Inflation pushes companies to raise salaries

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In 2010, just 40 per cent of surveyed companies said they had raised salaries.

As many as 81 per cent of the companies surveyed said they considered inflation as a salary adjustment factor.

The survey was conducted on 116 companies operating in Vietnam, to determine common human resource practices in coping with inflation challenges, Navigos Search managing director Nguyen Thi Van Anh said.

The one-month survey was named, “HR strategies during inflation” – however the headline factor was ranked second among the four fundamental factors in salary consideration.

According to this survey, amongst the four fundamental factors that a company considered while having a salary review, “individual performance” is the number one factor that is taken into consideration. The next two factors were "company performance" (78 per cent) and "external and internal competitiveness" (74 per cent).

“This result shows that companies in Vietnam are getting more sophisticated in determining annual salary adjustment. Beside inflation and other economy’s influences, the trend for determining salary adjustments is moving towards performance based indicators. In practice, while conducting a salary review, companies will need to consider a combination of the above mentioned factors. The challenge is how to manage the expectations,” Van Anh commented.

Figure 1:The average salary increment rate in 2011, compared with 2010 (Source: Navigos Search)

In this regard, 62 per cent of surveyed companies had increased salaries for professional levels by between 11 and 15 per cent, compared with 50.5 per cent last year.

More companies gave management-level staff a higher salary increment. In 2010, only 17.6 per cent of surveyed companies adjusted the salary for managerial staff by more than 15 per cent, while this figure increased to 27 per cent in 2011.

Van Anh said: “Hiring the right talents for management positions is difficult, but how to retain them is even harder, which has always been a concern of business leaders. Beside many other factors like training and development as well as improving the work environment, companies are willing to adjust salaries for management-level staff to stay competitive in the market”.

Figure2:Factors affect a salary review (Source: Navigos Search)

The survey also showed a good sign for employees, as the percentage of companies which had an average salary increment rise below 10 per cent dropped significantly in 2011; 26 per cent against 31.5 per cent in 2010 for management level, 23 per cent compared with 34.3 per cent for professional level, and 32 per cent compared with 48.6 per cent for general staff level.