Salary increase on the horizon in 2019

This 2019, the overall forecast for salary increase here in the Philippines is at 6 percent, according to “Compensation Planning for 2019,” the study by global human resources consulting firm Mercer.

But it’s a nominal figure, explains Floriza Molon, Mercer’s career business leader for the Philippines. “Because of inflation, your real salary increase would be at 0.8 percent,” she says. “It’s a hard reality, but if we look at the salary pattern, it’s the same range [as last year’s].”

What that means, says Molon, is that salary movement here in the Philippines is driven by the market, not the economy.

“The salary increase rate is almost the same as inflation. What can we do about it? It will still be a market-driven decision, because companies won’t adjust to the inflation rate; they already have budgets in place. What we’re seeing is, since companies’ budgets are limited, employees need to stay relevant. Companies will choose who to give salary increases to based on skill and competitiveness,” says Molon.

An annual study released by Mercer since the ’90s, “Compensation Planning for 2019,” identifies key remuneration trends and makes hiring and pay increase predictions for the coming year across Asia, Middle East and Africa.

The Philippines’ data is gathered through a survey of over 400 of Mercer’s clients, a mix of both local and multinational firms.

Results are a combination of the market data provided by these clients and Mercer’s analysis using economic indicators.

Comparing the country’s salary increase forecast to those of other emerging markets, the study places the Philippines’ 6 percent in the middle of the spectrum.

The highest salary increases in 2019 are expected for Bangladesh (10 percent), India (9.2 percent) and Vietnam (9.8 percent). At the other end of the spectrum, Australia is at 2.6 percent; New Zealand at 2.5 percent; while Japan has the lowest expected salary growth rate at 2 percent.

As for the country’s hiring outlook, Mercer’s study says that it is “positive,” with an average of 50 percent of companies across different industries looking to grow their talent pool to seize diversification and growth opportunities in the face of ongoing digital disruption. The shared services and outsourcing industry shows the most positive hiring outlook in 2019, with 70 percent of companies in this sector looking to expand and 24 percent looking to maintain their current head count.

Still, Molon emphasizes the need for employees to upskill to stay competitive. Digital is driving demand for new skills, and companies in the Philippines have begun to offer a significant premium for professionals in data analysis and specialist sales roles.

“Everyone is going online, for example, so business models are changing, which means that the people being hired will need to also adapt,” says Molon. “As the world’s engine of growth, Asia, especially in markets with young populations like the Philippines, continues to see sustained demand for skilled talent, with digital skills continuing to draw a premium.”

On the other hand, the study reveals that talent retention is a particular struggle for companies here in the Philippines, as, on the average, employees across all industries stay in their current organization for only five years. The shared services and outsourcing industry has the shortest employee tenure, with employees staying an average of only three years in their jobs.

Molon says talent retention goes beyond offering the best compensation package—it’s about engaging one’s employees.

The survey reveals that employees cited these top reasons for leaving their current company: lack of career path and opportunity to grow; low pay competitiveness; and unpleasant relationships with supervisors. However, these employees also noted that beyond competitive compensation, they also highly value focus on health and well-being, career empowerment, and a sense of purpose in the workplace.

An innovative benefits or rewards program could be one solution to this challenge, says Molon. Some companies now offer quirky employee rewards such as date night sponsorships, pet health insurance, and even a regular raffle for an instant out-of-town vacation (employees come to work with a packed luggage; the lucky winner is chosen at the end of the day, and he or she takes the next flight out to the destination chosen by his or her company).

“To attract and retain employees, companies are going beyond offering generous incentives and retention bonuses, and taking a more holistic view of their total rewards philosophy,” Molon says. “They are increasingly focusing on the experiential components of rewards programs to deliver meaningful career experiences and flexible arrangements, as well as programs to help manage the physical, financial and emotional well-being of their employees.”