Philippine employers to cut salary budgets in 2026 — WTW

Philippine employers expect to see a decline in their salary budgets in 2026, which could affect potential pay hikes for private sector workers, global advisory firm WTW said.

In its Salary Budget Planning Survey Report, WTW said that private companies are projected to allocate an average median increase of 5.5% for salaries in 2026. This is slightly higher than the 5.3% actual average salary increase this year, and unchanged from 5.5% in 2024.

The Philippines ranked fourth out of 13 countries in the Asia-Pacific region with the highest projected median salary increase for 2026. It was behind India (9%), Vietnam (7%), and Indonesia (6.1%).

WTW said that nearly 47.8% of the 344 local employers surveyed had lowered their salary budgets for 2026 due to an anticipated recession or weaker financial results, while 43.5% cited cost management concerns.

“Although overall budgets remain stable, the real transformation is happening behind the scenes. Employers are becoming more strategic in how they distribute compensation, prioritize investments, and define the results they aim to achieve,” WTW Philippines Rewards Data Intelligence Practice Leader Chantal Querubin said in a statement.

“Rather than simply reacting to economic trends, companies are proactively reshaping their approach to better align with broader business objectives, even in uncertain times,” she added.

On the other hand, the WTW report found that only 14.3% of Philippine employers are expecting to increase their salary budget for 2026.

Philippine employers noted that the increase in the budget for compensation would mainly be driven by inflationary pressures (26.1%), tight labor markets (19.6%), and anticipated stronger financial results (19.6%).

The WTW survey also showed that 92.6% of employers have conducted regular salary reviews this year, slightly lower than the 96.1% recorded in 2024. The rest said they either halted their salary review process (3.9%) or postponed wage negotiations (3.5%).

“This reflects a cautious approach by companies amidst current global economic uncertainties,” the advisory firm said.

Maria Ella Calaor-Oplas, an economics professor who specializes in human capital development research at De La Salle University, said that the smaller budget for salary hikes may affect the household finances of private sector workers.

“They will not be able to sustain their lifestyle, especially if the wage increase is smaller than inflation,” Ms. Oplas said in a Facebook Messenger chat. “Meaning that combined income levels of families may have increased, but it is not sufficient given inflation levels.”

The Bangko Sentral ng Pilipinas (BSP) expects inflation to settle at 1.6% this year and 3.4% in 2026.

Benjamin Velasco, an assistant professor at the University of the Philippines Diliman School of Labor and Industrial Relations, said that sluggish pay hikes may encourage more Filipinos to seek work overseas.

“The stagnation of wages will nudge more workers to overseas employment or gig work — both of which present challenges despite the prospects of better pay,” he said in a Messenger chat.

“If decent jobs in the private sector are lacking, one option is for the state to take up the slack through an improved and innovative public employment program, such as climate jobs,” he added.

The Department of Labor and Employment recently launched the National Green Jobs Human Resource Development Plan, with the aim of developing a skilled workforce to support the country’s green transition.

Mr. Velasco said that the labor sector’s call for a legislated wage hike may remain relevant amid the projected stagnation of salary increases for workers in the private sector.

Labor groups are expected to continue to push lawmakers to approve a wage hike bill, after a similar measure failed to hurdle the previous Congress.

“The recent minimum wage hike of P50 in the National Capital Region (NCR) which amounts to a 7.8% increase, is not too far off from the 5.5% finding of the survey,” Mr. Velasco added, noting that expected adjustments in other regions may be lower.

A P50 daily pay increase for minimum wage workers in the NCR took effect on July 18, bringing the daily minimum wage to PHP 695.

Headcount

Meanwhile, the WTW report showed 76.9% of employers in the Philippines plan to maintain their headcount in the next 12 months.

Only 15.4% of surveyed companies said that they intended to increase the number of employees, while 7.7% are planning to cut their workforce.

“In today’s Philippine labor market, shaped by both local and global pressures, employers are shifting from rapid expansion to maintaining a stable and resilient workforce,” WTW’s Ms. Querubin said.

The WTW survey also showed 57% of employers are experiencing little to no difficulty in attracting and retaining their employees.

WTW said Philippine employers have been adjusting their compensation programs to augment their regular salary reviews “amid rising operating costs and intensifying labor market pressures.”

The report showed that 54% of companies are reviewing the compensation of all employees, while 49% said they are reviewing only salaries of specific employee groups. Organizations are also raising starting salaries (44%), using retention bonuses and spot awards (39%), and adjusting salary ranges more aggressively (38%).

“More organizations have likewise undertaken or are planning complementary actions to address talent needs and support their employees,” WTW said.

About 73% of companies are looking to improve employee experience, while 62% will increase training opportunities and 60% will enhance health and wellness benefits.

“Instead of broad hiring or large budget increases, companies are taking a more measured approach, carefully managing costs while staying focused on long-term talent priorities such as upskilling, succession planning, internal mobility, and employee well-being,” Ms. Querubin said.

She added that these strategies would become essential in sustaining the capability and competitiveness of a company’s workforce. — Adrian H. Halili, Reporter