Salaries in Southeast Asia are expected to increase slightly for 2023 compared to this year. According to Aon’s 2022 Salary Increase and Turnover Study, median salary increase budgets are forecasted across industries at 4.7% for Singapore, 5.1% for Malaysia, 6.8% for Indonesia, 6% for the Philippines, 5.1% for Thailand, and 7.9% for Vietnam.
While inflation plays a significant role in how salary changes look across the region, they are also driven by supply and demand in the talent market. According to Aon, high attrition rates across southeast Asia in 2022 are putting pressure on firms to use compensation measures to tackle hiring and retention challenges.
Rahul Chawla, partner and head of Human Capital Solutions for Southeast Asia at Aon, explained that while it is critical for businesses to define and adapt pay for different worker types and the nature of the work, organisations must stay agile as they rethink their pay principles.
“Businesses need to shape their strategies towards long-term drivers of pay and performance by making changes in a phased manner to optimise pay effectiveness,” he said.
He added that companies must define their 2023 salary increase approach in the context of the competitiveness of their current salary levels and employee value proposition. “Companies that adopt a skill-based compensation programme will help ensure they can continue to build future skills for their organisation’s resilient workforce,” Chawla said.
Meanwhile, Aon’s survey showed that salary increases this year varied across industries across the region, with the retail industry having the highest increases (6.5%), followed by technology and life sciences (6.1%) and financial institutions (5.9%).
Aon explained that the ongoing technology and digital skills shortage across the region as a consequence of firms competing to accelerate transformation and drive their digital initiatives resulted in higher year-on-year increases in salaries and total compensation for technology and data analytics roles compared to others. However, with the recent reports of a potential global economic slowdown, firms are taking a cautious approach and focusing on salary increases for selected employee groups or levels as they navigate a volatile and uncertain environment.
Alina Cheng, senior consultant, Human Capital Solutions for Southeast Asia at Aon, said that with the rise of fintech and digital banks in the region, roles in areas such as risk, compliance and talent acquisition are in demand. According to her, firms are paying a premium to attract new talent at the junior and middle management levels for these roles.
“As a result, over the past two years, we have seen compensation structures shifting towards lesser variable and pay at risk and an increased focus on salaries. There is no one-size-fits-all approach for developing a salary increase strategy in a volatile environment,” she said.
Instead, employers must constantly analyse the market, study the available data and contextualise the unique circumstances of their industry and organisation to make better and more informed decisions.
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