Projected salary increases across Southeast Asia in 2024

Attrition rates across the region dropped in 2023 from the previous year, yet continued to remain in the double digits - with Philippines (17.5%) recording the highest rate.

While salaries in Singapore and Malaysia are expected to stay flat at 4% and 5% respectively, median salaries are expected to increase for Indonesia (6.5%), the Philippines (5.5%), Thailand (4.9%), and Vietnam (8%) in 2024.

Although slightly higher, Aon's 2023 Salary Increase and Turnover Report for Southeast Asia has projected that the increase in salaries in Southeast Asia continues to defy economic slowdown concerns.

Further, attrition rates across the region dropped in 2023 from the previous year, yet continued to remain in the double digits due to an ever-changing talent strategy and the ongoing gap between supply and demand of talent. Particularly, attrition rates are the highest in Philippines at 17.5% and lowest in Vietnam at 13.8%.

The report further revealed that businesses in Southeast Asia are cautiously optimistic about hiring; 40% of the companies reported no changes to their recruitment numbers, while 40% of companies have hiring restrictions.

Despite an increase in layoffs earlier in the year, the data shows headcount numbers across industries remain higher than pre-pandemic levels, with layoffs mainly occurring in the non-core/expansion areas of the business, while they continue to hire for other business lines.

Meanwhile, new hire premiums are averaging between 5.6% and 13.3&, with firms becoming more cautious with compensation spends as they streamline budgets, enhance cost efficiency and reevaluate compensation strategy. This contrasts with 2022, where Southeast Asia saw a hiring boom and new hire premiums averaged between 14.7% and 23.6%.

Alina Cheng, Head of Data Solutions, Southeast Asia for Talent Solutions at Aon commented: "Firms need to recognise and proactively address pay compression that is the gap in pay between employees regardless of their experience and talent to maintain an engaged, competitive and resilient workforce.

"When new hires receive higher compensation than long-term employees, firms start to see pay compression issues develop. The unintended consequences of pay compression can lead to higher attrition and a decline in employee morale. 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.”

Looking ahead to 2024, salaries across industries also continue to vary in addition to the differences between countries.

By sector, the retail industry continues to have the highest budgeted salary increases at 6.1%, followed by:

• technology (6%),
• life sciences and medical devices industry (5.9%),
• manufacturing (5.8%), and
• financial services (4.8%)

The technology sector is expected to have the highest increase in Singapore (4.5%), Indonesia (10.2%) and Vietnam (10.9%). In comparison, the manufacturing industry had the highest year on year salary increase across industries in Thailand (8.0%), Malaysia (13.7%) and Philippines (14.5%).

Across Southeast Asia – Malaysia, Philippines and Singapore – over half of the roles have had salary increases outrun inflation, with Singapore and Philippines having 71.7% of salary increases outrunning inflation and Malaysia at 56.4%. However, for Indonesia, Vietnam and Thailand, on average, 70% of salary increases lagged inflation.

For 67% of firms in Southeast Asia, inflationary pressures are included as part of their pay policy considerations when reviewing salary increases.

Cheng added: “Southeast Asia has long been a hotbed of economic growth, attracting talent from across the globe. As it confronts the prospect of a looming recession, the dynamics of salary increases, turnover, and workforce stability take on greater significance. In these challenging times, simply increasing salaries is unsustainable for firms as they look to manage profitability and people cost amongst other factors."

Lead image / Aon