also become talent magnets. Hsu points out that “more competition will arise at second-tier cities in 2011, and the focus will still be on sales and marketing roles.”
So what will overseas firms do to attract and retain talent?
“We have seen some changes in salary schemes at foreign banks. Their strategy is clearly leaning toward key positions and adding budget in, which might intensify the overall compensation rise. And secondly, they should attract high calibre freshmen – 27 banks say they will turn up the starting salary for graduates,” says Hsu.