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% overall merit increase in salaries for 2021, though 18% of companies remain uncertain about increments next year. In 2020, companies granted employees increases between of 6.8% this year, below the 7.6% 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% will implement or continue salary freezes while 6% 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% who implemented salary freezes this year.
Recruitment efforts are expected to slow in the year ahead. 58% of companies in Indonesia indicated that they intend to maintain their headcount in 2021, hiring only for replacements, while 10% 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.”
Mercer’s flagship annual compensation and benefits benchmarking study, the Total Remuneration Survey, identifies key remuneration trends and predictions for hiring and pay for the year ahead. This year, 523 companies across 14 industries participated in Mercer’s Indonesia survey between April and June. Additional surveys were conducted in July and August in light of the fast-changing market environment.
Bonuses expected to decrease in 2021
In 2020, nine in 10 companies surveyed provided bonus payouts at an average of 15% of annual base salary, below the budgeted 17.5% pre-pandemic. The Automotive sector saw the highest bonuses at 29.2%, followed by Mining & Mining Services (19%).
But the bonus outlook for 2021 remains shrouded in uncertainty. 27% of companies surveyed expect bonuses to be less than this year, while one in two say it is too early to tell. Only 3.7% of companies surveyed expect bonuses to increase next year.
Astrid Suryapranata, Mercer’s Career Business Leader for Indonesia, said, “While the impact has been different across industries, companies are taking a closer look at how salary budgets and incentives are being allocated. They are reviewing performance factors, remuneration structures and the impact to market competitiveness, among other considerations.”
Focus on Benefits to Energize Employees
Although affordability is a key criterion for making decisions on salary increases, many organizations are taking a holistic view to redesign the work experience for their employees, including providing additional incentives and benefits.
77% of companies surveyed have either implemented or are considering flexible working arrangements in response to the COVID-19 outbreak. Additionally, one in two companies have provided work-from-home tools and subsidies to their employees. Support includes laptops, allowances to cover work-from-home related costs, access to external online learning, and one-time subsidies for home office setup costs.
Ms Suryapranata said, “In this time of uncertainty, it is more critical than ever that business leaders make informed decisions about their people and compensation strategies as employee engagement and retention will be instrumental as they position themselves for the recovery ahead. We are partnering with clients to better design agile and employee-centric reward packages so they can stay ahead of the curve.”
About Mercer’s Total Remuneration Survey
The Total Remuneration Survey, Mercer’s flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead. In addition, Mercer also conducts regular pulse surveys throughout the year to keep up with the impact of the rapidly changing business environment and compensation and workforce trends.
For more data and insights from Mercer’s Indonesia Total Remuneration Survey 2020, please see here.
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