Pay Rises Aren’t a Formula in 2026. They’re a Leadership Decision
Across APAC, pay planning for 2026 is being set against economic uncertainty, geopolitical disruption and uneven talent markets. Inflation and interest rates still matter—but they no longer dictate a single, uniform response. More employers are building pay plans that are targeted, flexible and tightly governed.
Data Led Decision Making
Employers have more market data than ever to support pay decisions. Aon’s compensation and market practice research points to a consistent pattern across APAC: organisations are using external benchmarks as a defensible anchor—then adjusting for their strategy, operating model and talent risks.
In other words, the debate is shifting from “what’s the right percentage?” to “where will each dollar do the most work?” That’s driving more targeted investment in retention risks, scarce skills and priority roles.
Differentiation Has Moved From “Nice to Have” to Standard Practice
Many organisations now segment the workforce and pay differently for groups such as top performers, high potentials and critical roles. The labels vary, but the mechanics are similar: separate increase guidelines, more frequent review cycles and selective out-of-cycle adjustments. For critical talent, the gap is real. Aon’s research shows that more than two-thirds of organisations award higher merit increases for these roles—most commonly 1.5x to 2.0x the overall employee average. That makes governance non-negotiable: without clear guardrails, differentiation quickly turns into inconsistency and perceived unfairness.
Budgets As Guardrails, Not Handcuffs
Across APAC markets, planned salary budgets and realised outcomes still broadly track each other.
Employers are keeping discretion to redirect spend toward pressure points—market hotspots, retention risk or priority roles—while holding the overall line. The result: the budget sets the boundary, but leaders decide the allocation.
Why Inflation Doesn’t Translate Into Pay, Dollar for Dollar
It’s tempting to assume salary increases should track inflation. In practice, they rarely do. Even during the inflation spike of 2023, most employers moderated their response rather than indexing pay. The reason is simple: inflation can fall; base salary typically doesn’t.
Budgets are usually set months ahead. Leaders must also balance multiple cost pressures and target to specific problems—not simply spread evenly across the workforce. Inflation is part of the context; strategy and talent risk drive the decision.
What We’re Seeing on the Ground for 2026
Most employers are choosing caution over theatrics. Many are still reviewing their position or taking no specific pay or benefits action in response to geopolitical and energy-related uncertainty. Where organisations are acting, the emphasis is on cost controls, flexibility and targeted support rather than sweeping pay freezes. In recent Aon polling during March 2026, 5% or organizations reported delaying or pausing pay reviews, and 2% temporarily froze 2026 salary increases. The common thread is optionality: keep room to move as conditions change.
If You’re Differentiating More, You Need Stronger Rules
Greater discretion raises one predictable risk: inconsistency. The fix isn’t to eliminate judgement—it’s to frame it. That means clear differentiation ranges, firmer guidance on pay range positioning, budgets split by purpose, and explicit checks for internal equity and pay compression. It also means using more than base pay when the situation calls for it—benefits and EVP levers can relieve pressure without permanently lifting fixed costs.
Bottom line: in 2026, pay planning isn’t about finding the “right” number. It’s about building a system that lets leaders move fast—without losing fairness, equity or control.
What leaders should do now
1) Separate signal from noise: use market data, but challenge what’s temporary versus structural.
2) Differentiate with discipline: define roles, set ranges, and run equity checks before you communicate outcomes.
3) Keep capacity in reserve: treat the budget as a boundary and hold back funds for real pressure points.
The winners in 2026 will be those that differentiate pay with discipline—using data, guardrails and total reward to stay competitive without losing control.
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Aon Thought Leaders
Belinda Armenta
Head of Talent Analytics, APAC
Yvette O'Reilly
Associate Partner, Data Business Leader, Pacific