Companies in the Asia Pacific region are forecasting, on average, a 4.8% increase in overall salaries in 2023, according to research by Mercer. That’s a slight increase from 4.6% this year. However, real salary increases will be nominal in most countries because of ongoing inflation.

India has the highest projected salary increase at 9.1%, followed by Vietnam at 7.1%, Indonesia at 6.1% and the Philippines at 5.5%.

The country with the lowest forecast average increase in salary was Japan as 2.2%. It was followed by Australia at 3.1% and New Zealand at 3.2%.

All countries, with the exception of Mainland China, are projecting increases in average salary. While the average rate for China is rising 5.38%, it has risen by 5.40% last year.

“We observed a strong rebound late last year and early part of this year, with projected salary increase rates reverting to pre-pandemic levels for countries like India, Japan and Singapore,” said Puneet Swani, Mercer’s senior partner and career business leader for AMEA and Pacific. “On the other hand, Mainland China’s salary increments have been muted primarily due to its extended lockdown and travel restrictions’ direct impact on the retail and hospitality sectors.”

Mercer also found that voluntary attrition rates have increased across all Asia Pacific markets this year compared to 2021. The highest attrition rates were found in New Zealand, India, Vietnam, Malaysia and Hong Kong.

More job opportunities abound as employers recover from the pandemic, and this has resulted in talent shortages across the globe, according to Mercer. For example, close to 83% of employers in Mainland China are finding it difficult to fill jobs compared to 28% in 2021. Similarly, in markets like Singapore (84%, up from 64% in 2021) and Hong Kong (83%, up from 68% in 2021), businesses are grappling with shortages that are more prevalent than usual.

The fierce competition for talent has also pushed up wages. Dissatisfaction with pay and the ability to get a higher salary elsewhere (67%) ranked as the top reason for voluntary turnover in the region, while the ability to get better benefits at another company (25%) is also a growing trend among employees.

“Organizations need to approach the labor market challenge as a marathon — not a sprint,” Swani said.

“In the near-term, companies should focus on addressing the supply of talent by creating a better value proposition to attract new workers and retain existing ones through financial fixes like pay premiums and retention awards, and benefits like flexible work and paid time off,” he said. “As for long-term solutions, employers need to rethink their talent strategies around talent acquisition and retention and focus on building new work models like a talent marketplace.”

Mercer’s global survey included 35,000 participating organizations worldwide in more than 140 countries.