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11 | 2007 Wage inflation, rapid employee turnover, talent shortages – how are companies responding to the challenges of managing reward in China?

Rewarding ChinaTalent management in the world’s most competitive economy

2 Rewarding China

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Contents

Executive summary 2

China reward – time for an audit 4

Rising salaries, hidden costs 5

Boom times 7

Look behind the bull run 10

Rewarding best practices 13

Appendix 1: Hay Group PayNet China database participants 15

2 Rewarding China

Companies who identify, develop, promote and reward high performers are succeeding in retaining their people, and in getting the returns on their people investments. The risks of getting it wrong are high, but the returns for getting it right are even higher.

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These facts are not entirely surprising, given the challenges faced by MNCs in China. The buoyant employment market has led to a culture of job-hopping, with employee turnover between two and three times higher than in the West. A shortage of experienced employees means younger managers are promoted – sometimes beyond their current level of competence – without the benefit of older, knowledgeable managers to mentor them. Cultural factors also influence reward practices, with employees more likely to expect their company to compensate them for changes in the market, such as CPI increases.

However, the situation has been made worse by poor reward management practices. Faced with astronomical

turnover figures, many companies resort to the ‘blunt tool’ of increasing salaries to retain employees – regardless of performance, or whether they anticipate an increased return on investment for that additional spend. This is feeding China’s spiralling wage growth.

But the picture for those companies who implement strategic reward and talent management programs is bright. Companies who identify, develop, promote and reward high performers are succeeding in retaining their people, and in getting the returns on their people investments. The risks of getting it wrong are high, but the returns for getting it right are even higher.

Executive summary

Many multinational companies (MNCs) are struggling to build effective reward programs in China. Most MNCs in China believe that the effectiveness of their reward management programs is average or below average. And almost a third are not meeting their business objectives in China – while facing a wage bill that is growing over 9% every year.

4 Rewarding China

China reward – time for an audit

CASE ONE:In 2004, in an attempt to reduce their high attrition rate, the management of Company A rolled out a new reward initiative – the Employees Saving Plan. The plan was specially developed to retain their selected group of ‘high potential’ employees. Under the plan, a sum equivalent to 12% of their base salary was deposited into a pool to be paid out at the end of the second year. When that time came, only 55% of the participants received their ‘bonus’ payments; the other 45% of the participants had already left the organization.

CASE TWO:Faced with pressure to retain employees in the rapidly booming insurance industry, many HR managers drew up plans for new ‘reward-for-retention’ initiatives.

Company B was no exception. They launched a scheme in 2004 which provided 8% of base salary to a large group of employees, with a maturity period of 3 years. However, the scheme did not improve employee retention rates. In June 2006, Company B decided to buy out the entire scheme even though it was more than a year away from the maturity period.

Our survey found a consistently bleak

picture of the effectiveness of MNCs

reward strategies in China.

Reward management in China is often a frustrating job. Companies struggle to find and retain suitably talented and experienced employees, while facing a rapidly rising bill for their salary budgets.

The root cause can be found in China’s extraordinary growth over the past 20 years. China has become the world’s third largest foreign direct investment recipient. Exports will hit US$1 trillion in 2008. From the former austerity of twenty years ago, China will grow to consume 29% of the world’s luxury goods in 2015.

How is this rapid change impacting reward? Hay Group has conducted an in-depth study covering more than 300 MNCs’ operations in China. The study analyzed reward and demographic data from Hay Group PayNet (see Appendix 1) and drew on the results of our recent survey of almost 4,500 MNCs in China, Winning in China. We then conducted face-to-face interviews with top executives and HR professionals who shared their observations on reward in China, based on their extensive experience. The comments and case studies in this paper were drawn from those interviews, although some details have been changed to preserve confidentiality.

