Introduction

The global wave of salary increases is gaining momentum. From Asian neighbors like Japan and Vietnam to Western countries such as Germany and the United States, wage hikes are sweeping across the world.

In Japan, the average full-time salary in October 2024 increased by 2.8% year-on-year to ¥336,070, marking the largest growth since 1994.

According to EU data, in the third quarter of 2024, labor costs per hour in the Eurozone rose 4.6% compared with the previous year, with Spain, Italy, and Germany experiencing wage growth of 4.7%, 5.2%, and 5.5%, respectively.

In the United States, the latest survey shows strong employment and wage growth for entry-level and technical positions, with further increases expected in 2025. States such as California are planning a new round of minimum wage hikes.

Wage increases are not limited to developed countries; many developing nations are also experiencing pay growth. According to consulting firm Aon, salary increases in Southeast Asian countries in 2025 are expected to exceed 2024 levels. The top three countries in terms of wage growth are Vietnam (6.7%), Indonesia (6.3%), and the Philippines (5.8%).

These salary hikes are not merely a simple market phenomenon—they are closely linked to national policies, economic conditions, and labor market dynamics. SailGlobal suggests that Chinese companies expanding overseas should consider not only cost implications but also team stability and operational efficiency when responding to the wage surge. By adjusting compensation policies strategically, companies can ensure compliance, control costs, and stabilize their overseas teams.

Behind the Global Wage Surge: Unstoppable Inflation, Unavoidable Pay Raises

The global wave of salary increases is closely linked to widespread inflation in many countries.

According to the latest U.S. data, the Consumer Price Index (CPI) rose 5% year-on-year in March 2025, with food prices up 8.5% and housing costs up 8.2%. In Japan, the core CPI increased 3% year-on-year in December 2024, reaching a 16-month high.

As prices continue to climb, workers demand higher wages. On March 13, Japan’s largest labor union federation, UA Zensen, announced that its member unions had reached a significant wage increase agreement with employers for the third consecutive year, with full-time employees receiving an average raise of 5.37% and part-time employees 6.53%. In the U.S., wage growth is even more pronounced. Not only did average salaries generally rise in 2024, but several state governments also passed legislation to increase minimum wages. For example, starting January 1, 2025, California’s minimum wage will rise to $16.5 per hour.

Beyond inflation-driven labor cost increases, each country faces its own unique circumstances.

In Japan, a long-term low birth rate has led to structural changes in the labor market—in short, there are not enough young workers. In 2024, leading companies across various industries experienced significantly higher recruitment difficulties. The ratio of available positions to new graduates dropped to 0.8:1, meaning there were more positions than graduates. In this context, companies actively competed for talent, offering favorable salaries to new graduates, which objectively contributed to wage growth.

Vietnam’s labor force aged 15–64 accounts for 69% of the population, with an average age of just 31. While this age structure should be advantageous, Vietnamese companies are starting to face labor shortages. Many young workers are reluctant to work in factories, turning instead to flexible jobs such as ride-hailing and food delivery. Additionally, Vietnam suffers from a severe shortage of high-tech talent. Only 67% of the labor force has received training, and just 27% hold professional certifications, making it difficult to meet the demands of industries like electronics and semiconductors. Companies are therefore forced to compete for a limited pool of skilled workers with higher salaries.

Facing such challenging circumstances, how can overseas-operating companies maintain profitability while avoiding excessive cost pressures?

SailGlobal Expert Recommendations

1.Restructuring Workforce: Full-Time + Outsourced Staff

Overseas-operating companies can retain full-time employees for core positions (e.g., technical R&D, management) while outsourcing replaceable roles such as production and customer service to contractors or outsourced staff. In countries like Japan and Vietnam, repetitive roles can be assigned to outsourced employees to reduce salary expenses. Developed countries like Japan have well-established outsourcing systems that can effectively lower overall payroll costs.

