The Top 5 HR Challenges in Southeast Asia 2024

hr challenges
Table of Contents

The Southeast Asian economy has gained global attention, attracting foreign direct investments and multinational companies to expand into this region. A typical example is WeChat, a China technology company that has achieved nearly 50% of significant growth after expanding to SEA.

As a diverse business hub, HR departments in the region face unique challenges. Managing a diverse workforce requires understanding local customs and practices, promoting inclusivity, and fostering a harmonious work environment.

In this article, we will discuss:

  • The challenges of DEI initiatives in Southeast Asia
  • Is talent retention a challenge to SEA's HR managers?
  • Are overseas companies hiring from this region?
  • The region's growing emerging economy and its impact on businesses and hiring
  • Digital economy impact on HR technology
  • The top hurdle for digital transformation in the HR industry

Diversity and Inclusion

The Southeast Asia region consists of more than 100 ethnic groups that speak more than 1,000 languages and dialects; it is one of the most diverse regions in the world. Nevertheless, many organizations operating there have yet to tap the potential of this vast talent pool. Compared to the global average of 96%, just 58% of businesses in Southeast Asia have at least some D&I programs 1.

Generally, the workforce leadership teams consist primarily of the major ethnic group, such as a male-dominated workforce, and few companies have proper policies to support diversity and inclusion. Among the employees from underrepresented groups, including women, ethnic and religious minorities, the expectations for their voices to be heard and demand for fair treatment are rising.

Similarly, a research poll with 3,000 working professionals across 6 Southeast Asia countries found that merely 49% of employees felt that their company actively considers workplace diversity in hiring

The number is even lower in Singapore and Malaysia, where respondents are skeptical that equal opportunities exist.

Is diversity and inclusion important in the workplace? Does diversity increase creativity and business performance? Check out the 8 sustainable D&I strategies for HR teams.

Retention Challenges

57% of the respondents from a global survey, including 90% from the underrepresented groups, would consider leaving their job to a more inclusive company.

According to Boston consulting group's research, the estimated replacement costs attributed to this is more than $25 billion a year. Therefore, hiring and retention will be one of the main HR challenges for human resources and leadership teams.

From a hiring perspective, what do employees from the Southeast Asian region want? Milieu Research revealed that when searching for a new role, salary and benefits are their top priority (87%), followed by company stability and performance (63%), flexible working arrangement (60%), and DEI initiatives and policies (54%).

Retention rates have become a major issue for businesses in Southeast Asia, particularly affecting SMEs where company stability, salary and benefits, and DEI initiatives are incomparable with established companies or MNCs.

HR management from SEA can dive deep to understand the employee's needs, such as work from home hybrid arrangements or flexible work schedules to compete with competitors offering remote jobs.

The talent battle is now global

On the other hand, this presents an exceptional opportunity for developed countries to capitalize on hiring talents from the region. For instance, over half of South Korea's SMEs are looking for opportunities to hire software developers from overseas.

The Ministry of SMEs and Startups in Korea shared that hiring and retaining software engineers from their own country is difficult, and 75.4% of SMEs face this challenge.

Talent deficiency, which accounted for 74.3%, and a significant pay disparity were the main causes of this hiring shortage in which 54.5% of Korean SMEs have at least started to recruit offshore 2.

Where are they hiring from? The answer is India, Vietnam, China, and Indonesia. By hiring from emerging countries, companies can achieve lower compensation payouts than hiring from their own country.

Similar trends are happening in the United States, where employers are not able to find employees. The workforce gap has reached 4.3 million between employees searching for a job and unfilled positions.

Growing and emerging economies

The Southeast Asian Internet economy is projected to reach $200 billion in transactions; it is one of the fastest-growing regions in which global companies aim to scale fast and focus on business expansion to venture. One of the countries in the region has the potential to reach 49 billion GMV (Gross merchandise value) in 2025.

The challenge of human resources department here is to identify the areas where companies can compete with the growth of multinational companies in the region and the competition of the rising trend of borderless hiring.

Since flexible work arrangements such as remote work is favored by most of the SEA's employees, HR professionals can propose a hybrid work model that aids in improving the company's EVP while ensuring the employees are connected with the company.

SAP is a leading example that has opened its first hybrid office in Southeast Asia 3 as the company found that 88% of its employees spent less than 50% of their working hours at their desks. The new SAP's hybrid policy empowers employees to have the autonomy to choose where and when they want to work.

This is consistent with Manatal research finding that 7 out 10 employees in Singapore, Malaysia, Indonesia, and the Philippines believe a hybrid work arrangement helps to increase productivity and foster creativity 4, and 50% wish that the company can upgrade their home hardware and provide subsidies for high-speed internet connections during their work from home days.

Digital Economy and HR transformation

As an emerging region with digital transformation, HR professionals will need to overcome the challenge of making data-driven and evidence-based decision-making. The digital economy requires HR professionals to adopt and implement digital technology and solutions for various HR processes.

HR teams will need to navigate the complexities of selecting and implementing these digital tools while ensuring seamless integration with existing systems. When automation and artificial intelligence (AI) are integrated into the HR processes, HR teams can focus on strategic initiatives and employee engagement, freeing up repetitive HR tasks such as payroll processing, benefits administration, and reporting.

Based on the current market dynamics, the high volume of job applicants and the struggle to acquire suitable candidates to fill the talent gap have increased the workload for the hiring teams who wish to expand fast and create value for the company.

In regards to this challenge, 41% of HR-surveyed respondents indicated that driving revenue growth and profitability will be the number one priority for HR technology transformation for the next 3 years 5.

According to Gartner's prediction, 95% of global midsize and large businesses will have completely migrated to cloud by 2030, leaving no on-premises HR applications behind.

Although many HR departments are aware of the importance of HR digitization and have invested in HR technology, the adoption of these technologies remains the biggest challenge for HR technology leaders to ensure that employees and managers widely use the solutions to serve the functionality.

An All-in-One HR Platform

We have seen growth potential in Southeast Asia and the need to digitize your HR payroll solutions. Whether hiring remote workers or on-site employees from Southeast Asia or seeking a payroll solution from Southeast Asia, AYP global pay is the best option for cross-border hiring.

AYP Global Pay is a cutting-edge platform that provides a modern solution for paying your multinational remote team members in 130 currencies, making it easier for businesses to hire and manage global talents from anywhere.

Are you concerned about handling various HR policies and compliance issues from multiple countries? AYP is also the in-country expert in cross-border hiring regulations, cultures, and norms where you wish to expand.

With the world shifting towards a distributed work model, HR analytics tools and technologies help analyze employee data, such as workforce productivity and payroll cost, boost employee engagement rates, identify areas for improvement, and optimize HR strategies.

Are you looking for candidates from Southeast Asia?

Hiring the best talent without geographical restriction and enabling businesses to build a scalable distributed workforce is AYP Global Pay's brand promise.

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  1. The Diversity Dividend in Southeast Asia
  2. Korean SMEs turning to offshore software engineers amid talent shortage
  3. SAP launches first-ever hybrid office in Asia
  4. Outlook: Hybrid Working in Southeast Asia
  5. HR Technology Planning Imperatives

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