Growing pressure to improve pay-for-performance programs and ensure fair pay throughout the workplace is sparking employers in Asia Pacific into action. However, only less than half of companies in Asia Pacific are currently getting compensation right, according to a new survey by leading global advisory, broking, and solutions company Willis Towers Watson.

Limited budgets (61%), manager capability (49%) and limited differentiation in base pay to drive performance (37%) were identified as top challenges in designing an effective pay-for-performance program. When it comes to meeting employee expectations for compensation, employers must clarify how base pay is determined, improve the differentiation of incentives, make effective use of technology, prioritize fair pay and build a culture of pay transparency, says the survey.

“Getting compensation right is becoming increasingly important as companies look to drive higher levels of performance, attract and retain key talent, and make fair pay decisions,” says Maggy Fang, Head of Talent & Rewards, Asia Pacific, Willis Towers Watson.

The survey also found that many employers in the region may be using multiple factors to determine the base pay increment, Factors that are most likely to be considered by employers in the region include achievement of individual goals, year-end rating, criticality of the role, and possession of skills critical to future business success.

Prioritize fair pay

Fair pay is another essential element of an effective compensation program and an integral part of the employee experience. About three-quarters of respondents have established formal processes across a range of areas, including performance review (77%), hiring decisions (76%), starting salaries (74%) and base pay increases (74%).

Despite giving themselves high marks, only one in five organizations (22%) in this region have formally structured and managed Inclusion & Diversity (I&D) programs targeted at diverse employee populations. Japan, Australia, and India are leading the region in this aspect, while the Greater China market is lagging behind.

When it comes to gender pay equality, for example, women are still paid significantly less than men on average.

In addition, only 13% of employers in Asia Pacific believe that addressing gender pay equality will become a more important factor in making base pay decisions over the next three years. This varies significantly from companies in Europe (39%) and North America (41%). In addition, only 36% of Asia Pacific employers responded that they have or are intending to conduct a gender pay or pay equity diagnostic. This compares to almost 60% globally.