Whether it is to attract job candidates with sought-after skill sets or to keep pace with inflation, or whether it is just a simple reflection of rising GDP, it seems there will be no stopping salary growth across Asia-Pacific (APAC) in the coming year.

The 2013 APAC Salary Budget Planning Report, produced by professional services firm Towers Watson and based on a survey of companies in 20 countries, predicts salaries in the region to rise 7 per cent on average in 2014.

In East Asia, China and Vietnam lead the way with forecast increases of 8.5 per cent and 11.5 per cent, respectively. Staff in Hong Kong and Singapore, meanwhile, can only expect salaries to rise by 4.5 per cent.

The upwards pressure seems to be intensifying, with fewer than 1 per cent of firms surveyed anticipating a pay freeze, compared with nearly 4 per cent in 2013.

“The survey reveals pressure points in the labour force around the region and the difficulty in finding and retaining skilled staff,” says Sambhav Rakyan, global data services practice leader for Asia-Pacific at Towers Watson.

His observation is underlined by the fact that over 80 per cent of the businesses contacted said a larger portion of their budget for salary increases would be going to high performers next year.

While a lack of available talent is a main driver of pay rises, for several countries there is another significant factor. “If inflation is high then traditionally salary increases would follow,” Rakyan says. “So in markets where there is high inflation – such as India, Vietnam and Bangladesh – you will see much higher salary increases.”

The survey also shows a marked difference in the size of the anticipated salary rises in the financial sector. “I think that in the financial services industry, we’re seeing companies shift to a fixed compensation strategy and that’s a lot to do with regulation,” Rakyan says. “However, the Asian market is still quite divided and we have countries such as Indonesia and Malaysia which are doing quite well in this sector, but the traditional markets in Hong Kong and Singapore are more integrated with the developed markets. So they will face the same slowdown as developed markets.”

For now, though, Hong Kong-based bank staff have reason to be cheerful, says Andy Bentote, senior managing director for PageGroup in Hong Kong. “Salary rises in the banking industry have definitely improved in the last 12 months, though, obviously, they are nowhere near pre-2008 levels,” he says.

Bentote believes that staff in Hong Kong working in fast-growing sectors can expect average salary increases of up to 8 per cent, depending on the industry in which they work.

“We’re seeing a big push for people with digital and online experience, and [people with] very strong retail experience can command higher salaries whether in luxury [goods], the high street or in sourcing,” he says.

Rakyan believes that across the region, it is hard for firms to hire the precise skills they need. “If they need, for example, senior management, then they get middle management and groom them,” he says.

Bentote considers the situation in Hong Kong to be a little different. “The economy here is okay-to-good, rather than great, and in these sorts of conditions, companies get a little fussier when they are hiring. To a degree, that can then give more of a sense that there is a skills shortage, with firms looking for, say, a 90 to 95 per cent fit rather than a 70 to 75 per cent fit when they are hiring,” he says.

He also points out that Hong Kong has seen an increase in “buy-backs”, or counter offers, made by companies when key people hand in their resignation letters.

“If an organisation has got a really good person that it knows is going to be relatively hard to replace, it may make a greater effort to retain them, whether that’s through a salary increase or through other areas [of their package],” he says.

Regionally, Rakyan sees an effort by institutions to tackle the troubling issue of skills shortages. “At entry level, I think governments around Asia are trying to put in place programmes that will negate this gap, and are looking at what sort of skills will be in demand in the next decade or so,” he says. “The other gap is at senior management level and here I think governments are trying to put in place incentives, but I also think many of the companies are doing a lot themselves – it’s a partnership model.”