Multinational companies in China are bracing for a renewed talent war, with job-hopping and poaching expected to increase along with economic recovery.
During the global downturn, foreign companies in China had little difficulty retaining staff, but conditions are changing as the country helps lead the world out of recession.
Carl Redondo, general manager for Asia-Pacific at Hewitt Associates, a human resource consultancy, said: “The war for talent is back on and bigger.”
Hewitt estimates that the average voluntary employee turnover rate for foreign companies in China will this year return to pre-crisis levels of more than 15 per cent. Last year, the rate fell to 14.2 per cent from 17.4 per cent in 2008.
While the talent shortage is expected to be most acute for highly skilled professionals in sectors such as chemicals, pharmaceuticals and financial services, Chinese export-related companies face a severe shortage of factory workers.
Analysts say an ageing population, declining birth rates, diminishing company loyalty and growing investment in China are contributing to a tighter labour market. There is some evidence that local companies are increasingly poaching trained staff from multinationals, such as BASF, the world's largest chemicals group by revenues.
Peter Johann, head of human resources in Asia for BASF, said the loss of each employee was a “disaster”. “More and more local companies come up and see our skilled, well trained workers as a nice pool,” said Mr Johann.
Colin Tan, China country director at Akzo Nobel, the Dutch chemicals producer, expects the “war for talent” to intensify this year. “Job- hopping may increase but we hope our senior managers will stay,” said Mr Tan.
Labour market experts say financial firms are concerned that a long-term talent shortage could hurt business plans, particularly as the local market becomes increasingly appealing. Banks are also concerned about attracting talent as big local institutions begin to look and feel much more like foreign rivals.
HSBC, for example, plans to keep expanding in China in 2010 after adding 19 outlets last year. Goldman Sachs anticipates “significant growth” in China but said the “key to that growth is hiring good people”.
Jill Malila of Mercer, a human resource consultancy, said that wages at multinationals in China were already climbing. She forecast that they would rise an average of 7.2 per cent this year, an increased pace from 6.9 per cent last year.
Some employers that froze salaries in 2009 might have to play catch up in the pay race just to remain competitive and retain staff.
Ms Malila said: “As the war for talent heats up, employers shouldn't be surprised if the cost for talent increases . . . 50 per cent to 70 per cent at some professional levels.”
Garry Wang, head of M&A advisory services at Mercer, who also chairs the Human Resources Forum at the European Chamber of Commerce in China, noted that for new China market entrants, it was much easier to poach than to develop internal talent.
Even Google, the online search company, has become the target of aggressive poaching by local technology companies after it threatened to leave China.
Foreign companies are also having to take into account the fact that young Chinese workers, like their American counterparts, tend to shift jobs relatively frequently.
While foreign companies are taking steps to protect their talent by focusing on salaries, career development and job satisfaction, Mr Redondo warned that there were limits. “There is only so long that you can throw money at people,” he said.