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Jan 25, 2011

Jan 25, 2011. Building Rewards, Retaining Talent, Delivering Success Compensation and Benefits Trends in High Tech Industry. Elley Cao Mercer Shanghai. What we will cover…. Setting the scene: economic and labor market outlook Compensation and benefits trends Talent retention.

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Jan 25, 2011

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  1. Jan 25, 2011 Building Rewards, Retaining Talent, Delivering SuccessCompensation and Benefits Trends in High Tech Industry Elley Cao Mercer Shanghai

  2. What we will cover… • Setting the scene:economic and labor market outlook • Compensation and benefits trends • Talent retention

  3. Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key About Mercer

  4. Ireland Canada Norway Cezh Republic Australia United States United Kingdom Italy Japan Mexico Portugal India Hungary Denmark Poland Malaysia France Spain Netherlands Thailand South Korea Belgium Austria Turkey Colombia Indonesia Singapore Switzerland Germany Sweden New Zealand Venezuela Brazil Argentina Chile Mercer has more than 20,000 employees serving clients from more than 180 cities and 40 countries and territories worldwide Greater China Mercer started its operation in mainland China since 1995 and much earlier in Hong Kong and Taipei (over 20 years ago) In Greater China, Mercer operates 8 offices: Beijing ShanghaiGuangzhou Hong Kong Dalian NanjingShenzhenTaipei Over 500 employees . About 3,000 clients.

  5. 9 of 10 FORTUNE 100 firms • 3 of 4 FORTUNE 1000 firms • 2 of 3 FTSE 100 firms • A majority of Nikkei 225 firms Americas Asia/Pac Europe More than 25,000 clients worldwide Serving all regions, industries and sizes … and the world’s leading companies

  6. Mercer Total Remuneration Surveys (TRS)The Strongest Database in Leading Industries and Geographies in China (26 Cities and 14 Industries) A step ahead to designing competitive pay packagesaround the world. Mercer Total Remuneration Survey in China • Covered Cities • Beijing • Guangzhou • Shanghai • Shenzhen • Changchun • Changzhou • Chengdu • Chongqing • Dalian • Dongguan • Foshan • Fuzhou • Hangzhou • Covered Cities • Kunshan • Nanjing • Ningbo • Qingdao • Shenyang • Suzhou • Tianjin • Wuhan • Wuxi • Xi’an • Xiamen • Zhongshan • Zhuhai • Covered Industries • Auto • Chemical • Consumer • Energy • High tech • Insurance • Internet • Petroleum • Pharmaceutical & Medical Device • Real Estate • Research & Development • Retail • All Industries Office • All Industries Manufacturing

  7. Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key Economic and Labor Market Outlook

  8. 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 -10 -10 1 5 9 13 17 21 Global GDP growthIMF raised global GDP growth for 2010 to 4.8% and keep 4.2% growth forecast for 2011 Emerging and developing economies World Advanced economies 2006 2007 2008 2009 2010 2011 Source: IMF World Economic Outlook (Oct)

  9. Economic predictions for a multi-speed recovery2010 GDP growth forecasts – emerging economies in the Lead Russia/CIS4.3% United States2.6% CEE 3.7% Euro Area1.7% Japan 2.8% China 10.3% ME/North Africa4.1% ASEAN6.6% India 9.7% S.S. Africa5.0% Brazil 7.5% LA5.7% Source: IMF World Economic Outlook (Oct)

  10. GDP Growth 15 2009 2010 2011 12 9 6 3 0 Asia JP AU NZ HK SK SG TW CN IN MY ID PH TH VN -3 -6 Asia: Leading the global recoveryAsia’s strong recovery from the global financial crisis continued in 2010 Source: IMF World Economic Outlook (Oct)

