SINGAPORE: According to the latest Singapore Business Review report, Singapore’s salary growth is expected to remain modest in 2025, with a projected increase of just 4.4%, the lowest across Southeast Asia, revealed by Aon’s recent Salary Increase and Turnover Study.
This marks a continuation of restrained wage growth in the city-state, following a similar trend seen in Thailand, which is forecasting a 4.7% salary hike for next year.
In contrast, other countries in the region are anticipating more robust salary increases.
Vietnam is leading the pack with an impressive 6.7% increase, while Indonesia and the Philippines are projected to see salary rises of 6.3% and 5.8%, respectively.
Within Singapore, the consulting, business, and community services sectors are expected to see the highest salary growth, with a projected increase of 5.7%.
However, other industries anticipate more conservative pay raises as companies face economic uncertainty and cost constraints.
The study also highlighted a growing challenge for employers in Singapore, with employee attrition rates edging up slightly to 16.7% year-on-year in 2024.
This marks a notable concern for businesses grappling with talent retention amidst an increasingly competitive job market.
The consulting and business services sectors are experiencing the highest turnover, while the technology sector’s attrition rate remains relatively stable at 15.1%.
Impacts on employee morale and retention
A modest salary increase can significantly impact employee morale and retention, especially when employees feel their contributions aren’t adequately recognized or rewarded.
In such cases, job satisfaction tends to dip, leading to decreased motivation and overall work engagement.
Furthermore, employees may perceive salary growth as unfair, particularly compared to compensation levels in other Southeast Asian countries.
This sense of inequality can breed dissatisfaction, eroding trust and fostering a negative workplace atmosphere. As a result, companies could see a rise in turnover rates.
Employees dissatisfied with the limited salary growth may seek better opportunities within Singapore or abroad, where salary growth prospects are more favourable.
In a Ministry of Manpower report featured in an article dated April 2024, Singapore’s attrition rate reached 19.6% year-over-year, a sign of increasing worker discontent.
For employers, this presents a competitive challenge. Companies may struggle to retain top talent as skilled professionals are lured away by more attractive compensation packages in other regions.
This can lead to a talent drain, where the most skilled employees leave for better opportunities, ultimately impacting the company’s ability to maintain a competitive edge in the market.
Wage growth vs business stability
Some business leaders may argue that it is essential to maintain a balance between wage growth and overall business stability in an environment of fluctuating economic conditions.
They may view modest salary increases as a means of safeguarding against potential downturns, ensuring they can navigate future uncertainties without compromising their financial health.
However, this perspective risks overlooking the long-term benefits of investing in employee satisfaction and loyalty.
In a thriving economy, wage growth and business stability are increasingly intertwined.
When employees feel valued and adequately compensated, they are more likely to invest their energy and creativity into their work.
This enhances individual productivity and cultivates a positive workplace culture that attracts new talent.
What should companies prioritize?
Rather than viewing wage growth as an expense, forward-thinking businesses should consider it an investment in their most valuable asset — their people.
As the cost of living continues to rise, companies in Singapore should prioritize ensuring that wage growth keeps pace with inflation.
By doing so, they support the financial well-being of their employees and contribute to their long-term stability and success in a competitive marketplace.
Ultimately, it is about creating a balanced ecosystem where employees feel valued and businesses thrive together.
