Optimistic incremental salary in 2019 for Indonesian employees

Mercer’s 2018 Total Remuneration Surveys forecasts an optimistic incremental salary in 2019 for Indonesian employees

Mercer’s 2018 Total Remuneration Surveys forecasts an optimistic incremental salary in 2019 for Indonesian employees

  • 6 December 2018
  • Indonesia, Jakarta
  • Overall salary increase forecast for Indonesia in 2019 is 8.0%, with life science (8.8%) sector projected to have the highest salary increases
  • Indonesian employees cite ‘lack of career opportunities’ and ‘low pay competitiveness’ as top reasons for leaving jobs

Mercer today unveiled the results of its annual ‘Compensation Planning for 2019’ study which identifies key remuneration trends and makes hiring and pay increase predictions for the coming year across Asia, Middle East and Africa. Figures and forecasts are based on the Total Remuneration Surveys (TRS) – Mercer’s flagship annual compensation and benefits benchmarking study, with participation from 545 companies in Indonesia across 8 industries this year. In total, there were more than 34,800 organizations in 130 countries participating and it covers close to 8,000 cross-industry jobs, from executives to para-professional levels.

Astrid Suryapranata, Career Business Leader, Mercer Indonesia said, “With competitive inflation rate and positive GDP in Indonesia, the salary of employees in the 8 key Industry sectors that we studied shows a fairly good increase in their salary forecast. Our study found that there was payroll budget increase of 7.6%  salary increase for 2018 with mining and life science industry sectors recording the highest increases of 8.4% and 8.2% respectively. Meanwhile overall salary increase forecast for Indonesia in 2019 is 8%, with life science (8.8%) sector projecting the highest salary increases amongst industries surveyed in Indonesia. In fact, most industries are expected to see salary increases in 2019 as compared to 2018.”

Similar to other countries in Asia, such as Hong Kong, India, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand and Vietnam, Indonesian respondents stated that ‘lack of clear career path and opportunity to grow’ as well as ‘low pay competitiveness’ were the top two reasons for employees leaving their organization. Surprisingly, only a few respondents in Indonesia consider aspects like ‘long working hours, overtime and inflexible working arrangements’ and ‘long distance and /or long hours taken to go to work’ as main reasons for leaving the company.  

The overall salary increase forecast reflects the confidence level of companies operating in Indonesia in facing 2019 and beyond as 80% of respondents rely on the company performance as major factor in determining individual salary increases. Individual performance (according to 96% of respondents) will remain a deciding factor for the salary increase, followed by employee’s pay position in the salary range as noted by 77% of respondents. This factor is becoming one of the top 3 factors in determining individual salary increase, replacing inflation factor. It shows that organizations are now more aware of the internal pay equity as mandated through the Regulation of Ministry of Manpower No. 1/2017 about Salary Structure and Scale. Only 20% consider length of service as an important factor in this matter.

Another interesting finding relates to the hiring intention for 2019. Based on the survey respondents, more than half plan to maintain their current employee headcount next year. A little over one-third plan to increase their number of employees and merely 8% plan to reduce their headcount.

Mercer Total Remuneration Surveys, a global perspective

Against a backdrop of continued strong economic and real wage growth (salary increase minus inflation rate) in emerging markets, the highest salary increases in 2019 are forecasted for Bangladesh (10%), India (9.2%) and Vietnam (9.8%). At the other end of the spectrum, Australia is at 2.6%, New Zealand 2.5%, and Japan has the lowest expected salary growth rate at 2%.  

“Despite some variations across Asia Pacific, the overall hiring outlook is positive, with 66% of companies looking to maintain headcount in order to seize diversification and growth opportunities in the face of ongoing disruption,” said Puneet Swani, Partner and Career Business Leader for International Region of Mercer. “Mercer continues to dedicate resources into understanding these trends, so our clients can plan more effectively and their employees can be appropriately engaged and rewarded,” he added.

A closer look at pay parity (in terms of annual total cash) reveals that there are now several ‘tiers’ of countries across the region. For example, in Australia, Japan and Korea, starting salaries begin at US$30k p.a., and rise steeply as employees reach senior levels, often reaching US$250–350k. Starting salaries are much lower (often just US$5k) in low-cost manufacturing bases, but increase significantly at top management levels.

In some countries – China, most notably – the highest-ranking executives out-earn their peers in the US and UK, although it is important to note that this picture changes once long-term incentives (LTIs) and European social security benefits are factored in. 26% of organizations reported a retention bonus provision for employees with specific digital skills.

Mercer’s study reveals that talent scarcity plays a major role in shaping remuneration trends. 48% of companies in Asia report having difficulty filling-in vacant positions, compared with 38% of companies globally that are struggling to find the right talent to fuel their business expansion. Subsequently, a significant premium is being paid for employees in specialist sales and engineering roles, in addition to local language expertise. The rising numbers represent a challenge in terms of replacement costs in the form of higher salaries for new joiners, recruitment costs and lost production, which adversely impact the overall cost of operations and resulting margins.

Swani said, “As the world’s engine of growth, Asia continues to see sustained demand for skilled talent, with digital skills continuing to draw a premium. Companies are offering generous incentives and retention bonuses. We also find companies deleveraging pay in the wake of increased regulatory scrutiny of discretionary bonuses, reducing year-end pay-outs and increasing base pay in order to contain excessive risk-taking.”

“Companies in Asia Pacific are taking a more holistic view of their total rewards philosophy and employers are increasingly focusing on the experiential components of rewards programs to deliver meaningful career experiences and flexible arrangements, as well as programs to help manage the physical, financial and emotional well-being of their employees,” Mr. Swani added.

For more data and insights from the 2018 Total Remuneration Survey please see here.

About Mercer
Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With nearly 65,000 colleagues and annual revenue over $14 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. Marsh & McLennan Companies is also the parent company of Marsh, which advises individual and commercial clients of all sizes on insurance broking and innovative risk management solutions; Guy Carpenter, which develops advanced risk, reinsurance and capital strategies that help clients grow profitably and pursue emerging opportunities; and Oliver Wyman, which serves as a critical strategic, economic and brand advisor to private sector and governmental clients. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

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