Ageing workforce solutions: Adapting rewards for changing needs 

Asia's major economies are facing significant demographic changes, with rapidly ageing populations creating new workforce challenges. By 2060, Asia will have 60% of the world’s population aged 65 and older, and along with the Pacific region, projected to surpass one billion  by 2050. Notably, the demographic aged 80 years or older is expected to comprise about one-fifth  of all older persons in the same period¹. 

This shift is particularly pronounced in South Korea and Japan, where over one in three people will be over 65 years old by 2050. South Korea’s working-age population is projected to decline by 4.7%, while Japan’s age-old dependency ratio is expected to increase to 55% from 2018 to 2025. In contrast, emerging markets such as India are estimated to have an average median age of less than 30 years²,  with over 60% of the population projected to be below the working age of 60 years by 2031.³

Amid these changes, the region’s rapid digitalisation and adoption of technologies such as Generative AI, blockchain, and robotics continue to bring forth a duality of opportunities and challenges.⁴  In Southeast Asia alone, 42% of companies have reported exploring AI to automate tasks within the HR function in 2025,⁵  leading to shifting talent demands across the labour market.

This demographic shift, combined with accelerating technological change, requires companies to fundamentally rethink their reward strategies to maintain competitiveness and ensure sustainable talent pipelines.

The intersection of ageing populations and digital transformation creates two primary pressures that demand immediate strategic response:

1. Shrinking talent pipeline: With fewer young professionals entering the workforce—as evidenced by China’s population decline in 2022 and a projected reduction of 3 million young workers between 2023 and 2025—competition for early-career talent is intensifying. This labour shortage is driving up compensation costs, making traditional recruitment methods increasingly unsustainable. 
   
   
2. Growing skills gaps: Rapid technological advancements are widening skills gaps across all age groups. The demand for skilled jobs in APAC, particularly in sectors like communications, finance, and professional services, is outpacing the supply of young job seekers. Moreover, experienced workers require ongoing upskilling to stay relevant. This situation further escalates costs, as companies must invest in training and development to bridge these gaps.

How can companies adapt their employee rewards strategies to address these challenges to build a sustainable talent pool?

Success requires ongoing monitoring of demographic trends, regular strategy adjustment, and a commitment to creating inclusive workplaces that value and reward contribution regardless of age. 

At Mercer Asia, we have partnered with organisations across the region to transform rigid age-based systems into adaptable frameworks. Leveraging our extensive experience and data-driven insights, we empower companies to effectively navigate the challenges and seize the opportunities presented by an ageing workforce.