Southeast Asia's 2025 salary increases outpace inflation concerns

As 2024 comes to a close, businesses across Southeast Asia are preparing for a significant increase in salary budgets for 2025. A report by professional services firm Aon, conducted from July to September 2024, reveals that salary increases are expected to rise from 4.2% in 2024 to a budgeted increase of 4.4% in 2025. This rise comes amid a lower inflationary environment and ongoing demand for skilled talent in various industries. The analysis included data from over 950 companies in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, highlighting the economic trends shaping employment costs in these countries. Technology and manufacturing are predicted to see the highest salary increases, particularly influenced by the technological advancements and the growing need for specialized skills. Despite this overall increase, specific countries such as Singapore and Thailand are projected to lag behind the regional average. Salary increases in Singapore are estimated at 4.4%, primarily due to its status as a developed market and lower inflation compared to its neighbors. Similarly, Thailand's expected increase of 4.7% stems from its relatively slower economic growth and a more stationary talent pool, which contrasts with the dynamic labor markets in other Southeast Asian nations. Companies in Singapore and Thailand face challenges in attracting and retaining top talent, a growing concern in the Asia-Pacific region. The disparity between the budgeted salary increases and the varying economic conditions among Southeast Asian countries underscores the complexity facing businesses. While there is a backdrop of lower inflation and interest rates, the high demand for talent creates a competitive environment that necessitates greater investments in human resources. Employers must navigate these conflicting dynamics to remain attractive to potential employees and ensure sustainability in growth. In summary, while the region anticipates higher salary budgets for 2025, countries like Singapore and Thailand are expected to offer less competitive increases. As companies respond to the demand for specialized skills and address talent retention issues, it will be critical for them to adapt strategies that align compensation with the needs of a changing labor market.