Despite the troubled economic times, expatriate numbers in Shanghai are holding firm but foreigners can expect companies to increasingly scale back large salary packages, according to a number of business experts.

Hewitt Consulting delivered the findings of a survey of 170 companies that revealed that despite the worsening economic environment, 56.2 percent of companies planned to increase the number of expatriates they employ, up from 55 percent last year.

But the report also found that the recent trend to localize packages for expatriates - particularly the winding back of a variety of benefits in education, hardship allowances and annual leave - would continue unabated.

The findings of the report were delivered to an American Chamber of Commerce seminar recently.

The expatriate hiring trends revealed in the report were supported by what a number of Shanghai business representatives are seeing.

While warning that the data for the report were finalized on July 1, before the full extent of the financial crisis became apparent, Hewitt senior consultant Lindsay Oliver Klump said the report's findings revealed that the employment of foreigners in senior management was still a necessity for many companies.

"I think there are still opportunities but expats have to be willing to take maybe less comprehensive packages than they did before," she said. "I think for anyone with talent in senior positions the opportunities are still abundant here when you consider there is shortage of talent in China for these positions."

Numbers to rise

More than 82 percent of the companies surveyed indicated they would increase numbers due to business expansion in China. Of the 14.9 percent of the firms which said they would cut their expatriate numbers, more than half said it was due to the localization of expatriate positions.

Klump said the auto, financial and property industries had been hit hard by the financial crisis and were looking to reduce staff. But pharmaceuticals, health care and research and development sectors were still strong employers.

One of the key trends the report mentioned is the increasing prominence of Chinese mainland-hired foreigners in top executive or director positions, 24.1 percent and 36.7 percent respectively.

The strong demand for Chinese mainland-hired foreigners is reflected in the growing proportion this category makes up of the total expatriate workforce of the companies surveyed.

In 2005, mainland-hired foreigners made up 27 percent of the total expatriate population but in 2008 this has grown to 55 percent.

"The number of Western expatriates holding top executive and director level positions is clearly decreasing, and they are being replaced by Chinese mainland-hired foreigners more and more," the report says.

Localization, however, does not necessarily mean less cash in the pockets of expatriates. While Western assignees are still leading in terms of their cash packages at all levels, Chinese mainland-hired foreigners are for the first time receiving higher cash packages than Hong Kong and Singaporean assignees at the top executive level. Total salary packages for a Chinese mainland-hired top executive are around US$384,229 compared with US$413,743 for Western and US$ 357,812 for Singaporean/Hong Kong assignees.

Of the total expatriate salary, premiums, like hardship allowances, are also being slashed from 16.5 percent of the package in 2001 to just 6 percent in 2008.

Brodie McDougall, a finance manager at Michael Page, which specializes in recruitment for top line financial positions, said there was still positive sentiment from their clients about hiring expatriate staff. While some industries have been hit hard, he said companies with exposure to Chinese market were cautious but still looking for senior talent.

More caution

"They were not as bullish about increasing their headcount as they may have been, say, 12 months ago,'' he said. "There is caution and people are waiting until after Chinese New Year but most of the clients we talk to are keeping quite positive."

In a sign of the volatile job market in some sectors, Relocasia China Manager Lars Kuepper said they have seen a sharp increase in the number of expatriates they are sending home. But he said the number of expatriates coming to China was also rising.

"We have shipped more than double the people compared to last year," he said, adding that people are leaving because companies are in liquidation, rep offices have closed or staff reduced and "we are extremely busy moving people mainly to the US, Australia and Europe."

British Chamber of Commerce Executive Director Ian Crawford said he had not heard of large numbers of British expatriates being sent home. But he said some companies were planning to reduce foreign hires.

(Shanghai Daily December 15, 2008)