Philippines Workforce Growth and Salary Plans for 2025 Analyzed

The Philippine labor market is gearing up for significant changes as businesses anticipate economic recovery and stabilize their workforce strategies. Key insights reveal important trends in hiring intentions, salary budgeting, and the demand for digital skills. Here, we delve into the details of how the landscape is shaping up for 2025.

Hiring Intentions and Workforce Expansion

Plans for Workforce Increase

A standout finding is that 24.4% of organizations plan to ramp up their workforce in the coming year. This propensity to expand headcount is among the highest in the region. Sectors such as Business Services, Leisure, Banking, Technology, and Energy and Natural Resources are the frontrunners in these expansion plans. The anticipation of economic rebound fuels this optimism, as companies prepare to seize emerging opportunities.

In particular, businesses in the Technology and Banking sectors are keen to tap into the growing demand for their services, driven by rapid digitalization and increasing consumer confidence. The energy sector’s workforce expansion reflects global energy trends and renewable initiatives taking root in the country. Leisure and Business Services equally see a positive outlook, riding on the back of eased travel restrictions and increased corporate engagements. These expansions are not only indicative of sector resilience but also reflect strategic moves to capitalize on anticipated market growth in 2025.

Balancing Headcount and Retention

While a considerable number of companies are gearing up to hire more talent, the majority, about 69.5%, intend to maintain their current headcount. This reflects a cautious yet forward-thinking approach to workforce management, ensuring that they do not overextend their resources. Meanwhile, a smaller segment, accounting for 6.1%, plans to reduce their workforce, likely indicating a strategic restructuring or optimization of operations.

This conservative approach signals a collective effort among businesses to safeguard against potential economic volatility by focusing on retaining existing talent and avoiding hasty expansions. Organizations are increasingly recognizing the benefits of stability, understanding that retaining a competent workforce can be as valuable as bringing fresh talent on board. Strategic structures and optimized processes are being implemented to ensure that the existing workforce remains productive and engaged. These moves reflect a blend of caution and optimism in their workforce strategies.

Workforce Stabilization and Attrition Trends

Evolving Attrition Rates

The Philippine labor market has been marked by high attrition rates in the past few years. However, recent data suggests a stabilization, with voluntary attrition rates at 12.5% and involuntary attrition at 8.2% over the past 12 months. This stability allows employers to shift their focus back to retention and strategic human resource planning. Companies are expected to invest more in engagement strategies to keep their current talent pool satisfied and motivated.

The stabilization in attrition rates marks a significant turning point for businesses. These improved rates signify that employees are finding more reasons to stay with their current employers, possibly due to better working conditions, enhanced employee benefits, and improved career development opportunities. For businesses, this stabilization offers a platform to build more robust retention strategies, including comprehensive workforce engagement plans which can lead to higher staff morale and productivity. Ultimately, this could positively impact the organization’s overall performance, providing a competitive edge in the market.

Strategic Retention Efforts

Given the stabilized attrition rates, businesses are now better positioned to deploy effective retention strategies. Employee engagement programs, career development opportunities, and competitive compensation packages are becoming central to retaining top talent. Organizations are also investing in creating a positive work culture and ensuring a good work-life balance to reduce turnover rates further.

Companies are increasingly shifting towards holistic human resource practices, focusing not just on financial incentives but also on mental health support, flexible working arrangements, and a nurturing work environment. This change is pivotal in maintaining workforce stability and enhancing job satisfaction. By investing in targeted retention programs and fostering a supportive culture, businesses can reduce turnover and mitigate the costs associated with recruiting and training new employees. These proactive strategies highlight the importance of maintaining a content, committed, and high-performing workforce in the long run.

Salary Budget Trends

Salary Allocations and Pay Increases

Despite signs of economic recovery, 34.6% of businesses have reported lower salary allocations for 2024 compared to the previous year. The median pay increase for 2024 is pegged at 5.6%, a slight dip from the 5.7% increase witnessed in 2023. These cautious salary adjustments reflect ongoing economic uncertainties, cost management concerns, and the competitive nature of the labor market.

Amid these tight financial circumstances, businesses are prioritizing efficiency and sustainability. The reported adjustments in salary allocations suggest companies are resorting to more prudent financial planning against the backdrop of uncertain economic conditions. By balancing salary increments with broader economic pressures and internal budget constraints, organizations aim to remain competitive in attracting and retaining talent. Additionally, maintaining a moderate salary growth trajectory serves to mitigate risks associated with potential inflationary trends and ensures long-term financial health and operational efficacy.

Financial Prudence in Salary Planning

With the projected median pay increase for 2025 remaining consistent at 5.6%, businesses are adopting a conservative approach to salary budgeting. Factors such as inflationary pressures and the need to maintain financial sustainability are influencing these decisions. This prudence ensures that organizations can balance rewarding employees and managing operational costs effectively.

This conservative planning highlights a nuanced understanding of the economic landscape: companies are being mindful of potential cost escalations and their impact on overall financial stability. By adopting a cautious approach to salary budgeting, businesses can effectively navigate fiscal challenges while maintaining sufficient resources to support strategic growth initiatives. Such balanced compensation strategies indicate a commitment to financial discipline, ensuring that salary increments are sustainable and aligned with broader business goals and economic conditions.

Demand for Digital Skills

Rising Digital Skills Premium

In line with the global trend towards digitalization, there is a significant rise in salaries for roles requiring technology skills. Between 2022 and 2023, salaries for such positions have surged by 10.28%. This surge is especially pronounced in roles related to AI, machine learning, cybersecurity, and IT architecture. Companies recognize the critical importance of these skills in driving business transformation and are willing to pay a premium to attract top talent.

As businesses across various sectors embrace digital transformation, the competition for tech-savvy professionals intensifies. The rising salary premiums for digital skills reflect their vital role in contemporary organizational strategy and operations. These specialists are crucial not only for developing innovative technologies but also for safeguarding digital assets, ensuring seamless IT architecture, and driving data-centric decision-making. This trend underscores the strategic imperative for businesses to secure talent with advanced digital skills, which are pivotal in gaining a competitive edge and achieving sustainable growth.

Strategic Positioning for Tech Talent

The Philippine labor market is poised for substantial changes as businesses brace for economic recovery and fine-tune their workforce strategies. The 2024 Salary Budget Planning Report by WTW offers critical insights into emerging trends in hiring, salary budgeting, and the increasing demand for digital skills. These shifts are expected to significantly influence the employment landscape in 2025.

This surge in hiring is accompanied by a strategic focus on salary budgeting, ensuring that businesses remain competitive in attracting top talent. Another notable trend is the rising demand for digital skills, driven by the accelerating pace of technological advancements.

As companies navigate this evolving landscape, they are placing a premium on employees who possess a blend of technical expertise and adaptability. The ability to swiftly learn and apply new digital tools is becoming increasingly valuable. Overall, the report underscores the importance of strategic planning and investment in human capital to prepare for the dynamic shifts expected in the coming year.

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