Philippine employers to boost 2023 pay raises to attract and retain more talents

Leading global advisory, broking and solutions company WTW’s (NASDAQ: WTW) Salary Budget Planning Report found that salary budgets for employees in the Philippines are projected to increase in 2023, mainly influenced by a continuation of the tight labor market and rising inflation concerns in Asia-Pacific (APAC). The report saw an overall average median increase of 5.7% for 2023 which is higher than the actual 5.5% increase in 2022. This marks the highest salary increase budget since the pandemic.

According to the survey results,  52.5% 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% have made further adjustments from what they have initially planned for, while 51% have maintained the pay budgets they set at the start of 2022. 

The higher 2022 actual salary budgets compared with the projections made in 2021 can be attributed to 1) Concerns over a tighter labor market (59%) 2) Concerns related to cost management such as inflation rising and cost of supplies (58%), and 3) Employee expectations for higher increases driven by inflation (44%).

The economic conditions and new ways of working are driving organizations to reassess their salary budgets to remain competitive, according to 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,” he explained.

The survey also found that 86% of organizations face the challenge of attracting and retaining talents but only 38% of the respondents expect difficulties in 2023. Similarly, 84% of companies reported difficulty retaining employees this year, but that number is expected to drop to just 49% next year. 

Information Technology skills are most sought after by companies. In the Philippines, 64% 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 74% of companies experienced problems in attracting and 66% in retaining them.

To address this issue, many organizations have taken or plan to take non-monetary actions to attract talent. 65% of respondents have increased workplace flexibility and 20% are planning or considering doing so in the next couple of years. 58% of respondents have placed a broader emphasis on diversity, equity and inclusion (DEI), while 24% are planning or considering doing so in the next few years. Additionally, 45% of companies continue to enhance recruitment offers with sign-on bonuses and incentive awards, and 22% are planning or considering doing so in the next few years. 

Organizations are taking steps to retain employees, with 59% of companies broadening their emphasis on DEI to retain more talent, while 25% are planning or considering doing so. In addition, 52% have increased the flexibility for remote work, and 26% are considering doing so in the future. Almost 40% have changed their compensation programs (e.g., base salary and short- and long-term incentive plans), and another 35% are planning or considering it. 36% have already made changes to improve their employees’ experience while 45% are planning or considering doing so.

Marquina stated that organizations need to get more creative to attract and retain talents, with the significant risks in the global economy, continued high inflation, and employers grappling with talent supply challenges. He added, “The workforce is composed of a diverse employee population, each with their own unique dynamics.” Now, employers are facing the challenge to meet their preferences and needs while delivering a superior employee experience for all.

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