5

Rising salaries, hidden costs

Our survey found a consistently bleak picture of the effectiveness of MNCs reward strategies in China. A clear majority of many companies felt that they were underperforming across all significant measures of reward effectiveness:

n 73% say their compensation structure is average or below average at supporting business objectives

n 68% feel that their executive incentive compensation plan is working at average or below average levels

n 63% are having difficulty in achieving an above-average combination of variable and fixed remuneration

n 60% believe the fairness and consistency of their remuneration plans is average or below average

n 60% are not successful in creating an above-average linkage between compensation and performance

Contrast this with similar studies we’ve done in the US. Our recent study of 1,200 US human resources professionals (In the trenches: what works and what doesn’t when it comes to rewarding employees) found that 70% were satisfied with their compensation programs, and 80% believed their reward programs were effective or very effective in supporting their external competitiveness.

The China picture is borne out by the mismatch between the growth of salaries and the performance of MNCs’ Chinese operations. According to Hay Group’s China Compensation Report 2008, the base salary increase for all employees in China has hovered at a high of 9.2% for the past two years, and is forecasted to hit 9.4% in 2008. Salaries have been increasing at an average of 8% for the last five years, with average real wage inflation at 6% (see Table 2 overleaf ).

100

80

60(%)

40

20

0Supports business

objectivesExecutiveincentives

TABLE 1 HOW SUCCESSFUL ARE COMPANIES IN MANAGING THEIR REWARD PROGRAMS?

Variable/�xedrenumeration

Fairness andconsistency

Linkage withperformance

Supports businessobjectives

Executiveincentives

Variable/�xedrenumeration

Fairness andconsistency

not at all less than successful average successful very successful n/a

“The problem is we clearly have not realized much from this investment. Is this the same for other foreign companies in China?” CEO FROM A MANUFACTURING MNC, SHANGHAI

6 Rewarding China

CPI Average (%)

8

10

6

4

2

0

-22002 2003

Year

2004 2005 2006 2007 2008

Real Wage In�ation Annual Base Salary Increment (%)China

6

5

7

8

4

3

2

1

0

TABLE 3 MEDIAN LENGTH OF SERVICE – BY MANAGEMENT LEVELS

Germany Singapore

Med

ian

Year

s of

Ser

vice

Junior Management Middle Management Senior ManagementJunior Management Middle Management Senior Management

SOURCE: HAY GROUP PAYNET, 2007

TABLE 2 REAL WAGE INFLATION IN CHINA

At the same time, companies have not seen a corresponding growth in performance. Over a third of MNCs in China say that they are not meeting their business objectives (Figure 1). What is contributing to this situation?

Over the past three years, to what extent has your company achieved

business objectives (eg. profits, market

share, revenue growth?)

FIGURE 1

BEYOND OBJECTIVES

26%

CLOSE TOOBJECTIVES

27%

ON OBJECTIVES

37%

FAR FROM

OBJECTIVES10%

7

CPI Average (%)

8

10

6

4

2

0

-22002 2003

Year

2004 2005 2006 2007 2008

Real Wage In�ation Annual Base Salary Increment (%)China

6

5

7

8

4

3

2

1

0

TABLE 3 MEDIAN LENGTH OF SERVICE – BY MANAGEMENT LEVELS

Germany Singapore

Med

ian

Year

s of

Ser

vice

Junior Management Middle Management Senior ManagementJunior Management Middle Management Senior Management

SOURCE: HAY GROUP PAYNET, 2007

TABLE 2 REAL WAGE INFLATION IN CHINA

“Companies can plan for their employees’ future career progression, but Chinese employees are not prepared to wait and see what those plans might be. They want to move up as fast as possible in this buoyant market,” HR DIRECTOR OF A HIGH TECHNOLOGY MNC IN CHINA

Boom times

Becoming the world’s most competitive market almost overnight has put enormous pressure on the market for talent. Demand for key talent outstrips supply, particularly when it comes to technical, sales and marketing and – most of all – management roles. And companies are struggling to cope: Winning in China found that 76% of business leaders felt talent management was important, but only 32% said that they were dealing well with the issue.