  11. GDP 18 CPI (Inflation Rate) Salary Increase 16 15.6 14.6 Staff Voluntary Turnover 13.5 14 13.4 12.8 13.0 12.2 11.2 11.3 11.6 12 11.9 10.3 10.4 10.1 9.3 9.0 10 9.1 9.1 8.8 8.0 7.3 8.0 Percentage 8 8.8 8.6 8.5 8.7 8.2 7.6 7.4 8.3 7.3 8.2 7.4 6.9 6 5.9 4 3.3 4.8 4.4 3.9 2 1.2 0.7 -0.8 1.8 -0.7 0.4 1.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(E) -2 China replaced Japan as Asia’s biggest economy in 2010, which will also make it the world’s second biggest country after the US Source : National Bureau of Statistics of China ww.EIU.com Mercer Total Remuneration Survey

  12. 60 54 50 43 40 35 30 30 23 18 20 10 0 2005 2006 2007 2008 2009 2010 Rising of Chinese companies on a global scalePowerful state-owned enterprise becoming major global players Chinese companies listed in the Fortune 500 Source: Fortune 500 2005-2010

  13. 2010 top 10 best employers ranked by university graduates What happened in China in 2010? • Labor crisis • 30 out of 31 provinces in China adjusted their minimum wage in 2010 • 10.3% turnover rate in the first half of 2010 • 2010 more than 1.46 million people will attend China's national examination for 2010 admissions to the civil service, 41% increase than 2009 • State-owned overtake foreign companies in luring graduates

  14. What is happening in high-tech industry? • M&A becomes a hot topic in High-Tech industry. • SAP acquired Sybase • IBM acquired SPSS • Oracle acquired Sun • Intel acquired McAfee • NSN acquired Motorola telecommunication network business • Some local high-tech companies also strengthen business by M&A, e.g. Asiainfo & Linkage • Internet industry (including game sector) is very booming in China. • 15.1% turnover rate in the first three quarter in high tech industry of 2010

  15. 20.0% 20% 16.1% 15.1% 15% 13.5% 10% 5% 0% China Beijing Shanghai 2nd Tier Cities Employee Voluntary Turnover Rate by Location—high-tech industry • From January to September, all locations encountered rising staff turnover as economy continues to recover. Turnover Rate in 2nd tier cities is at a high level. Voluntary Turnover Rate in Year 2010 Source: 2010 China Hi-Tech Industry Snapshot survey--Oct

  16. Hottest positionsTop three positions most difficult to fill in/retain Source: 2010 Mercer China Total Remuneration Survey

  17. Hottest positionsTop three positions most difficult to fill in/retain Source: 2010 Mercer China Total Remuneration Survey

  18. Conclusion • Opportunities in Asia and China are fantastic • Biggest risk is you do not have the talent to deliver • Talent development and retention must be prioritised • Talent acquisition becomes more difficult than ever in China • Win talents from competitions against MNCs and local players, across all industries • Special attentions need to be paid to talents from Sales, Marketing, R&D functions and etc • Review talent strategy of fresh graduates attraction

  19. Compensation and Benefits Trends • Compensation Trends • Benefits Trends Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key

  20. 10% 9% 8% 7% 6% Percentage 5% 4% 3% 2% 1% 0% 2009 (Excluding salary 2009 (Including salary 2010 2011 freeze) freeze) 5.2% 2.7% 6.5% 7.1% Shanghai 5.0% 2.7% 6.5% 7.0% Beijing 5.7% 2.9% 6.4% 7.1% Guangzhou Average merit salary increases — high-tech industry A comparison across cities (July) Source: July 2010 China Hi-Tech Industry Total Remuneration Survey

  21. 0.7% 9.9% 62.9% 36.4% 53.0% No Plan to do in Y2010 Yes, to all staff Yes, only to key staff / high performers Special Salary Adjustment in Year 2010 — high-tech industrySnapshot survey result in Oct • 36% of 151 responses did not have special salary adjustment in year 2010. • One company plans to do special salary adjustment in the rest two months of this year. • Among companies had additional special salary adjustment in year 2010, majority chose to focus on key staff and high performers.

  22. 29% 5% 94% 1% 65% Plan to freeze salary Approved salary increase budget Propose for Global approval Not sure yet 2011 Salary Increase Plan — high-tech industry Snapshot survey result in Oct • Only 1% of 154 responses plan to freeze salary in year 2011. • 5% are not sure about salary increase plan so far. • Among those who have salary increase budget for the next year, about one third have got Global/Headquarters’ approval already.

