Technology and demographics affect hiring and pay strategies

TECHNOLOGICAL developments and demographic shifts will force companies operating in the Philippines to rationalize their hiring and compensation strategies in 2024 and beyond in order to be cost-competitive and win the talent war. Inflationary pressures, the tight market for highly skilled professionals and managers, and the workers’ needs will continue to influence budget planning for salary increases through the years. There is no need for legislated wage increases.

Robert Walters Salary Survey

The recently released 2024 Robert Walters Salary Survey report highlights the selective but growing emphasis on compensatory benefits and substantial salary increases for key positions, “especially in technology and finance, where skilled professionals are in high demand. Despite the optimistic job market outlook, there remains a notable discord between employers and employees regarding compensation, benefits, and worklife balance preferences.”

Here are some of the changing employee preferences highlighted by the survey:

– 50 percent of employees are actively seeking new job opportunities for career advancement; 86 percent prefer an attractive bonus scheme; 82 percent want access to private health care insurance; and 57 percent prefer flexible or remote work arrangements

– 52 percent will stay if they are offered salary adjustments, promotions or retention bonuses

– 91 percent of employees prioritize worklife balance, favoring a four-day work week; 36 percent want well-being services; and 35 percent expect diversity and inclusion initiatives, which signal a paradigm shift from traditional work structures

– 72 percent of job seekers want to spend two to three days in the office, while 70 percent of employers expect full staff presence for three to five days per week.

Other hiring trends

As companies have started integrating artificial intelligence (AI) into their operations, the demand for professionals with skills in AI, technology, sustainability and commercial leadership will increase in 2024 and beyond. As companies rely on automation to arrest the increasing fixed labor cost, the demand for professionals with international exposure and diverse technological skills sets will rise. This is great news for OFWs (overseas Filipino workers) who want to return and work in the Philippines.

Here are other interesting highlights from the survey:

– 25 percent of companies already use AI models to automate routine tasks; 35 percent plan to do so by 2025; and only 43 percent of workers expressed little concern over AI’s impact in enhancing their efficiency

– 58 percent said that talent acquisition continues to be a major challenge in 2024 due to high salary/benefit expectations, shortage of highly specialized candidates, and lack of technical skills within the technology sector

– to address challenges in talent retention, 72 percent of companies implement enhanced learning and career development opportunities, hybrid work policies (60 percent), and increased well-being initiatives (55 percent)

– The skills that are most in-demand have to do with automation, digitalization, technology, digital competencies, commercial leadership, and profit and loss management. Candidates with international exposure will have an edge.

“Having a stellar candidate experience is now vital as the hiring market becomes more competitive, with more players vying over the best talent. Companies who can lay out a compelling story about the role they are hiring for and how it plays out in the company’s vision will have a better shot at winning the candidates they are after,” Robert Walters Philippines Director Alejandro Perez-Higuero said.

WTW Survey

For 2024, Philippine companies forecast an overall median salary increase budget of 5.7 percent, about the same level as in 2023 when inflation rates were higher. Biopharma and life sciences, financial services, and shared services and outsourcing sectors will likely pay up to 6.0 percent in salary increases this year. Real estate, construction and engineering will have lower budgeted salary increases. (Source: WTW 2023 Salary Budget Planning Survey Report – Asia-Pacific, December 2023 edition)

The WTW Survey, with 500+ respondents and companies employing over 1 million employees, seems to confirm the Robert Walters Survey, particularly on hiring trends in 2024.

The WTW Survey cited voluntary attrition at 15.9 percent in 2023, compared to 14.2 percent in 2022. Typical reasons for resignations are better pay and growth opportunities elsewhere, relocation or family migration, and work-life balance issues.

“This trend looks set to continue in 2024, and employers in the Philippines will continue to face significant talent challenges, including the attraction and retention of key talent. Winning the talent race will require employers to stay focused on balancing the entire package of rewards they offer, both monetary and non-monetary, in order to remain competitive and align with employees’ needs and wants,” said Patrick Marquina, head of Work & Rewards, Philippines, WTW.

Gen Z phenomenon

The WTW survey also reveals how the demographic shift has affected talent acquisition and retention strategies in the Philippines. The tech, media and gaming sectors and the shared services and outsourcing sectors have the greatest number of Gen Y (Millennials) and Gen Z employees in the country.

The Gen Z workforce grew by 100 percent in 2023. It was 10 percent in 2022 and 19.9 percent in 2023 as a percentage of the total Filipino workforce. In 2023, the Gen Ys and Gen Zs comprised 77 percent of the total Filipino workforce, while the Gen Xers were 22.3 percent and the Baby Boomers were 0.7 percent.

This demographic shift has pushed Philippine employers to rethink their work models and organizational structures. Respondents to the WTW Survey reported the following adjustments:

– 44 percent of companies plan to use more technology and automation; 39 percent are redesigning jobs or roles to reallocate work among employees, non-employees, and new technologies; and 39 percent have strengthened internal communication

– 58 percent will implement more flexible work arrangements; 37 percent have conducted employee listening activities to measure changes in employee preferences; and 36 percent are redesigning their employee experience to promote a new work culture

– only 14 percent of employers are prepared for greater use of alternative talent sources; of those, 44 percent have already used new sources of talent, and 39 percent are redesigning their employee experience to align with new work and career models.

It sounds cliché, but it is no longer business as usual. CEOs and CHROs must look at external competition and internal preparedness for change. Among the megatrends and change drivers, technology and the demographic shift will make the most impact on organizations and people. These two could render ineffective whatever business strategies worked a decade ago. Organizations that will adapt to change will likely outperform those who cannot demolish old mindsets, paradigms, and legacies from the founding fathers who operated in an entirely different business environment in the distant past. Ernie Cecilia is the Chairman of the Human Capital Committee and the Publication Committee of the American Chamber of Commerce of the Philippines (AmCham); Chairman of the Employers Confederation of the Philippines’ (ECOP’s) TWG on Labor and Social Policy Issues; and Past President of the People Management Association of the Philippines (PMAP). He can be reached at erniececilia@gmail.com.