Rampant wage inflation exacerbates this situation. Consider the following data from Hay Group PayNet:n When a Chinese employee is lured away from their

current job, not only do they get a promotion, they also pocket at least 40% more in base salary. This compares with an average of 24% and 21% in Singapore and Hong Kong respectively.

n If the employee moves to a position that is two steps above their current role (a ‘champagne’ promotion), their base salary jumps by 91%. This compares to a 48% increase in Singapore.

This is having an obvious effect on the level of employee turnover. Table 3 shows that the duration of Chinese employees’ tenure in MNCs is dramatically shorter than that in other countries. Junior management employees stay two years with a company while top level employees clock up about four years.

The culture of job-hopping to seek the highest possible salary and position in the shortest possible time may be due to a perceived impermanence of the current economic boom – an ‘I want mine and I want it NOW because the money might not be there tomorrow’ attitude.

China’s under-supplied skilled labour market has created a lot of opportunities for employees. Companies are assigning bigger jobs and salaries without considering whether employees have the necessary skills to perform them.

8 Rewarding China

Our view is that there is nothing unique about people management in China. Faced with the immense pressure to retain staff, companies have lost their bearings and thrown the Human Resources 101 handbook out of the window. Some of the HR fundamentals that are not being followed: 1) Considering the size of the job and what kind

of person will fit the role before you rush to fill it 2) Spreading your reward according to performance

– many companies are failing to differentiate between high, average and poor performers in the annual pay review

3) Watching the market – many companies don’t set a salary benchmark that will support their business objectives, or benchmark their salaries against the market

There is a general lack of understanding of how to use reward as a tool to further corporate strategy.

Roland Ruiz, Hay Group’s Reward Information Services Managing Director for Asia, says “Reward is one of the most misunderstood and mismanaged corporate tools in China. Many executives still rely on gut feel, rather than on hard data, to make reward management decisions. Even when companies do put strategic reward programs into place, they often undermine them with knee-jerk decision making, rather than sticking to their guns.”

A major driver of the upwards trend in salaries is that MNCs still tend to use the blunt tool of compensation to deal with China’s talent shortage. Most employers have the misconception that, as the base salary is low anyway, another 9.4% increase won’t matter. However, most of these same companies do not plan how they will recover this 9.4%. Is the employee doing the same job? Is the employee’s performance above or just average? Are you paying 9.4% more to retain poor performers?

The talent shortage is in reward management, too!

Gold rush: looking for China’s mythical ‘cheap labor’

CASE THREE: The RMB1.4 million directorAn expatriate compensation and benefits manager based in China with six years of local and regional experience, Mr Chang, was recently approached by a search firm on behalf of an international company. Company C had moved its regional headquarters from Singapore to Shanghai, on the basis that it made better financial sense to be closer to their biggest potential customers. The search company was originally tasked to recruit a local Chinese with regional compensation and benefits experience but this proved to be an almost impossible task. So Company C agreed to widen the search to include expatriate talent.

Mr Chang was asked, in essence, to write his own package and he demanded RMB1.4 million (USD210,000) nett salary, expat housing allowance, car allowance plus a host of other expatriate perks, the sum of which was very much higher than what a regional compensation and benefits director based in Singapore would get. Company C did not flinch. What is ironic was that the job description included responsibility to “find ways to reduce manpower cost and improve return on investment.”

“To compete in the war for talent, the

management invested lots of time, resources

and energy in designing good pay programs.

But every time a talented employee

leaves the company, our pay structure

gets thrown out of the window.”

REGIONAL HR DIRECTOR OF A MANUFACTURING COMPANY

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Local Chinese managers with the skills and experience to run a company’s Asia operations are like gold dust. The rapid growth of the market and the move away from a largely state-run, socialist economy has outstripped China’s capability to produce sufficient experienced managers capable of working in the new China and beyond.

However, the myth of China’s bottomless supply of cheap labor has led to a ‘gold rush’, as many MNCs relocate their regional headquarters to China to save costs. Instead companies are finding that they are incurring more manpower costs as they are unable

to fill key regional positions with local Chinese and therefore have to import foreign talent.

