Jakarta. Workers in Indonesia are expected to see a 6.3 percent increase in salaries in 2025, a rise that surpasses the projected salary growth in 2024 across most Southeast Asian countries, except for Vietnam.

According to the Aon Global Risk Management Survey, salary increases in the region are expected to range from 4.4 percent in Singapore to 6.7 percent in Vietnam, with the Philippines at 5.8 percent, Malaysia at 5.0 percent, and Thailand at 4.7 percent.

Aon's projection preceded President Prabowo Subianto's announcement of a 6.5 percent increase in the 2025 Provincial Minimum Wage (UMP), made during a press conference at the Presidential Palace in Jakarta on Friday.

The report, which analyzed data from over 950 companies across Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam between July and September 2024, suggests that business activity in Southeast Asia will likely stabilize or even grow the workforce in the coming years.

Rahul Chawla, partner and head of talent solutions for Southeast Asia at Aon, said that while inflation is projected to decline, salary hikes are expected to continue.

Chawla explained during an interview with CNBC Make It that the continued salary growth, despite weaker inflation, signals a significant gap between the supply and demand for talent that is outpacing inflationary pressures. 

While inflation continues to influence salary projections, other factors, such as the high demand for skilled labor in Southeast Asia, are also contributing to the expected wage increases.

Industries such as technology and manufacturing are expected to see the highest salary increases, with budgets for raises estimated at 5.8 percent. Other sectors like retail, consulting, business services, and life sciences are projected to see increases of 5.4 percent, while the energy, financial services, and transportation sectors are expected to see more modest hikes of 4.9 percent, 4.8 percent, and 4.1 percent, respectively.

The study further shows that when broken down by country, the technology sector will see the highest salary growth in Vietnam (7.5 percent) and Thailand (5.2 percent), while the manufacturing sector will see the highest increases in Indonesia (6.9 percent) and the Philippines (6.1 percent). In Malaysia and Singapore, the consulting, business, and community services sectors are expected to experience the largest salary hikes, with projected increases of 5.9 percent and 5.7 percent, respectively.

The survey also revealed that 64 percent of companies are facing difficulties in hiring or retaining employees. One-third of these firms plan to increase their headcount by 5 to 20 percent. Despite these challenges, companies are still slightly increasing workforce numbers by streamlining management layers and focusing on hiring individual contributors to strengthen their teams.

“This issue now ranks as the fourth-highest risk for organizations—up from not even being in the top ten two years ago,” Chawla said.

Employers are grappling with the challenge of balancing rising compensation costs with the need to secure top talent. Chawla emphasized that firms must be proactive in their talent strategies, utilizing real-time data and predictive analytics to stay ahead in a dynamic market.

“Agile firms are using these tools to understand broader market trends, such as which roles are in demand and where cost-saving opportunities exist,” he said.