Firms in Singapore are told to prioritize pay for critical talent due to talent shortages

Companies in Singapore need to adopt a more focused approach to salary increases in 2026, prioritizing critical talent over blanket salary hikes across their entire workforce.

Mercer data indicates that overall salaries in Singapore are expected to rise by about 4% in 2026, slightly below the 4.1% increase seen in 2025. This suggests that most employers are controlling costs while retaining specialists.

Industry experts advise that employers should concentrate on how to allocate increases rather than how much to increase salaries.

“Companies should strategically allocate their budgets towards critical talent and key roles that drive business resilience and growth,” said Eugene Chong, head of career products for Singapore at Mercer.

Singapore’s tightening labor market makes these actions necessary. According to Robert Walters, demand continues to outpace supply across technology, artificial intelligence (AI), cybersecurity, finance and compliance.

A recent survey by ManpowerGroup found that filling AI-related roles, including AI model and application development and AI literacy, remains especially challenging.

As a result, companies are expected to reduce reliance on large-scale hiring and instead focus on boosting productivity within existing teams. This includes investing in automation, upskilling employees and using contract or project-based hiring to maintain flexibility and control costs.

Simultaneously, compensation strategies are becoming more performance-oriented. Fewer companies plan to give overall salary increases, with Mercer data showing the percentage dropping to 97.6% in 2026 from 99.2% last year. Employers are increasingly rewarding employees who meet or surpass performance targets while prioritizing roles with scarce or business-critical skills.

Pay adjustments are expected in sectors such as logistics, aerospace, high-tech manufacturing, healthcare, life sciences, technology, financial services and supply chain functions. Positions related to digital transformation, cybersecurity, data analytics and risk and compliance are likely to remain among the most competitive.