A similar scenario applies in the drive to invest in second- and third-tier cities, ostensibly to cut costs. Consider the case of one company who moved their manufacturing base to a second-tier city, Dalian (China’s northernmost ice-free seaport). What they found was that their costs increased, as they were unable to find suitably skilled engineers and technicians. They had to import talent from the first-tier cities and pay them a hardship allowance on top of their first-tier city salaries.

Under pressure to meet short-term revenue and profit targets, many companies look to localize management as a way of cutting costs. This is based on the assumption that expatriates are expensive, but companies are forgetting to ask the crucial question: is this market ready for localization?

Management positions such as regional finance, regional human resources and legal counsel require intellectual horsepower, strategic agility and international market experience. These types of roles are often inappropriate for localization in China. While there is no doubt there are some very significant advantages to be gained by employing local Chinese management, the point we are making is that the shortage of quality talent at this stage

in China’s economic development makes it unwise to totally localize all management positions, without first considering if you can find suitable local talent.

What, then, is the alternative? Local foreign talent can offer a shrewd alternative to full management localisation. Hiring foreigners who have themselves opted to live in China gives companies many of the benefits of imported expatriate talent but at ‘half-pat’ rates. In many cases, because expatriates living in China enjoy one of the highest disposable incomes in the world, companies only give housing assistance and possibly some tax equalisation. Hence you get the higher levels of experience but at lower costs.

Paying the price of mismanagement

“Most companies will overestimate the return they will get from China and underestimate resources required to deal with constraints. Companies should place equal importance to conducting people due diligence as to financial due diligence.” HEAD OF OPERATIONS FOR A HIGH TECHNOLOGY MNC IN CHINA.

10 Rewarding China

Look behind the bull run

CASE FOUR: Low competence, high salary Mr Chen is an engineer with a wholly-foreign owned IT company in China. He was lured away from the competitor with a 40% increase in base salary, more responsibilities and a grander job title. But he proves to be only an average performer. So the IT company invests time and resources in training him, trying to increase his competency

and performance levels. However within two years, he gets lured away yet again by another competitor who offered an even more attractive package. So Mr Chen, an average performing employee, gets more and more expensive without a corresponding increase in performance and skill levels.

Employees, line and business managers are putting a lot of pressure on HR professionals to increase reward investment but there is usually no plan to recoup the returns.

Consider what happened when the Consumer Price Inflation jumped to 6.5% in August 2007 on the back of higher food prices. After the new rate was announced, our clients reported that they were deluged with requests from department heads about when and how much their salary will be adjusted.

Or consider what happened when the government revised the statutory housing benefits policy earlier this year. Not only was the employers’ contribution reduced, the employee contribution above a cap amount now become taxable. In effect, employees now had less disposable income. Again, HR departments were inundated with requests for salary adjustments.

Let’s stop and consider what might be behind these requests.

Most Chinese have worked for

all-embracing state-owned

enterprises. This has given them a very

different view of their employer’s role than their counterparts in

the West.

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Are employees more ‘dependent’ in China? Most Chinese have worked for all-embracing state-owned enterprises who took care of employees from cradle to grave. This has given them a very different view of their employer’s role than their counterparts in the West or other parts of Asia. The expectation is that employers will compensate them for changes such as increases in tax or contributions to statutory housing schemes. Employers will usually have to bear the cost of these changes if they want to retain employees – because it is expected of them.

Is there a culture of ‘asking’?The government’s one child policy may also be a factor. On the whole, China’s Little Emperors have never been told ‘no’ by their parents, so they think ‘why shouldn’t I ask for what I want? The boss just might say yes!’

On this basis, it’s not surprising that as China’s CPI increased, many employees have asked for an increase in their base salary to compensate for the loss of disposable income. Line managers also feel compelled to lobby HR for more money lest they be seen as ‘uncaring’ managers.

