The pandemic has wreaked havoc on businesses and economies worldwide. In a region severely affected by COVID-19, Asia Pacific economic indicators point to a rebound. In Willis Towers Watson’s 2021 Salary Budget Planning Survey Report, the average salary increase in the Asia Pacific region is predicted to bounce back close to pre-pandemic levels in 2022 at 5.3%, after dipping to 4.9% in 2021.
This shows that employers are more optimistic about their salary budget planning for the year ahead, and there are three drivers for this confident approach.
1. A revived economy and a talent market with increased opportunities for growth.
The Asia Pacific economies are growing faster than those of other regions, and the region is expected to continue doing so. The region posted a growth rate of 6% last year and is forecasted to stabilize at 4.5% this year. The solid economic performance of Asia Pacific markets contributed to salary increase rates in the region, which is the highest among all regions in 2022.
In markets with relatively high attrition rates in 2021, such as Australia, China, Singapore, Taiwan, and Vietnam, employers use salary increases to address their turnover problem and attract talent. This results in a more favorable salary budget forecast.
2. Wages are growing at a favorable rate.
When inflation outpaces salary increases, workers effectively make less money than before. Fortunately for Asia Pacific workers, they can expect to see their salaries increase at a healthy pace, as rising inflation rates are unlikely to negate gains from salary increases.
In Southeast Asia, projected salary increases for this year stood at 6.6% for Indonesia (up from 5.8% in 2021); 3.8% for Singapore (from 3.4% in 2021); and 4.8% for Thailand (from 4.2% in 2021) according to Willis Towers Watson.
This is good news for employees in the region, as their purchasing power remains steady, and they will still be able to afford goods and services.
3. Salary freezes are on the way out.
When the pandemic hit, many companies in the Asia Pacific introduced salary freezes. In 2020, three out of 10 companies froze salaries. A year later, that number has halved to 13% and is expected to fall even further to 2.5% by 2022—close to pre-pandemic levels.
Along with the positive outlook, Southeast Asian markets are projecting even higher salary increases next year, with Indonesia (8%) and Malaysia (7%) posting the highest jump in percentage points based on the same report by Willis Towers Watson.
With Asia’s economy steadily reviving, the report says that business owners have the confidence and stability to start reinvesting. This will positively impact the labor market as companies start hiring more, which bodes well for workers who are no doubt looking forward to more significant income increases and better job security in the coming year.