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Asia's ageing workforce and falling birth rates are shrinking the talent pool. What does that mean for your organisation? Let’s unlock the workplace implications and turn this trend into a competitive edge.
This article is brought to you by Mercer.
Asia finds itself at the epicentre of a demographic transformation.
The APAC region is said to be ageing faster than any other in the world, with the proportion of people aged 60 and above expected to double by 2050. At the same time, fertility rates are falling below replacement levels in 71% of APAC countries, creating a dual challenge: a shrinking talent pool amidst a growing population of older workers.
These data points were recently shared by talent expert Ravi Nippani, Partner, Regional Industries Leader – Asia, Mercer, who went on to reveal:
“One in every four people in Asia Pacific will be 60 years and above by 2050. This has implications not just for society, but also at the workplace.”
Indeed, this demographic shift is not purely a societal issue and will impact employers and strategy makers as well.
The time is right for HR leaders to rethink total rewards through a "future pay" lens, anchored in three key transformation pillars:
- Longevity: Supporting longer, healthier working lives.
- Cost planning: Managing rising costs with targeted investments.
- Multi-generational strategy: Designing inclusive, life-stage-based rewards.
Let’s have a look at how to leverage the above three pivots for a more future-ready compensation strategy.
Is it possible to tie compensation to business KPIs?
In most organisations, age and role still tend to be significant levers affecting pay decisions across APAC – in Korea, for instance, 34% of pay variation beyond job level is influenced by age. However, this is beginning to shift, as observed by Hua Teck Tan, Principal, Regional Benefits Lead – APAC, Mercer.
The traditional tenure-based pay model is giving way to more agile, skills-based compensation frameworks. More than just being about fairness, this shift is expected to align pay better with performance and long-term business outcomes.
Hua Teck affirms:
“It’s important to shift to a skills-based sort of pay, segment your workforce and hire talent by timeline, as well as tailor rewards by life stages.”
Organisations across APAC, and especially in ageing markets, are also increasingly adopting long-term incentive (LTI) plans, as observed by Nippani. In Japan, for example, the uptake of LTIs, including restricted share units and performance-based share plans, has grown significantly.
This, he points out, is a shift that goes beyond pay structures. “Long-term incentive planning is about aligning compensation with strategic business goals, such as productivity, innovation, and long-term value creation,” Nippani says.
Prepping compensation models for 3–5-year cost scenarios
With the medical trend rate in Southeast Asia, i.e., the year-on-year percentage increase in the cost of medical claims per person, reaching double digits, organisations are under pressure to manage rising costs while maintaining competitive benefits. Mercer’s data shows that Asia has the highest projected medical trend rates in 2026, at a projected rate of 12.5%. This jump is largely being driven by higher utilisation, treatment changes, and medical inflation.
As a result, for the first time in four years, APAC insurers actually project employers to reduce coverage for employees.
For compensation & benefits (C&B) leaders grappling with this challenge as you plan for 2026, Samuel Tan, Principal, Advisory Enablement – MMB Asia, Mercer, recommends an event-driven benefits strategy, where offerings are aligned with key life stages of employees, and delivered through digital platforms to maximise reach and cost-efficiency.
“Not all employees need all the benefits all the time. Using a time frame, events-driven strategy helps maintain cost control,” added Hua Tek.
This approach, they say, also supports targeted investments in talent development and upskilling, ensuring that organisations are building future-ready workforces while managing financial sustainability.
Reimagining pay and benefits for multi-generational talent
With five generations now coexisting in the workplace, a one-size-fits-all approach to rewards is no longer viable – and likely never was the most optimum strategy. Benefits are increasingly being tailored to life stages over ages, from early-career support to wellbeing to eldercare and phased retirement.
The interesting thing is that Mercer’s research shows one of the oldest generations, namely Boomers, is thriving in the workplace, often outperforming younger generations in physical and mental wellbeing. Yet, younger employees — particularly Millennials and Gen Z — have also expressed concerns about longevity, financial security, and health.
Here's where policies such as flexible benefits, family care leave, and eldercare support are gaining popularity for their widely-applicable impact.
For example, one global banking major has partnered with a vendor to offer its employees a family marketplace — a one-stop platform for childcare, parenting resources, and eldercare services.
Another example is that of a digital engineering high-tech firm rooted in Asia, which has partnered with an elder care organisation, to create an app that helps employees manage care for their aging parents. Not only does this unlock a community-based platform for assistance, but it also helps with managing services for seniors in employees' hometowns.
Hua Tek affirms the impact of such interventions: "Employees can utilise such platforms as a one-stop resource for their related family needs. It is a differentiator in a competitive talent market.”
Organisations are also redefining traditional concepts such as who comprises “caregivers” or “dependents” to reflect modern family structures.
One financial services firm, for instance, expanded its benefits to cover parents and pets, after discovering that many younger employees were single caregivers or pet owners. This has allowed single employees to then claim medical expenses for parents and vet bills for their pets.
Other innovations that have been introduced across the landscape include micro-retirement programmes, discount programmes, and defined contribution models for eldercare – all designed to support employees through different life phases while managing costs.
Conclusion: Building fit-for-purpose total rewards
As APAC’s workforce continues to evolve, HR leaders must act with urgency to future-proof their total rewards strategies. As shared above, embracing skills-based pay, investing in longevity-focused benefits, and designing inclusive, life-stage-aligned programmes are more likely than other initiatives to be helpful.
“With the changing demographics and with age, organisations will need to look at how rewards frameworks are being designed,” concluded Nippani.
“By aligning compensation and benefits with long-term business goals and the realities of a multi-generational workforce, organisations can build resilient, future-ready talent strategies that thrive in the longevity economy.”
About Mercer
Mercer, a business of Marsh McLennan (NYSE: MMC), is a global leader in helping clients realise their investment objectives, shape the future of work, and enhance health and retirement outcomes for their people.
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