Multinational companies seeking to set up lower-cost operations in Asia will face higher wage costs in China than in India, according to a survey by Mercer Human Resource Consulting.  The report shows that for 95% of the 42 job roles examined, average base pay is higher in China than in India. While pay differences are less stark at lower levels, some senior managers and professionals in China earn more than double their counterparts in India. 

The survey found that HR managers in China earn $32,000 on average compared to $15,100 in India, while project managers and financial analysts earn $23,400 and $13,200 respectively in China compared to $10,000 and $8,400 in India.

At the lower end of the salary scale, customer service assistants receive $2,400 a year in China compared to just $1,600 in India, while skilled production workers earn $2,300 compared to $1,900 in India.

Mark Sullivan, Worldwide Partner at Mercer, said: "China and India have become prime locations for investment by multinational organisations because of their skilled labor and low wage costs.  Companies are increasingly looking to outsource their back-office operations to these countries to reduce overheads.

"While it is far cheaper to employ staff in both China and India than Europe or the US, India appears to have the advantage of slightly lower wage costs."

But, he said: "Although labor costs are lower in India, there is a high demand for skilled workers there, particularly at the executive level.  If demand continues to outweigh supply then we can expect wages to increase substantially over the next few years." He added: "The challenge for employers is to make sure they retain their top staff and equip lower-level employees with the necessary skills to move up the organization."

"When global companies compare China and India as places to outsource their operations, wage rates are only one factor in the equation," said Steve Gross, a Worldwide Partner who leads reward strategy consulting at Mercer and who advises US-based multinationals.  "Organizations need to weigh up other operational costs, as well as factors such as proximity to markets, to determine the most cost-effective option.  They can then focus on the type of rewards program that will attract and retain the right level of skilled workers."

According to the survey, the average pay increase in India over the last five years is 11.5% compared to 7.5% in China.  India currently has the largest population of English speakers outside the US.

"The Chinese market is very complex, and wage rates can vary considerably," noted Jeff Fuller, Mercer´s rewards business leader for greater China, based in Shanghai.  "Salaries in the corporate centers like Shanghai, Beijing and Guang Zhou are some 20% higher than in other large cities.  The pay gap is even wider in more rural areas."

Employment Culture

Both India and China rely heavily on a system of values that emphasize ethics and traditions. However, the survey reports that employees are driven by different motivations.  Employees in China are motivated by a sense of personal accomplishment, fair pay and benefits while those in India tend to place more importance in confidence in senior management and organizational reputation, as well as fair pay.  In both countries, 80% of workers have a favorable view of their organization.

Copies of Mercer´s report China and India: comparative HR advantages cost $960 and are available at www.mercerHR.com/china-indiareport

Table of average annual base pay for various jobs in China and India 

Mercer Human Resource Consulting is the global leader for trusted HR and related financial advice, products, and services, with more than 15,000 employees serving clients in over 190 cities and 41 countries and territories worldwide. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific, and London stock exchanges.