Employers warned against pay compression
Employees in Southeast Asia can expect bigger salaries in 2024 as a new report from Aon revealed upcoming increases for the region.
The latest 2023 Salary Increase and Turnover Report for Southeast Asia uncovered salary increases for Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam in 2024.
Vietnam leads with an eight per cent expected salary increase, followed by Indonesia with 6.5%. Other markets are projecting the following increases:
- Philippines (5.5%)
- Malaysia (5.0%)
- Thailand (4.9%)
- Singapore (4.0%)
Meanwhile, the report also found that employers across the region are "becoming more cautious" when it comes to compensation spends, with new hire premiums averaging between 5.6% and 13.3%.
But as salaries continue to go up, Alina Cheng, head of Data Solutions, Southeast Asia for Talent Solutions at Aon, warned employers about the risk of pay compression, which refers to the gap in pay between employees regardless of experience and skill.
"When new hires receive higher compensation than long-term employees, firms start to see pay compression issues develop," Cheng said in a statement.
Cheng warned employers that pay compression can lead to higher attrition and a decline in employee morale within an organisation.
"By focusing and nurturing talent from within, firms can subsequently decrease the need for new hire premiums while enhancing their organisation's employee value proposition," Cheng said.
The warning comes as other findings from the report indicate that employers in Southeast Asia have become "cautiously optimistic" when it comes to hiring.
The report found that 40% of the 950 employers surveyed said there were no changes to their recruitment numbers, while another 40% said they have hiring restrictions.
Defying economic slowdown
According to the report, the expected increases in salaries across Southeast Asia "defy economic slowdown concerns."
It also comes as "new forms of volatility" emerge in the region, making salary-increase planning challenging, according to Rahul Chawla, partner and head of Talent Solutions for southeast Asia at Aon.
Chawla said a reassessment of compensation strategies based on advanced analytics will be crucial for employers if they want to remain competitive in the employment landscape.
"By leveraging data from within their own organisations as well as the market, companies can make more informed decisions enabling them to not only weather the challenges of an uncertain economic climate but to thrive in an evolving workforce landscape," Chawla said.
Cheng, however, warned that simply increasing salaries will be "unsustainable" for firms amid challenging times.
"Having a holistic total rewards strategy based on data and analytics will therefore ensure organisations will attract and retain the right talent and continue to build a resilient workforce," Cheng said.