By Diego Gabriel C. Robles
PHILIPPINE EMPLOYERS will probably increase their budget for pay increases next year amid a tight labor market and rising prices, according to Willis Towers Watson (WTW).
Private companies are allotting an average median increase of 5.7% in salaries for 2023, higher than the actual 5.5% increase this year and at any time during the pandemic, the insurance advisor company said, citing the results of its survey for the Asia-Pacific region.
“Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive,” Patrick Marquina, Work and Rewards Leader at WTW Philippines, said in a statement.
“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 added.
Sergio Ortiz-Luis, Jr., president of the Employers Confederation of the Philippines, and Raymond Democrito C. Mendoza, party-list representative of the Trade Union Congress of the Philippines, did not immediately reply to separate Viber messages seeking comment.
The Philippines ranked fifth out of 14 countries, with India (10%), Vietnam (8%), Indonesia (7%) and China (6%) at the top. The country was also fifth for actual pay raises this year.
Willis Towers Watson said 52.5% of 385 employers in the Philippines who participated in the survey had increased their salary increase budgets this year from last year.
“When asked whether they have changed their 2022 salary increases from their original projections, only 32.5% have made further adjustment from what they have initially planned for, while 51% have maintained the pay budgets they set at the start of 2022,” it said.
Consumer product companies are expected to increase their pay hike budgets next year to 5.8% from 5.6%, while high-tech and pharmaceutical companies will increase theirs to 5.7% from 5.5%.
The fintech industry would probably increase its budget to 7.1% from 7%, while energy and natural resources and financial services would both remain unchanged at 6%, Willis Towers Watson said.
The most cited reasons for the higher actual pay raise this year were a tighter labor market (59%), cost management such as inflation and rising supply costs (58%) and employee expectations (44%).
Despite inflation concerns, 65% of the companies said they would not make more frequent salary increases, while the rest said they already did or were planning to increase how often they raise salaries. Among these, 98% said they have or will adjust salaries twice a year.
Willis Towers Watson said 86% of companies said they were experiencing difficulties attracting talent this year, but only 38% expect the same next year.
While 84% of companies reported difficulty keeping workers this year, the number is expected to drop to 49% next year.
Information technology skills were the most sought after by companies, with 64% of companies in the Philippines looking to recruit digital talent in the next 12 months.
A third of companies said that they experienced problems in attracting (74%) and retaining (66%) these professionals.
Most companies are taking nonmonetary actions to attract and keep talent, with 65% having increased workplace flexibility and 20% planning to do so soon.
This includes putting more emphasis on diversity, equity and inclusion (58%) and allowing remote work (52%).
“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,” Mr. Marquina said.
“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.”
Some companies were also using monetary incentives such as sign-on bonuses and incentive awards (45%) and changing compensation programs (40%).
“The optimism is based on the continuing normalization of socioeconomic activity leading into a steady, pre-pandemic pace of expansion, which should keep inflation relatively stable with energy prices likely to decelerate,” James G. Matti, head of WTW Philippines, said in a text message.
“Moreover, the recovery in tourism and private investments, coupled with sustained public spending on large infrastructure projects and robust remittances from overseas Filipino workers should enhance the continuous pace of economic recovery,” he added.
Mr. Matti said lockdowns spurred by another pandemic and runaway inflation could halt the expected salary increases next year.