The inflation rate in the Philippines hit 7.7 percent in October 2022, according to a report released this month by the Philippine Statistics Authority (PSA). The agency said this is the highest inflation rate since December 2008 and was pushed by a 5.4 percent year-on-year increase in the average consumer price index (CPI) for January-October 2022 vs. 2021.
The PSA explained that the primary driver for faster inflation was the higher annual growth rate in the index for food and non-alcoholic beverages, which was up from 7.4 percent in September to 9.4 percent in October 2022.
The report also highlighted higher price index increases in housing, water, electricity, gas and other fuels (7.4 percent), restaurants and accommodation services (5.7 percent), and other commodity groups.
High inflation rate in 2022 means higher staff pay in 2023
Speaking in a briefing held by the Office of the President in October, socioeconomic planning secretary Arsenio Balisacan noted, “Our analysis shows sustained increases in inflation in 2022 and 2023 will cause a slowdown in the economic growth.”
Inflation is expected to bring not just a slowdown in economic growth. Salaries are also projected to increase in the following year. According to advisory firm Willis Towers Watson (WTW), salaries in the Philippines will increase by 5.7 percent in 2023, citing findings from the WTW 2022 Salary Budget Planning Survey Report – Asia Pacific (July 2022 edition).
WTW’s Work & Rewards Leader (Philippines) Patrick Marquina noted that “compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive.”
The Philippine situation is not unique. Workforce consulting company ECA International predicted that inflation will also cause salaries to increase in countries such as India, Vietnam, China, and Brazil.
How companies can prepare for salary increases
“With such a dynamic environment, it’s imperative for organizations not only to have a clear compensation strategy but also a keen understanding and appreciation of the factors that influence compensation growth,” Marquina advised.
WTW’s survey indicated that, for 2022, 52.5 percent of employers in the Philippines prepared salary increase budgets that were higher than projections. They cited the following reasons for doing this:
- Tighter labor market concerns,
- Cost management concerns (e.g., rising cost of supplies), and
- Employee expectations for higher pay increases due to inflation.
While salary increases can improve employee retention and attract higher-quality staff, some companies introduce incentives and non-monetary benefits to encourage workforce talent to stay or apply with them. Those benefits can be in the form of:
- Workplace flexibility
- Stronger emphasis on diversity, equity, and inclusion
- Sign-on bonuses and incentives
- Remote or hybrid work setups
- Improved employee experiences
For companies that need guidance
Readiness levels may differ for various companies with regard to the projected salary increases in 2023. If you need help in preparing for upcoming situations, Profitmaster can provide guidance, especially for companies that are considering outsourcing some business functions or hiring offshore employees. Message us today and we can discuss this with you, with no commitment required on your part.