So, unlike in other countries where the actions of the government are seen as beyond their employers’ control, in China there is an attitude that one’s employer is

(to a degree) a ‘nanny’ who will ‘make it all right’. How then should employers deal with their employees’ expectations without demotivating and losing them?

We have found that clear and firm communication is a key factor. The companies who are successful in coping with such situations all have a clear employee communication program in place dealing with such subjects – before employee unrest rears its head. Take as an example the practice of one Japanese conglomerate in China. When the new statutory housing policies were announced, the head of its China operations gathered all the managers and told them it was not company policy to adjust pay to external factors. He pointed out that, by the same line of logic, the company would not decrease salaries if personal income taxes were decreased.

Apart from theses cultural factors, there are also some demographical challenges in the current employment market.

How young are they, again!?On average, Chinese senior managers (Hay Group Reference Level 20) are five years younger than their Asian counterparts. At lower management levels the gap is even more dramatic (Table 4).

China

38

36

40

42

44

46

48

34

32

30

28

2612 13 14 15 16 17 18 19 20

Hay Group Reference Level

Ave

rage

age

of e

mpl

oyee

s w

orki

ng in

MN

C

TABLE 4 AGE ANAYSES – BY COUNTRY

Malaysia Singapore Hong Kong Germany

12 13 14 15 16 17 18 19 20

29

3536

3839

30

34

36 36

40

30

36 36

3839

33

35

3738

41

34

3738

39

41

36

4039

40

42

38

4241 41

44

39

43 4342

44

40

45

4344

46

China

12 13 14 15 16 17 18 19 20Hay Group Reference Level

Ave

rage

age

of e

mpl

oyee

s w

orki

ng in

MN

C

TABLE 5 AGE OF OLDEST 10% EMPLOYEES WORKING FOR MNCs

Malaysia Singapore Hong Kong Germany

12 13 14 15 16 17 18 19 20H G R f L l

4442

46485052

60585654

4038363432

JUNIOR MANAGEMENT MIDDLE MANAGEMENT SENIOR MANAGEMENT

35

45

47

45

53

35

4748

46

53

37

47 4748

52

41

46

4847

53

41

47

4950

54

44

50 50

48

55

48

5051

49

55

47

51

5253

55

46

53 53 53

57

12 Rewarding China

China

38

36

40

42

44

46

48

34

32

30

28

2612 13 14 15 16 17 18 19 20

Hay Group Reference Level

Ave

rage

age

of e

mp

loye

es w

orki

ng in

MN

C

TABLE 4 AGE ANAYSES – BY COUNTRY

Malaysia Singapore Hong Kong Germany

12 13 14 15 16 17 18 19 20

29

3536

3839

30

34

36 36

40

30

36 36

3839

33

35

3738

41

34

3738

39

41

36

4039

40

42

38

4241 41

44

39

43 4342

44

40

45

4344

46

China

12 13 14 15 16 17 18 19 20Hay Group Reference Level

Ave

rage

age

of e

mp

loye

es w

orki

ng in

MN

C

TABLE 5 AGE OF OLDEST 10% EMPLOYEES WORKING FOR MNCs

Malaysia Singapore Hong Kong Germany

12 13 14 15 16 17 18 19 20H G R f L l

4442

46485052

60585654

4038363432

JUNIOR MANAGEMENT MIDDLE MANAGEMENT SENIOR MANAGEMENT

35

45

47

45

53

35

4748

46

53

37

47 4748

52

41

46

4847

53

41

47

4950

54

44

50 50

48

55

48

5051

49

55

47

51

5253

55

46

53 53 53

57

Because of the lack of experienced professionals in the China market, younger executives take on roles that they may not be prepared for in terms of experience, skills and maturity.

Where are all the 50-year olds?The experienced workers who would normally mentor and develop these younger workers simply don’t exist in China. It’s a mirror image of Europe and the US, where an ageing baby-boomer population is threatening a succession crisis as fewer young people are coming through the ranks than are needed to fill the gaps.

As Table 5 shows, the gap between Chinese and other countries’ executive experience levels only increases as you climb the corporate ladder. The experience-rich managers who occupy the top third of the graph elsewhere are not found in China. Why?

