In spite of the over-supplied human resources market, foreign-funded companies in Shanghai will continue raising salaries for their employees next year, according to a recent research report.

New university graduates, if they can enter a foreign-funded company, can also expect higher starting salaries, according to a compensation payment and welfare report on foreign-funded enterprisesin Shanghai, released by the State-run China International Intellectech Corp (CIIC) on Wednesday.

The report, based on a survey of human resource managers in about 300 foreign-funded companies, said that average salary growth at those companies is expected to be 8.3 per cent, compared with 8.8 per cent this year.

However, CIIC's Senior Consultant Li Shuang said the figure is a conservative prediction based on tight financial conditions.

"Actual figures for next year will be higher," she said.

European and American companies expect to see the highest growth in their salary level at 8.9 per cent, leading 8.3 per cent in Japanese-funded companies and 7.6 per cent in companies funded by other Asia-Pacific countries and regions.

The high-tech sector leads all sectors in salary growth with an increase of 9.2 per cent, followed by the comprehensive trade sector, 8.8 per cent,and manufacturing, 8.3 per cent, said the report.

"Human resource professionals have a new challenge next year: How do we strike a good balance between controlling the fast-growing human resource costs and keeping or attracting more essential talent for the company,"
said Li.

Although Shanghai has a high jobless rate and an abundant supply of university graduates, foreign-funded companies are still plagued by a lack of skilled workers at all levels, said experts.

As a result of talent wars between companies, talented employees can expect to leave a company at any time and receive any of a wide range of compensation packages.

The report said salaries for new university graduates started at a higher level in 2006 than the previous year.

Bachelor's degree holders saw the highest growth at 14 per cent, followed by master's degree holders at 12 per cent, while PhD graduates' income rose 5 per cent.

Salary increases for MBA students was the lowest at 0.1 per cent.

The survey also found that holders of a bachelor's or master's degree are better treated in European and American companies, while PhD holders can be better paid in Asian-funded companies.

The turnover rate in foreign-funded companies remained high this year at 15.1 per cent, compared with 15.2 per cent of last year.

Employees with European or American-funded enterprises seemed to be the most loyal, with a turnover rate of 13.1 per cent.

In order to retain talent, human resource managers have started to pay more attention to the motivation effect of variable incomes on employees.

Variable income refers to monthly and annual bonuses and other awards from the company.

Companies also increased their contribution to the social welfare of their employees.

For example, 18.7 per cent of companies surveyed have started to cover the part of social insurance that were supposed to be borne by individuals.Companies also spent more on training and financing education of their employees.