A report indicates that salaries in Southeast Asia are expected to increase by 2025, with Singapore falling behind the region.

A report by Aon predicts that the projected budgeted salary increases for Southeast Asia in 2025 will be higher than in 2024.

The study, conducted from July to September 2024, predicts that businesses in the region will likely maintain or increase their overall workforce numbers. The research analyzed data from over 950 companies in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

The failure to attract and retain top talent has become a significant risk for organizations in the Asia-Pacific region, moving from the ninth to the fourth top risk in 2023, according to Aon's Global Risk Management Survey.

According to Rahul Chawla, Aon's partner and head of talent solutions for Southeast Asia, the salary increase rates are expected to be higher in 2025 compared to 2024, despite anticipating a lower inflationary and interest rate environment in the future.

Despite a softening inflationary environment, salary increases are becoming more difficult, indicating a talent supply and demand imbalance that extends beyond inflation.

In addition to inflation, other factors such as the high demand for skilled talent in the region also contribute to the expected increases.

"In Singapore, Southeast Asia has been a sandbox environment for technology companies to set up shop, which has attracted capital and created a demand for talent to serve this growth," Chawla said.

"The speed of technology evolution has led to the emergence of new skills, such as prompt engineering, which was not a significant skill set two years ago. However, with the advent of ChatGPT, there is now a growing demand for this skill," said Cheng Wan Hua, director of talent analytics for Southeast Asia at Aon.

According to Aon, the projected salary budget increases in 2025 across six Southeast Asian countries are as follows.

Vietnam

Actual salary increase in 2023: 7.5%

Actual salary increase in 2024: 6.4%

Budgeted salary increase in 2025: 6.7%

Indonesia

Actual salary increase in 2023: 6%

Actual salary increase in 2024: 5.7%

Budgeted salary increase in 2025: 6.3%

Philippines

Actual salary increase in 2023: 5.2%

Actual salary increase in 2024: 5.4%

Budgeted salary increase in 2025: 5.8%

Malaysia

Actual salary increase in 2023: 5%

Actual salary increase in 2024: 4.9%

Budgeted salary increase in 2025: 5%

Thailand

Actual salary increase in 2023: 4.7%

Actual salary increase in 2024: 4.4%

Budgeted salary increase in 2025: 4.7%

Singapore

Actual salary increase in 2023: 4%

Actual salary increase in 2024: 4.2%

Budgeted salary increase in 2025: 4.4%

The report indicates that salary increases in Southeast Asia vary across industries, with technology and manufacturing budgeting for the highest increase of 5.8%, while retail, consulting, business and community services, and life sciences and medical devices are set for a 5.4% increase.

According to the data, the energy, financial services, and transportation industries are at the lower end of the spectrum with percentages of 4.9%, 4.8%, and 4.1% respectively.

In 2025, it is predicted that the salary increases in Singapore and Thailand will not keep pace with the rest of the region, with projected growth rates of 4.4% and 4.7%, respectively.

According to Chawla, Singapore's salary increases tend to lag behind other markets in Southeast Asia due to its developed status, which results in lower inflation rates compared to faster-growing countries.

The city-state typically experiences lower GDP growth rates compared to other countries in the region, which contributes to the smaller salary increase, he stated.

While other countries in the region have experienced more economic growth, Thailand has seen less, according to Chawla. Furthermore, the country's talent pool is less mobile due to language and deployment constraints, which causes it to remain within its own market.