  23. Merit Increase for Year 2011 by Location — high-tech industry (Exclude Salary Freeze) • 2nd Tier Cities salary increase percentage is more aggressive than 1st Tier Cities. 12.0% 10.0% Merit Increase for Year 2011 9.1% 8.6% 8.1% 8.0% 7.4% 6.0% 4.0% Beijing Shanghai Guangzhou/Shenzhen 2nd Tier Cities P25-P50 P50-P75 Mean

  24. 14.0% 10.9% 12.0% 9.3% 8.6% 9.4% 10.0% 8.0% 6.0% P25-P50 P50-P75 Mean 4.0% 2.0% 0.0% Beijing Shanghai Guangzhou/Shenzhen 2nd Tier Cities Overall Salary Increase for Year 2011 by Location — high-tech industry (Exclude Salary Freeze) • 2nd Tier Cities salary increase percentage is more aggressive than 1st Tier Cities. Overall Salary Increase for Year 2011 Note: overall salary increase includes merit increase, promotion increase and etc.

  25. 14% 12% 10% 8% 6% 4% 2% 0% Telecommunicat Hareware Semiconductor Services Software Others ion 10.7% 9.0% 9.0% 10.5% 9.1% 9.6% Overall Increase 9.6% 7.6% 7.3% 8.6% 7.7% 8.4% Merit Increase Salary Increase for Year 2011 by Industry Segment — high-tech industry (Exclude Salary Freeze) • From industry segment perspective, Hardware and Software have the highest salary increase budget for year 2011. Average Salary Increase for Year 2011

  26. 45% 40% 35% 30% 25% Percentage of Annual Base Salary 20% 15% 10% 5% 0% Para- Para- Management - Management - Professional - Professional - Professional - Professional - Overall Sales Non Sales Sales Non Sales White Collar Blue Collar 30.9% 18.8% 32.8% 13.6% 13.0% 11.3% 18.8% 2009 35.8% 20.4% 36.2% 16.8% 16.3% 14.1% 21.6% 2010 40.3% 20.4% 42.0% 17.7% 16.1% 11.7% 22.8% 2011 Average variable pay — high-tech industry High-tech industry Source: July 2010 China Hi-Tech Industry Total Remuneration Survey

  27. 2008 2009 2010 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Fresh Diploma Fresh University Master - Master - Science PhD Holder Graduates Business Admin 34,916 54,552 81,127 87,341 130,144 2008 31,795 54,640 79,178 88,187 128,320 2009 39,000 57,053 89,050 90,000 131,520 2010 Starting salary trend — high-tech industry Result in July Annual Base Salary RMB P.A. Source: July 2010 China Hi-Tech Industry Total Remuneration Survey

  28. 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Diploma Bachelor Master PhD 36,905 67,270 93,845 130,218 Application Development 35,589 68,038 99,039 138,810 R&D 39,842 60,781 93,915 139,114 Sales 36,643 57,231 87,794 129,365 Technical Support 35,133 48,723 72,647 128,775 Supporting Function Annual base salary for fresh graduates — high-tech industry 1st tier cities (snapshot survey in Oct) RMB P.A.

  29. 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Diploma Bachelor Master PhD 31,200 48,542 72,947 116,711 Application Deveopment 32,820 49,653 70,686 119,973 R&D 36,328 45,458 70,425 - Sales 26,797 44,464 73,264 - Technical Support 25,498 38,564 59,908 - Supporting Function Annual base salary for fresh graduates — high-tech industry 2nd tier cities (snapshot survey in Oct) RMB P.A.

