The booming Chinese economy is leading to a retention melt-down that has left companies struggling to retain their professional staff, and faced with either having to pay higher salaries or excessive recruitment costs.
A survey by Mercer Human Resource Consulting of over 100 organisations in China, many of which are multinationals, shows that more than half (54 per cent) have experienced an increase in turnover for professional staff since last year, while four out of 10 have reported higher turnover for support staff.
Meanwhile, the average tenure for 25-35 year olds - the age group targeted most by multinational companies - fell from an average of between three and five years in 2004 to just one to two years in 2005.
"The employment market in China has ignited in recent years, as more multinational organisations set up operations there and local companies expand," said Mercer's Brenda Wilson. "Individuals with transferable skills have become a valuable commodity, and companies are battling to keep hold of them."
Many organisations response to employees threatening to walk out of the door is simply to throw more money at them, she added. But while this can sometimes work in the short term, more often than not a competitor is willing to pay just as much.
But despite these burgeoning retention problems, organisations are still underestimating the true costs of having to replace staff.
"Taking account of all the elements that contribute to turnover cost, like recruitment agency fees, interviewing time, and loss of sales while positions remain unfilled, employers can face bills of over 200 per cent of salary for senior staff," said Ms Wilson.
It's no surprise, then, that Chinese employers are starting to realise they need to be more sophisticated in their approach to employee attraction and retention.
The survey found that eight out of 10 organisations offer healthcare and related insurance, four out of 10 provide health and fitness plans and a quarter offer flexible working.
But results also show that more than four of 10 organisations believe their employees are still dissatisfied with the benefits on offer.
Nevertheless, Brenda Wilson argued that employers who offer variable pay, promote 'softer' benefits like flexible working and provide meaningful career opportunities are most likely to keep hold of their best employees.
Offering staff overseas assignments is deemed the most effective tool for developing employees' careers, although less than half (42 per cent) of organisations actually provide such opportunities.
Individual career development plans, offered by half of companies, are also believed to be effective. In contrast, mentorship programmes are considered relatively ineffective and are offered by just a quarter.
"Attractive pay and benefits and opportunities for career development are rated as the most important factors for attracting and retaining employees. Companies that offer structured overseas assignment programmes and individual career development plans demonstrate a willingness to invest in staff, and this can pay dividends," Brenda Wilson concluded.
"High-profile multinational organisations with strong employment brands typically provide more career opportunities and better training and mentoring programmes than many domestic companies in China. Employees tend to be attracted to these organisations because of the prospects they offer and the kudos associated with working for them."