Mercer has recently released its new Total Remuneration Survey, explaining that salaries in Indonesia are projected to increase in 2021 despite the economic fallout from the coronavirus pandemic. Excluding companies that have implemented wage freezes, businesses in Indonesia are forecasting an average 6.9 percent overall merit increase in salaries for 2021, though 18 percent of companies remain uncertain about increments next year. In 2020, companies granted employees increases between of 6.8 percent this year, below the 7.6 percent companies had budgeted before the pandemic hit.
Many organisations in Indonesia are taking a conservative approach to salary increments as they navigate the impact of COVID-19. Heading into 2021, the survey showed that 1.7 percent will implement or continue salary freezes while 6 percent have indicated they have or will implement temporary salary reductions in accordance to reduced work hours until the pandemic is over. That compares with 4.6 percent who implemented salary freezes this year.
Recruitment efforts are expected to slow in the year ahead. 58 percent of companies in Indonesia indicated that they intend to maintain their headcount in 2021, hiring only for replacements, while 10 percent of companies surveyed plan to reduce headcount.
Indonesia has fallen into its first recession since the 1998 Asian financial crisis as the coronavirus pandemic continues to take its toll. While the country is expected to return to growth next year, economic activity is likely to remain under pressure.
Bill Johnston, Mercer’s CEO for Indonesia said, “Depending on the course of the pandemic, we expect companies to watch and wait as they consider their compensation and benefit strategies for the year ahead. While most companies have avoided reducing salaries this year, salary budgets have gotten tighter. What this means is that employers need to think beyond pay and tap into other benefit and rewards initiatives to help retain their top talent. One area where employers can make a significant and critical impact is in supporting the well-being of their workforce. With growing expectations of employees for access to physical, financial, emotional and social well-being programs, companies have an opportunity to reimagine benefits for greater personalization and allocate their budget to where it counts most.”