  30. Compensation and Benefits Trends • Compensation Trends • Benefits Trends Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key

  31. Employee Benefits System in China China’s employee benefits system and trend at a glanceStatutory benefits vs. Supplementary Benefits Employer Sponsored Benefits (Optional) Statutory Benefits (Mandatory) • Supplementary Pension Plan/ Supplementary Medical Plan • Life Insurance • AD&D Insurance • Supplementary Housing Plan • Stock Plan • Cars • Training and Education Assistance • Work/Life Balance Plan • Perquisites • …. • Social Security (including Pension Insurance, Medical Insurance, Maternity Insurance, Work-related Injury Insurance, Unemployment Insurance, Housing Fund) • Public Holidays • Other Legal Holidays (e.g., Medical Treatment Period, Marriage Leave, Maternity Leave, etc.) • Severance and Termination Benefits

  32. 100 90 80 70 60 50 Percentage 40 30 20 10 0 Personal Suppl. Suppl. Life Company Car Personal Car Accident Medical for Medical for Insurance Car Allowance Assistance Insurance Employee Dependent 79 77 94 83 59 34 59 Chemical 85 75 88 73 62 30 29 Consumer 88 81 95 81 30 19 27 Hi-tech 87 70 96 79 42 27 25 Parmaceutical&Medical Device 86 74 90 73 44 25 21 All Industries Cross Industry ComparisonBenefit prevalence Source: 2010 Benefits Survey – 1st tier cities

  33. 100 90 80 70 60 50 Percentage 40 30 20 10 0 Suppl. Education Education Long Term Suppl. Housing Transportation Retirement Assistance for Assistance for Incentives Benefits Benefits Employee Children 66 41 56 23 69 23 Chemical 58 49 33 16 49 23 Consumer 47 59 51 12 72 8 Hi-tech 66 53 34 11 47 23 Parmaceutical&Medical Device 52 49 42 18 60 3 All Industries Cross Industry Comparison (Cont’d)Benefit prevalence Source: 2010 Benefits Survey – 1st tier cities

  34. Training and development 64 Work/Life balance 42 Supplementary medical benefits 42 38 Insurance 37 Allowances and subsidies 33 Supplementary high-end medical benefits Car and transportation 25 Annual leave 23 Long term incentives 21 12 Supplementary housing benefits 9 Flexible benefits 7 Supplementary retirement benefits 4 Savings plan 0 10 20 30 40 50 60 70 Percentage of Companies Benefits that companies are considering changing in 2011 • Only 3 companies don’t plan to review or change the following benefits program.

  35. Talent Retention Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key

  36. Market prevalence of retention practice in 2010

  37. Popularity of retention practice for different employee groups

  38. Trend of popularities of different retention tools2008 vs. 2010 Benefit Career Supporting Mechanism

  39. Effectiveness of retention tools in 2010 • According to the companies who exercised, some benefit plans were well recognized in terms of talent retention in 2010.

  40. Most Effective Period of Time for International Assignment 43% 45% 33% 30% 21% 15% 9% 6% 3% 0% < 3 months 3 months- 6 months- 1- 2 years >2 years Others 6 months 1 year The most acceptable time period for international assignment

  41. Flexible Benefits’ Value in Talent Retention Meet the diverse employee needs 83% Maximize benefit value while containing benefit costs 75% Differentiate benefit offerings from the competitors 49% Use benefits to strengthen motivation 48% Enhance employer brand 37% Enhance employee communication through total rewards 34% No relationship between flexible benefits and talent retention 3% Others 1% 0% 20% 40% 60% 80% 100% Flexible benefit & talent retention

  42. Challenges in high-end medical benefit practice The Biggest Challenges When Offering a High-end Medical Benefit Plan The costs are too high 67% 31% The market is immature with less choices 30% The program is too complicated to do a comparison 24% Difficult to measure the quality and service 5% Others 0% 20% 40% 60% 80%

  43. What’s working • The most suitable retention tools, rather than the most popular ones, are most effective to your organization. • Employee retention requires a holistic approach. Any tools should be applied in the holistic summation of things within a big equation. • The talent retention is a joint venture of employee, manager and organization. Hence it’s also your responsibility.

  44. Q&A Delete this text box to display the color square; you may also insert an image or client logo in this space. To delete the text box, click within text, hit the Esc key and then the Delete key

  45. Thank You! For more information on the information presented, please contact us at: Elley Cao 86 21 6103 5540 elley.cao@mercer.com

  46. www.mercer.com

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