Salary budgets for employees are projected to increase in 2023, mainly influenced by a continuation of the tight labor market and rising inflation concerns in Asia Pacific (APAC), including the Philippines, according to a report.
Leading global advisory, broking and solutions company WTW’s (NASDAQ: WTW) Salary Budget Planning Report found that companies in the Philippines are budgeting an overall average median increase of 5.7 percent for 2023, compared with the actual 5.5 percent increase in 2022.
“This is the highest salary increase budgeted since the pandemic,” the report noted.
The survey results show that 52.5 percent of employers in the Philippines have budgeted for higher salary increases in 2022 compared to last year.
When asked whether they have changed their 2022 salary increases from their original projections, only 32.5 percent have made further adjustment from what they have initially planned for while the 51 percent have maintained the pay budgets they set at the start of 2022.
The study that 59 percent of respondents attributed the higher pay rate to concerns over a tighter labor market (59%); cost management such as inflation rising cost of supplies (58%); and employee expectations for higher increases driven by inflation (44%).
The report also noted that dynamic talent and compensation market trends are reflecting dynamic business environment in the Philippines.
“Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive,” said Patrick Marquina, Work & Rewards Leader, Philippines, WTW.
“Although higher salary increases are expected, various industries are showing different developing rhythms. With such a dynamic environment, it’s imperative for organizations not only to have a clear compensation strategy but also a keen understanding and appreciation of the factors that influence compensation growth.”
Despite concerns on inflation and rising cost, 65 percent of companies are not looking into making more frequent salary increase adjustments with only 35 percent having already increased or planning to increase how often they raise salaries. Among those respondents, the vast majority (98%) have or will adjust salaries twice per year.
In lieu of salary rate as main tool to attract and retain talent, the study showed that some companies are taking non-monetary actions as fewer respondents expect high attrition and retention difficulties to continue plaguing the labor market next year.
Eighty-six percent are experiencing difficulties attracting talent this year, but only 38 percent expect difficulty in 2023. Similarly, 84 percent of companies reported difficulty retaining employees this year, but that number is expected to drop to just 49 percent next year.
Information Technology skills are most sought after by companies. In the Philippines, 64 percent of the organizations are looking to recruit digital talent in the next 12 months. Yet these professions are some of the most difficult to attract and retain, as three-quarters of companies experienced problems in attracting (74%) and retaining (66%) them.
In response to these issues, many organizations have taken or plan to take non-monetary actions to attract talent. For example, 65 percent of respondents have increased workplace flexibility, and 20 percent are planning or considering doing so in the next couple of years. More than half of the respondents (58%) have placed a broader emphasis on diversity, equity and inclusion (DEI), and 24 percent are planning or considering doing so in the next few years. Additionally, 45 percent of companies continue to enhance recruitment offers with sign-on bonuses and incentive awards, while 22 percent are planning or considering doing so in the next few years.
In the Philippines, 59 percent of companies have broadened their emphasis on DEI to retain more talent, and 25 percent are planning or considering doing so. In addition, a little more than half (52%) have increased the flexibility for remote work, and 26 percent are planning or considering doing so in the future. Almost 40 percent have changed their compensation programs (e.g., base salary and short- and long-term incentive plans), and another 35 percent are planning or considering to. Thirty-six percent (36%) have already made changes to improve their employees’ experience while 45 percent are planning or considering doing so.
“With significant risks in the global economy, continued high inflation and employers grappling with talent supply challenges, organizations need to get more creative to address attraction and retention challenges,” added Patrick. “The workforce is composed of a diverse employee population, each with their own unique dynamics. Employers are challenged to meet their preferences and needs while delivering on a superior employee experience for all.”
The Salary Budget Planning Report is compiled by WTW’s Reward Data Intelligence practice. The survey was conducted in April and May 2022. Approximately 22,570 sets of responses were received from companies across 168 countries worldwide. In Asia Pacific, 6,945 organizations from 14 markets responded. A total of 385 companies participated in the Philippines across different industries.