Companies in Indonesia show steady recovery with higher salary increments forecasted in 2023: Mercer survey
Indonesia, 13 Desember 2022
- Overall average salary increment projected to rise to 6.1% in Indonesia next year, but still below pre-pandemic levels
- Employees across most industries should expect to receive higher bonus payouts this year
Employees in Indonesia can look forward to an average 6.1% increase in their salaries next year, up from 5.8% this year, according to Mercer’s annual Total Remuneration Survey (TRS) 2022. The TRS surveyed 550 organizations across seven industries in Indonesia between April and June this year.
Salary increments in Indonesia have been increasing steadily since they hit a low (5.5%) in 2021, at the height of the pandemic. But while companies in Indonesia are generally showing signs of recovery, they have yet to return to pre-pandemic highs of 6.9% increments in 2019. Indonesia’s projected salary increment is above the Asia Pacific average of 4.8%. Across Asia, the overall average salary increases reflect a divergence in pay progression between emerging and developed economies, with estimates as high as 9.1% in India to 2.2% in Japan, the lowest in the region.
Astrid Suryapranata, Market Leader for Indonesia, said, “Salary increments are gradually returning to pre-pandemic norms as more organizations bounce back from the pandemic. Some employers are also responding to the higher inflation rate. This is also aligned with higher GDP growth expected in Indonesia this year. However, it will take a while longer for companies to pick up pace given the broad impact of the inflation rate hike.”
Modest to stable salary increments across most industries
Across the industries surveyed, Emerging Tech is projecting the highest salary increase of 8.2%, followed by High Tech (6.9%) and Life Sciences (6.4%). At the same time, both Emerging Tech and High Tech are also two of the few industries that are forecasting lower salary hikes as compared to 2022. This is likely due to a slowdown of investments in emerging technology companies and changing online consumer behaviors in the post-pandemic environment.
In terms of salary increases compared to the prior year, the Mining & Mining Services (6.3%, up from 5.7%) and Consumer Goods (6.1%, up from 5.7%) industries will expect to see the highest growth among all the sectors surveyed.
Bonus payouts this year will also see a slight increase across most industries, except for High Tech (18.5%, down from 18.9%) and Mining & Mining Services (35.8%, down from 47.6%). However, the latter’s target bonus payout is still the highest amongst all the industries surveyed.
On industry salary trends, Ms Suryapranata said, “While we have noticed a dip in Emerging Tech and High Tech industries’ salary projections for 2023, demand for their services will continue to grow. Organizations within these sectors should focus on cost sustainability moving forward. Mining & Mining Services is the only industry that has exceeded its pre-pandemic salary increment of 5.7% in 2019 in its projection, and this is due to the rapid increase in commodity prices since the start of 2021.”
Looking beyond financial incentives
The voluntary attrition rate is relatively stable in Indonesia. It has increased by just one percentage point this year to 8%. The industries with the highest voluntary attrition rate are the Emerging Tech (15%), Consumer Goods (9%) and High Tech (8%) industries. This is largely due to more available opportunities for professionally skilled employees as well as employees leaving sectors like Emerging Tech – which has seen recent layoffs – for more stability.
Employers are also cautiously optimistic about their business outlook in 2023, in light of higher inflation rates experienced in 2022 and a general economic slowdown. While fewer companies are increasing their headcount in 2023 (35%), as compared to 2022 (43%), only 2% of companies intend to decrease headcount next year, compared to 5% observed in 2022.
A Mercer survey on benefits trends conducted in Q3 2022 found that more employers in Indonesia are offering their employees flexible work hours, work from home arrangements and mental health support, as compared to 2021. These will be critical drivers for organizations to consider in order to attract and retain their talent.
Godelieve van Dooren, Mercer’s CEO for South East Asia Growth Markets said, “It is heartening to note that Indonesia is not experiencing a heightened increase in employee turnover this year, unlike other markets in the region. But employers should not be complacent. They should leverage this relative stability, which comes with some breathing room, to review and improve on their compensation and rewards strategies ahead of 2023. While companies may be more prudent with their resources during this time, they should still ensure that their packages are attractive and relevant by offering benefits like flexible work arrangements and employee wellbeing support, so that new talent will continue to flow through and the existing workforce remains engaged.”
About Mercer’s Total Remuneration Survey
The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.
For more data and insights from Mercer’s Indonesia Total Remuneration Survey 2021, please see here.