The Philippine economy has demonstrated notable resilience, achieving a 5.6% growth in its Gross Domestic Product in 2024. This positions the country as the second-fastest-growing economy within the ASEAN region.

The steady expansion, despite various global and local challenges, provides a stable foundation for potential adjustments in the labour market, including salary increases.

Projections for 2025 remain optimistic, with expectations of lower inflation coupled with increased consumption and investments fuelling a bullish outlook. The World Bank anticipates an average growth rate of 6.0% for the Philippine economy between 2024 and 2026. The Asian Development Bank also forecasts 6.2% GDP growth in 2025.

Against this backdrop of sustained economic growth, Filipino workers are anticipating salary increases. Several factors contribute to this expectation, most notably the impact of inflation on the cost of living.

The Philippines experienced an average inflation rate of 3.2% in 2024, which eroded the purchasing power of workers and created a demand for compensatory adjustments. While inflation has shown signs of easing in early 2025, with February recording a rate of 2.1%, the cumulative effect of previous price hikes continues to influence workers’ financial wellbeing.

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Economic impact on wage trends

While the moderation in price increases is beneficial for overall economic stability, the sustained cost of living remains a crucial factor influencing wage expectations. The cumulative impact of past inflation continues to put pressure on household finances, even if the rate of increase has slowed.

Looking at historical wage trends, data from the Philippine Statistics Authority reveals that the average monthly wage rate for time-rated workers saw an 11.7% increase between 2020 and 2022. This indicates a general upward movement in wages even before the more recent inflationary pressures.

Similarly, the median basic pay experienced a 6.9% rise during the same period, suggesting a broad pattern of wage growth across different income brackets.

In 2024, WTW monitored a median budget for salary increase at 5.7% for the Philippines in both 2023 and 2024. There have been projections from Mercer that salaries are also expected to rise in 2025, thereby continuing the same trend.

The same Mercer study also revealed that 97% of companies intend to revise their compensation strategies in 2025, with many looking at short-term incentives such as bonuses and long-term benefits such as stock options. This indicates a broader approach to employee compensation beyond just adjustments to base salaries.

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Businesses are also actively adjusting compensation strategies in response to prevailing economic conditions. The increasing adoption of short-term and long-term incentive plans suggests a move towards more comprehensive compensation packages that aim to reward performance and foster employee loyalty.

Furthermore, a growing number of companies are offering flexible benefits, demonstrating an understanding of the importance of addressing the evolving wellbeing needs of their workforce.

Ultimately, the profitability of the company will always be a primary driver in decisions regarding salary increases. The projected economic growth for the Philippines in 2025 provides a generally favourable environment for businesses to consider wage adjustments without unduly impacting their financial sustainability.

Employee expectations and labour market trends

The sustained increase in the cost of living in the Philippines over the past several years has undoubtedly influenced employee salary expectations. Workers are likely seeking wage adjustments to help them cope with the higher prices of essential goods and services.

Even with the recent slowdown in inflation, the cumulative effect of previous price hikes continues to exert pressure on household budgets.

The Trade Union Congress of the Philippines (TUCP) has emphasised that the current minimum wages are insufficient to lift many Filipinos out of poverty. This reflects a widespread sentiment that wages need to increase substantially to meet the basic cost of living.

Several broader labour market trends are also influencing local wages in the Philippines. The increasing prevalence of remote work has opened doors for Filipino professionals to secure employment with international companies, often offering more attractive salaries than local employers.

The access to global opportunities can create upward pressure on domestic wages, particularly for individuals with in-demand skills. However, talent migration – in which skilled Filipino workers seek better opportunities abroad – can lead to a shortage of qualified professionals within the Philippines.

To counter this, local companies may need to offer more competitive salaries to retain their key talent. The interconnected nature of the global labour market means Filipino professionals are increasingly competing on an international scale, and local businesses must offer compensation packages that are competitive globally to attract and retain top-tier employees.

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Government policies and union demands

Recent labour policies and wage-related legislative efforts may also influence salary adjustments in the Philippines for 2025. The Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act aims to stimulate economic growth and enhance the employability of the workforce.

While this legislation does not directly mandate salary increases, the anticipated rise in investments and job creation could indirectly lead to higher wages as companies compete for talent.

The labour department has also issued updated guidelines concerning the distribution of service charges, the procedures for hiring foreign nationals, and the compensation for work performed on holidays in 2025. These policies primarily focus on ensuring fair labour practices and do not necessarily mandate across-the-board salary increases.

However, ongoing discussions and the likely approval of the proposed daily minimum wage hike – across the board – represent significant government intervention that could impact the income of a substantial portion of the workforce.

Trade unions in the Philippines are actively advocating for higher wages for their members and for workers in general. The TUCP has been a vocal proponent of the increase in the daily minimum wage, arguing that current levels are insufficient to meet living costs.

Labour groups have also expressed their dissatisfaction with the last minimum wage increase in Metro Manila, deeming it inadequate. These groups are likely to continue pushing for more substantial adjustments.

Furthermore, some unions have resorted to industrial actions, such as strikes, to demand better wages and working conditions. A recent example is the Nexperia Philippines Workers’ Union, which successfully secured a wage increase for members after a three-day strike.

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What to expect in 2025?

Based on available employer surveys, it appears likely that Filipino employees can expect an average salary increase of up to 5.6% in 2025, the same amount as recent years.

Salary adjustments in 2025 are not expected to be uniform across all sectors. Industries experiencing high demand for specific skills, such as technology, or those facing challenges with employee attrition, like the SSO sector, are more likely to implement more competitive salary increases to attract and retain talent.

The energy sector, already a high-paying industry, is anticipated to maintain its competitive compensation levels. Therefore, while an average increase of about 5.5% is projected, the actual changes in individual salaries will likely vary considerably depending on the specific industry, nature of the job role, and region within the Philippines.

For employers, the expectation of moderate salary increases in 2025 necessitates careful planning to remain competitive in the talent market. A holistic approach to compensation – encompassing not only base salary but also incentives and benefits – will be crucial for attracting and retaining top talent.

Employers should also closely monitor developments regarding minimum wage legislation and be prepared to adjust compensation structures accordingly. Special attention should be paid to talent retention strategies, particularly in industries where demand for skilled professionals is high.

Employees, on the other hand, can generally anticipate moderate salary increases in the coming year. It is advisable for individuals to research industry-specific salary trends and be prepared to negotiate their compensation based on their skills, experience, and the prevailing market rates, especially in high-demand sectors.

Adjusting wages while protecting the financial sustainability of businesses is crucial. Companies should strive to link wage increases to improvements in employee productivity wherever feasible.

It’s important to remember that strategic compensation planning – which takes into account both market rates and the company’s financial health – is essential for long-term success.

Lastly, investing in the training and development of employees can lead to a more skilled and highly productive workforce. This can, in turn, justify higher wages and contribute to the overall economic growth and prosperity of the Philippines.