Companies in the Philippines are expected to raise salaries by a median of 5.1% in 2027, slightly higher than the 5% average increase this year, as employers balance rising costs with the need to retain talent.
The projected salary increase is part of a broader trend in Southeast Asia, with Vietnam and Indonesia expected to see higher increases of 7% and 6% respectively, while Malaysia, Thailand, and Singapore are projected to see lower increases of 4.7%, 4.6%, and 4% respectively.
Employers are increasingly using data-driven compensation strategies to improve employee retention, skills, and performance, according to a report by a leading advisory firm.
The report, which surveyed 408 organizations in the Philippines, found that more than half of employers said their actual 2026 salary budgets matched their original plans, while 18.8% reported spending less than initially budgeted and 8.9% said their salary budgets exceeded earlier projections.
Compensation planning continues to be influenced by inflation, business performance, and changing labor market conditions, with inflation averaging 4.8% in the first six months of the year and expected to settle at 6.4% this year and 4.5% in 2027.
Across the Asia-Pacific region, median salary increases are expected to stabilize at 4.9%, indicating that employers are adopting a more measured approach to compensation while continuing to compete for skilled workers.
The report also found that 71.9% of organizations plan to keep current headcount levels over the next 12 months, while 17.5% expect to increase their staff and 10.5% anticipate workforce reductions.
Employers are prioritizing workforce stability and talent retention amid ongoing economic uncertainty, with many firms investing in efforts to retain talent, including improving employees' experience, expanding training and development, and enhancing health and wellness benefits.
With compensation budgets remaining constrained, organizations are concentrating pay investments on critical roles and key talent segments, while compensation decisions for the wider employee population become more standardized.
An assistant professor at the University of the Philippines Diliman School of Labor and Industrial Relations noted that determining if a 5% salary increase is sufficient to attract talent is difficult, as employees weigh hikes against inflation and migration opportunities.
The professor said that highly productive and profitable sectors have the capacity to offer above-average increases, while occupations cutting across industries, such as janitorial roles, usually offer below-par adjustments.
The wage board recently approved a dual tranche P85 increase in the minimum wage in the National Capital Region, with the first tranche taking effect on July 25 and the second tranche set to take effect in January 2027.
However, some experts have raised concerns that the wage hike could trigger severe unintended economic consequences, including an inflationary wage-price spiral, hurting small businesses, and threatening macroeconomic stability.
The Foundation for Economic Freedom has called for the suspension of the NCR wage hike, citing the need for evidence-based, tripartite wage-setting that aligns wage growth with productivity gains and macroeconomic realities.