For the most part, it’s simply because a lot of these businesses just didn’t exist 20-30 years ago. Therefore, it’s almost impossible to find Chinese executives with the management experience to fill the upper ranks. Those who do have some level of experience are highly sought-after and command salaries out of all proportion to their effectiveness.

13

Rewarding best practices

What are some of the best performing companies in China doing to manage reward in this difficult climate? Here we share some best practices we’ve seen in our work with clients.

Monitor your reward ROI

Before giving into the demands for more salary, consider what an equitable return of productivity, revenue, or profits would be for the additional renminbi you are doling out. For example, for every RMB100 increase given, will the employee have a proportionate increase in their key revenue targets?

Since assuming his position three years ago, the Vice-President of Human Resources for a Japanese conglomerate in China instituted a practice where key performance indicators are revised upwards every time

a salary increase is given. During his tenure, he has seen the attrition rate of high-performance employees go down while the turnover of poor performers increases. With a clear and robust performance management system, the company was able to get an equitable ROI on their manpower costs and build long-term business sustainability.

Furthermore, with annual salary increments projected at a healthy 9.4% for 2008 – the highest for the past three years – conpanies have an unprecedented opportunity to enforce performance discipline and send clear signals to employees. Indeed, that is what the best companies are doing in China: giving twice or three times the increment to their high performers than average performers. Poor performers are often given nothing more than an inflation rate rise and, in extreme cases, no increment at all. In this way, companies will get a better ROI for their salary budgets.

CASE FIVE:Company E put in place a reward and talent management program that identified high performers who were matched with comprehensive career development programs, including training and development. These high-performers were paid above-market salaries. Their competency model means high performers are promoted when they are ready and supported with on-the-job training and mentoring. The company’s objectives and expectations were

clearly communicated, so that employees knew what behaviours and results would be rewarded.Company E has tracked its attrition rate over the past three years and found that the program was effective in retaining its high performers. The attrition rate for average and low performers was still high, but the company recognised that those employees generated less return on investment – so it will continue to focus its reward investments on its high performers.

The reward landscape is fast changing, challenging and sometimes frustrating. Some issues are unique to China; but most are not.

14 Rewarding China

Benchmark salaries against market rationally

We acknowledge that in China, companies have to move local Chinese employees more quickly up the ladder than in other markets. But companies must strike a fine balance between the readiness of the employee for more responsibilities versus retention. Otherwise, competitors will ‘promote’ them for you.

It is important to have accurate job sizes, especially for mission-critical roles, and benchmark them rationally against market practices, instead of relying on hearsay or gut-feel. Occasionally, there will be stampedes to deal with – like the one in early 2007 which drove up salaries in the banking sector by 50%. But armed with accurate and robust data and job sizing, it will be easier to analyze your reward ROI and avoid the panic that has broken out around you.

Smart employer branding

As elsewhere, people want to work for well-known companies like Nokia, Shell, and DHL. According to Hay Group PayNet, most Fortune 500 companies typically pay their staff at the 55th to 75th percentile levels, while the lesser known companies have to pay over the odds.

More than just savvy product marketing, your employer brand also communicates your attractiveness as an employer. It conveys your ‘value proposition’ – the sum of your culture, attitudes, systems, and employee relationships. And it encourages your people to embrace shared goals – success, productivity, and satisfaction – on both personal and professional levels. Hence smart employer branding will attract the best people, at a discounted rate.

The reward landscape is fast changing, challenging and sometimes frustrating. Some issues are unique to China; but most are not. By returning to the fundamentals of people and reward management, we are confident that companies will see a better return on their reward investment.

Roland RuizManaging DirectorReward Information Services, AsiaHay GroupTel: + 65 6323 1668 | Fax: +65 6225 2160Email: roland_ruiz@haygroup.com

Roland has worked with clients across Asia who face rapid change, impact of new technologies, internal organizational pressures for performance and major role changes. Roland has 20 years of combined managerial and consulting experience across Asia and advised senior executives on reward, work design and executive coaching issues for both large local companies and regional MNCs.