2.Optimizing Compensation Structure: Increase Benefits to Enhance Employee Stability

While inflation-driven wage increases are unavoidable, they also give companies more options to attract and retain talent. In addition to ensuring basic salary growth, companies can enhance employee stability by increasing benefits. Since employees demand higher pay due to rising living costs, providing part of this support through benefits can make positions more attractive to foreign employees.

Japan: Increase transportation allowances to boost employee satisfaction (commuting times are long in Japan). Such allowances are tax-free income for employees, making them highly appealing. These allowances can also be part of the total compensation package, reducing company cost pressure.
United States: Employer-provided benefits are often tax-free, such as group life insurance, housing, or meals. Leveraging tax-free benefits during high inflation can reduce employees’ living costs, increase net income, and stabilize teams.
Vietnam: Provide non-salary benefits like free gym memberships to attract younger employees.

3.Adjusting Hiring Demographics / Age Structure

Companies should adjust hiring strategies based on local policies and demographics.

United States: Hire individuals recognized by the IRS as facing employment barriers to apply for the Work Opportunity Tax Credit (WOTC), reducing company costs. Eligible groups include: TANF recipients, unemployed veterans (including disabled), formerly incarcerated individuals, residents in designated empowerment zones or rural counties, vocational rehabilitation referrals, summer youth employees in empowerment zones, SNAP recipients, SSI recipients, long-term public assistance recipients, and long-term unemployed. Small businesses (annual revenue ≤ $1M or ≤30 full-time employees) can also receive tax credits for hiring disabled workers. U.S. states provide guidance and services to facilitate these hires, further reducing company burden.
Japan: Under the “Stable Employment of Elderly Persons Act,” employers can apply for subsidies (¥150,000–¥1.6M) if they set retirement age at 65+, remove mandatory retirement, and continue employing willing staff beyond 66. Hiring older engineers or white-collar staff not only brings experience but also allows companies to apply for subsidies.
Vietnam: Increase the proportion of mid-aged stable employees (around 40 years old) to enhance overall team stability.

4.Policy and Regional Arbitrage

Understanding local policies can help reduce costs and improve operational efficiency.

United States: Low-Tax Regions

Establish regional headquarters in low-tax states like Texas and utilize government “skills training subsidies” for new employee training. Texas offers Small Business Skills Grants, providing $2,000 per new employee and $1,000 per existing full-time employee for companies with fewer than 100 staff.

Vietnam: Enterprise Support in Industrial Parks

Choose major national-level parks for more tax incentives, e.g., Hoa Lac Hi-Tech Park, Da Nang Hi-Tech Park, Saigon Hi-Tech Park.

Investment fields: semiconductors, advanced materials, biomedicine.
Requirements:
Annual R&D funding ≥5% of revenue or R&D expenses in Vietnam ≥1% of revenue
Employees with university degrees in R&D ≥5% of total staff
Production lines meet advanced standards, with at least 1/3 automated equipment
Compliance with environmental and technical standards
Tax incentives: corporate income tax, import duty exemptions, certain parks waive management fees
Japan: Shift to Regional Cities

Move part of the workforce to regional cities or satellite towns near metropolitan areas to reduce labor costs.

5.Technology to Replace Labor: AI Substitution

Deploy voice AI systems for customer service positions to reduce hiring costs.
Introduce industrial robots for repetitive tasks or more AI to replace customer service roles.

Building a “Cost, Efficiency, Compliance” Defense Against the Wage Surge

SailGlobal believes that rising labor costs are inevitable. Companies should build a defense in three dimensions:

Flexible employment (mixed hiring model)
Intelligent production (robots and AI)
Policy arbitrage (regional layout + subsidies)

As a professional global compensation management expert, SailGlobal recommends practical and compliant pay solutions tailored to each country, focusing on legally maximizing subsidies while maintaining the stability of overseas teams.

“With a Global Wave of Salary Increases, How Should Overseas-Operating Companies Respond?”