Asia Pacific continues to experience strong economic growth and evolving workforce dynamics, and with it comes a rising challenge for HR leaders: how to attract and retain top talent while maintaining financial sustainability. Salary budgets are rising faster than GDP growth and talent competition is intensifying across industries.
The economic outlook across Asia Pacific for 2026 remains stable, with GDP projected to grow by 3.6% and outpacing inflation, which is 2%. However, salary growth is expected to exceed GDP growth, signalling robust demand for talent (Figure 1).
Singapore continues to set the benchmark for competitive compensation in Asia Pacific, particularly for senior managers (M3) and intermediate career levels (P3). Its strong position reflects the country’s role as a regional hub for multinational corporations and its ability to attract top talent. Hong Kong remains close to Singapore in terms of pay levels, but talent inflow has slowed in recent years as financial services and related roles increasingly relocate to Singapore or Mainland China to align with business operations (Figure 2).
In contrast, compensation levels in China, Japan and Australia remain lower than Singapore’s, influenced by currency fluctuations, cost structures and differences in market maturity. Within Southeast Asia, Singapore still leads overall, but Malaysia is showing notable progress, with senior manager pay levels rising to narrow the gap with regional leaders. These shifts indicate that organisations are striving to maintain cost efficiency while ensuring retention for critical leadership roles.
Hong Kong’s salary increase budget for 2025 stands at 3.7%, slightly lower than previous years, signalling a cautious approach to cost management. Interestingly, the gap between companies at market median (P50) and upper quartile (P75) has narrowed, suggesting that even higher-paying organisations are controlling costs. Promotion activity remains moderate, with about 9% of employees promoted and 91% receiving merit increases, reflecting a focus on internal equity and sustainability.
In Malaysia, minimum wage increases and the introduction of living wage standards are driving wage compression across organisations as lower-level employees receive higher pay while internal salary freezes or capped raises remain for tenured staff. This can potentially impact employee morale, but proactive measures such as adjusting pay bands or incentivising beyond base pay can help organisations mitigate this risk.
Thailand expects modest salary growth and slightly higher variable payouts, but rising voluntary turnover suggests employees are actively seeking better opportunities. Involuntary turnover is also up, reflecting restructuring and cost-cutting measures.
These salary trends show how organisations in Asia Pacific are allocating their salary budget to retain critical talent, which may well be evident until 2026. Our 2026 Thailand People Strategic Planning Survey has found that HR personnel aim to focus on talent attraction, retention and development in the coming year by prioritising compensation and benefits, career management and employee branding. In contrast, business and operational leaders are concentrating on work transformation, manpower optimisation and establishing a performance-driven culture, signifying their goal to optimise resources and drive results. These findings indicate the need for organisations to strike a balance between these differing priorities as they prepare for the business landscape in 2026.
There is an increasing pressure to manage employee costs in many Asia Pacific countries, even as salary growth projections remain strong. This is somewhat in conflict with the wider trend where projected salary increases are expected to be higher than the forecasted GDP growth for 2026.
For HR professionals, managing costs means either securing lower cost to deliver the same value, or getting more value out of the same spend. To make a significant difference, HR can focus on three key areas:
By aligning total rewards with fiscal responsibility, organisations can boost productivity, engagement and business outcomes, ensuring the organisation’s sustainable success.
Fiscal responsibility is not just about cutting costs but also investing in areas that yield sustainable returns. Diversity, equity and inclusion (DEI) strengthen the business case for sustainability by improving talent retention, reducing risk and driving innovation.
Global conversations around DEI are evolving, with emphasis on cultivating inclusion or belonging in the workplace. People want to feel seen and valued in the organisation, making DEI critical for talent retention. Taking a deliberate, structured approach to DEI will make it more meaningful, measurable and sustainable — and one way to approach it is to consider the phases from insight to impact.
When DEI is treated as a core business strategy instead of a standalone initiative, it becomes a driver of long-term value.
Asia Pacific’s economic stability and rising salary budgets present both opportunities and challenges for HR leaders. Competitive pay remains essential for attracting and retaining talent, but organisations must balance this with financial sustainability. Organisations can maximise their talent investment while safeguarding long-term business health by benchmarking costs holistically, optimising organisational structures, investing in performance management and embedding DEI into financial strategies.