Goh Hern YinRegional Business Development ManagerReward Information ServicesHay GroupTel: + 65 6323 1668 | Fax: +65 6225 2160Email: hern_yin_goh@haygroup.com

Hern Yin has first-hand experience, as a former China country manager of Hay Group’s Reward Information Services, of the challenges of growing a business in China. He brings his knowledge of financial, talent and reward management issues in China to help multinational companies turn their China strategy into reality.

For more information, please contact:

15

ACCOR GroupAdidas Sports China AEGON Life Insurance Air New ZealandAllianz China Life Insurance Arch Chemicals (China) Ascott International Management Ashland Management (Shanghai) Aviva Cofco Life Insurance AXA-Minmetals Assurance BAC Cooling Systems (Dalian) Banpu Public Co., Ltd., ZhengZhou Rep. Office

Basell Asia Pacific Consulting (Shanghai) BASF China BASF Trading Shanghai Bayer China Holding Shanghai BranchBayer CropScience (China) Beijing Dejuxe Livestock Technology Beijing Embraco Snowflake Compressor Benetton Trading (Shanghai) BOC (China) Holdings BOC Insurance Bohai Property Insurance BP (China) Holding Bunge China Cargill Investments (China) Caterpillar (China) Investment Caterpillar (China) Machinery Components Caterpillar (Xuzhou) Caterpillar Motoren Guangdong Chanel ChinaChemtura Crop ProtectionChemtura ChemicalsCHEP (Shanghai) Chevron Companies (Greater China)

Chinatex Grains and Oils Import and ExportCiba Specialty Chemicals (China) CMA CGM (China) Shipping CMC Markets Beijing Representative OfficeColgatePalmolive (Guangzhou) ConocoPhillips China Continental – SABASCooper (China) CSAV Group (China) Logistics CSAV Group (China) Shipping CSM Cytec Industries ( Shanghai ) Cytec Surface Specialties ( Shanghai ) Dalian Total Consulting CompanyDeruite DHL Global ForwardingDi Ya Ge International Books & Magazines Distribution Dow AgroSciencesDow Chemical (China) Investment Dow Corning Shanghai Dow Corning Songjiang Manufacturing DSM (China) Ltd. DSM ChinaDSM Engineer Plastic Du Pont China DuBang Property & Casualty Insurance DuPont Agricultural Chemicals, ShanghaiEaton CorporationEcolean (Tianjin) Effem Foods (Beijing) Elcoteq Electronic Elf Lubricants (Guangzhou) EmbraerEsprit China

Fairton trading (Shanghai) FedEx Kinko’s ChinaFlowserve CorporationFMC-Suzhou Fu Mei Shi Crop Care Fonterra Brands (Guangzhou) Fortis AsiaGE (China) General Motors (China) Generali China Life Insurance Great Eastern Life Assurance (China) Great Lakes (Chemtura) Chemical Griffith Laboratories (China) Hanesbrands International (Shanghai) Heng An Standard Life Insurance Company Hercules Trading (Shanghai) Hexion Specialty Chemicals Shanghai Hilti AGHua Xia Life Insurance Huatai Insurance Huntsman Advanced Materials (Guangdong) Inbev Management (Shanghai) Ineos Management (Shanghai) ING Capital Life Insurance Ingersoll RandInternational Flavors and Fragrances (China) Invista ChinaINVISTA Fibers (Foshan) INVISTA Fibers (Shanghai) John Hancock Tianan Life Insurance Company Johnson Matthey (Shanghai) Chemicals Jotun Coatings (Zhangjiagang) Jotun COSCO Marine Coatings (Guangzhou)Joy Global

