As the threat of inflation continues, especially in South China, which has both coastal access and first-tier cities, salaries are following suit. A recent Mercer China survey puts estimated average and median 2011 salary increases among multinational companies in Guangdong at 9.3 percent and 8 percent respectively (2011 China Monitor Survey 1st Issue).

Unfortunately, offering a competitive salary alone does not ensure employee loyalty. Given the continual war for talent, corporations are now "fine tuning" their benefit packages - seeking to define a new standard and differentiate themselves in the market. Finding the right mix of key reward components - salary, benefits, career development and work lifestyle - leads to an employer brand that presents a cost-effective solution with high employee satisfaction and engagement, the magic bullet in the HR space.

Especially in the benefits arena, there is currently much room for differentiation. Apart from the mandatory benefits provided under social plans, which are defined by the government, employer supplemental plans show lack of imagination. Consider medical supplementary benefits.

The annual maximum benefit for the 25th, 50th and 75th percentile of over 700 companies surveyed is all 20,000 yuan (2010 Mercer All Industry Employee Benefits Survey). This type of plan was designed about 10 years ago and has not changed since, while the underlying social programs have undergone major revisions. In the last decade, employee needs and expectations from their employer have also evolved and must be considered in today's context.

Business in the Pearl River Delta has traditionally depended on a large supply of blue-collar workers supporting low margin business intended for export. As this labor pool shrinks, many employers are now seeking to restructure their business into more high-end or specialized products. Simultaneously, employee expectations will increase.

Employee needs should be satisfied by the employment value proposition that an employer provides. Maslow's Hierarchy of Needs - a socio/psychological theory first published in 1943, states that needs are progressive - the most basic of needs are satisfied before an individual seeks fulfillment of the next level of needs and so on until all different needs are satisfied.

Until physiological needs are met, an individual will not focus on safety needs. In the benefits space this means that accommodation, meals and commutes must be resolved before employees focus on accident, death or disease coverage. As safety needs are met, an individual will focus on love and belonging, then esteem and finally self-actualization, realizing one's full potential.

Currently the average benefits plan is still focusing on accidents, death and disease, but employees need and want more from their employer if they are to remain loyal to that employer. A competitive total rewards package must respond to the total hierarchy of employee needs if it is to engender personal satisfaction in the employee and loyalty to the employer providing the opportunity for mutual achievement.

When it comes to health and wealth accumulation, many still say - "Why not just give employees cash and let them take care of their own needs? Market practice is good enough." No organization should be providing benefits merely because it is market practice. These employers face a future where there are ever-escalating pay packages or a constant exodus of employees and the related costs of training new hires. Benefits should be provided to:

Avoid business damage: Medical issues ranging from mental health (suicide attempts) to meningitis to denied life insurance claims paint a picture of a company and can harm its reputation.

Maximize productivity: If an employee is worried about a family member or waiting in line at the hospital they are not contributing fully to the company. As those needs are met and the worries taken away, productivity increases.

Become an employer of choice: A satisfied, high achieving, productive workforce will contribute to meeting corporate social sustainability goals and help to brand a company's products and service as high quality, desirable in the market and worth more to consumers.

The author is principal and consulting director at the Shanghai office of Mercer, a global consultancy.