With inflation surging around the world, it has never been more important to make sure you get pay increases just right. Too much, and organizations will see margins further eroded. Too little, and you risk losing top talent in a tight labor market.

To find that balance, you need to understand local market movements and expectations. According to Korn Ferry’s recent Global Total Rewards Survey, the average pay raise globally was 4.4% in 2023. Although 28% of the 2,600 companies surveyed said they ended up granting higher increases than originally budgeted, this means on average employee remuneration is not keeping pace with inflation, which the UN predicts will decline globally to 5.3% in 2023.

Kartikey Singh heads Korn Ferry’s Reward & Benefit Solution practice in Singapore. According to Singh, inflation is moving at such a pace in some markets that it just isn’t possible for companies to pay in line with that growth. Instead, they are mapping pay increases to market movements for specific jobs.

Economic fundamentals drive pay growth

Across APAC, reported pay increases signal wide variance between individual countries. India increased salaries by 9.5% in 2023, and forecasts 9.8% growth in 2024. Australia, despite having one of the highest voluntary turnover rates in the region, is only planning to increase wages 4% this year—in line with the US at 3.8% and the UK at 4%.

Singh says these differences reflect the maturity and growth within each economy. “Australia, like the US and UK, is used to having lower and more stable inflation—and its rewards movements also tend to be more stable. Growth markets like India, Indonesia and China continue to struggle with talent supply shortages, especially in specific areas like technology and commercial sales.”

Singh also suggests that India is also now benefiting from changes to global supply chain strategies, with advanced manufacturing diversifying out of China. “Talent with skills in manufacturing, operations and supply chain can command a higher premium in India now,” he notes.

In contrast, Singapore is experiencing rapid wage growth in its lower-level roles due to its Progressive Wage Credit scheme—which is co-funded by the Singaporean government. Singaporean organizations told Korn Ferry they awarded a 4.3% median salary increase in 2023, with slightly more to juniors and clerical positions.

Moving towards bespoke rewards

Singh says he is also seeing many APAC organizations think more creatively about total rewards.

“We used to see everyone get a market-base increase—an inflation-plus baseline range, with some differentiation based on merit,” he explains. “Now, HR professionals are linking this merit-based approach to specific job families—focusing pay growth on roles or skills that are very difficult to hire in the current market.”

He believes in the future this could become even more individualized. “In the next five years, every employee could have customized compensation. Perhaps they will be able to choose—they can dial up the bonus, or select the benefits they value most, like childcare or extra leave. We are currently working with a tech company that ties compensation to ‘identities.’ By measuring proficiency level on different competencies, the company can assess the value of that identity—and pay accordingly.”

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Full pay disclosure

Bespoke rewards are challenging to execute at scale—and even more difficult in markets where there is regulatory requirement for pay transparency.

Pay transparency can help organizations attract and retain top talent by leveling the playing field and showing a commitment to pay equity. Yet Korn Ferry’s survey found just 12% of global respondents have developed and implemented a strategy for pay transparency, while almost half are adopting a ‘wait and see’ approach.

Singh says he is starting to see more transparency around executive pay in APAC, “but broader pay still tends to be a bit of a black hole. Organizations will become more transparent if there is regulation in place.”

Starting in 2024, Australian companies with more than 100 employees will need to publish their gender pay gap data, and a recent amendment to the Fair Work Act bans pay secrecy clauses in employment contracts.

Singh says it can take two to three years to collect and analyze data to make pay transparency reporting both accurate and realistic.

“We have been working with a major listed hospital group in ASEAN. They decided a few years ago they wanted to disclose compensation in their annual reports, to show they are working towards best practice in pay equity. They are just now reporting at a senior executive level, and will be able to provide greater detail across all jobs next year,” he says.

Taking the next steps for pay transparency

Ultimately, employers know pay transparency gives employees more power. Especially in a market where top talent is being enticed by competitors with a 20% pay bump.

If HR has previously tried to match those offers, pay transparency will open the door to everyone with that role or skillset demanding the same compensation. No wonder 51% of HR professionals globally believe pay transparency will lead to higher wages, according to the Korn Ferry survey.

This is ultimately the challenge for HR in 2023: to make sure they can get the most productivity and performance from a limited budget for payroll increases. Labor costs have a significant impact on the bottom line, across all industries. So how can you best spend planned payroll increases in a way that is fair, consistent and makes people feel valued?

It will be a careful balancing act—especially as inflation continues to erode the meaningful impact of wage growth for many employees.

Learn more about Korn Ferry’s Total Rewards capabilities.