Appendix 1Hay Group PayNet China database participants

16 Rewarding China

Kanebo Cosmetic (China)Kao (China)Kao (China) Research& Development Centre Kao Commercial (Shanghai)Kao Corporation Shanghai Kraft Food ChinaKraton Polymers Trading (Shanghai) Lanxess Chemical (Shanghai)Lenzing FibersLeoni Bordnetz Systeme ChinaL’oreal ChinaLouis Dreyfus (Beijing)Lucite International (China) Chemical Industry

LVMH Perfumes & Cosmetics (Shanghai) Maersk (China) Shipping Maersk Logistics (China) Manulife-Sinochem Life Insurance Maxxium Shanghai Methanex Services ShanghaiMillennium ChemicalsMOL (China) Montaigne (Shanghai) Trading CompanyMontaigne Garments (Shanghai) MoogMosaicMSC ShippingMunich Reinsurance Company (Life)Munich Reinsurance Company (NonLife)National Starch & Chemical (Shanghai) New China Life InsuranceNike ChinaNunhems Beijing Seeds NutrecoNYK Line (China)

NYK Logistics (China) OI ChinaOMRON (China) Orient Overseas Container Line (China) Orient Overseas Logistics (China) Owens Illinois (ACI Packaging)P&G BeautyPacific Credit Card Centre, Bank of CommunicationsPacific International Lines (China) PepsiCo Foods (China ) PepsiCo PepsiCo Investment (China) Petroliam National BerhadPetronas Marketing (China) Pfizer Investment PPG Coating (Tianjin) PPG Industries PPG Industries – Asia PacificProcter & Gamble China Qingdao Almatis Reckitt Benckiser (China) Rhodia China Rijk Zwaan QingdaoRohm and Haas SABIC Asia Pacific Saint Gobain GroupSamsung Air China Life Insurance Insurance

Samsung Fire & Marine Insurance (China)Sasol Chemicals Pacific SchlumbergerShanghai SEB Electric Appliance Shell ChinaShiseido China SigmaKalon ChinaSino French Life Insurance Sino US MetLife Insurance

SIRONA Dental Systems SOCOMEC Group ChinaSolvay Asia Pacific Sonoco Group ChinaSumitomo Chemical Asia Sun Life Everbright Life Insurance Supresta Shanghai Syngenta China Investment Syngenta Seeds (Beijing) Taiping Insurance Tait Mobile Radio (Hong Kong) Teijin Creative Staff Tian’an Insurance Tianjin International Modern Equipment Timberland ChinaTIMEC (Tianjin) Titan Trading TNT (China) Total (China) Total Fuels (WuHan) Total Huadong Lubricants (Zhenjiang) Total Petrochemicals (China) TOTAL Petrochemicals (Foshan) TotalSinochem Fuels Trespa China United Metlife Insurance Unitor China Unitor China Production Viessmann Heating Technology BeijingVoith FabricsVorwerk InternationalWacker Chemicals (China) Wuhan Owens Glasses Container Yves Rocher GroupZIM Integrated Shipping Service ZIM Logistics China

Appendix 1 Hay Group PayNet China database participants cont.

17

Africa Cape Town Johannesburg Pretoria

Asia Bangkok BeijingHong KongJakarta Kuala LumpurMumbaiNew Delhi SeoulShanghaiShenzhenSingaporeTokyo

Europe Athens BarcelonaBerlin BilbaoBirminghamBratislavaBristolBrusselsBucharestBudapest DublinFrankfurtGlasgow Helsinki

IstanbulKievLilleLisbonLondon LyonMadridManchesterMilanMoscowOsloParisPrague RomeStrasbourgStockholmViennaVilniusWarsaw WindsorZeistZurich

Middle EastDubaiTel Aviv

North America AtlantaBoston CalgaryCharlotteChicagoDallas

EdmontonHalifaxKansas CityLos AngelesMexico CityMontrealNew York MetroOttawaPhiladelphiaReginaSan FranciscoSan Josè (CR)TorontoVancouverWashington DC Metro

Pacific AucklandBrisbaneCanberraMelbournePerthSydneyWellington

South America BogotaBuenos AiresCaracasLimaSantiagoSao Paulo

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