Singapore firms told to prioritise pay for critical talent

Demand outstrips supply in tech, AI, cybersecurity, and finance roles.

Singapore companies should focus pay increases on roles that directly drive business results, rather than handing out broad-based raises, as the city-state prepares for a projected 4% salary rise in 2026.

“Companies should strategically allocate their budgets towards critical talent and key roles that drive business resilience and growth,” Eugene Chong, head of career products for Singapore at Mercer LLC, told Singapore Business Review in an emailed reply to questions.

Mercer’s preliminary data released in January showed Singapore’s salary growth is expected to remain stable at 4%, slightly below last year’s 4.1% increase. The figure reflects efforts by companies to retain talent amid rising living costs.

Singapore remains Asia’s most expensive city, according to the 2026 Global Cost of Living Index by Numbeo DOO Beograd-Palilul, with a score of 87.7, up from 79.1 in 2025, placing it ninth globally.

Kirsty Poltock, country manager for Singapore at Robert Walters Plc, said the tight labour market is particularly evident for critical skill sets.

“Demand continues to outpace supply in areas such as technology, artificial intelligence (AI), cybersecurity, finance, risk, compliance, and transformation-related roles,” she said in a separate email.

The 2026 Global Talent Shortage Survey by ManpowerGroup found AI skills remain amongst the hardest to fill in Singapore, with AI model and application development at 26% and AI literacy at 25%.

Poltock expects companies to shift focus from hiring more staff to optimising existing workforces.

Firms should invest in productivity improvements, automation, and upskilling, whilst contract roles, project-based hiring, and outsourcing provide scale and cost control.

Chong added that performance-based pay should become central. Mercer’s data showed the proportion of employers planning raises has dipped to 97.6% this year from 99.2% in 2025, as companies reward employees who meet or exceed targets.

“Instead of across-the-board raises, we are seeing a stronger emphasis on differentiated compensation strategies,” Poltock said. “Increments are more targeted and aligned to performance, skill scarcity, and business priorities.”

Industries expected to see the biggest compensation movements include logistics, aerospace, high-tech manufacturing, consumer goods, healthcare, life sciences, chemicals, technology, financial services, and supply chain functions.

Roles tied to digital transformation, cybersecurity, data analytics, regulatory compliance, and risk management remain particularly well-compensated, Poltock said.