Businesses across Southeast Asia are navigating economic headwinds that show no signs of easing in 2025. Inflation continues to bite, geopolitical tensions remain unresolved, and talent remains in short supply.

For HR leaders, this backdrop demands strategic sharpness – balancing agility with resilience, while ensuring performance doesn’t fall through the cracks.

Aon’s H1 SEA Pulse Survey provides a timely barometer of how firms across the region are adapting their people strategies to a climate defined by caution.

The survey findings indicate optimism among companies, but it’s tempered by a growing sense of unease. As the business climate shifts, firms are tightening their belts and recalibrating priorities.

Guarded optimism defines the business mood

There’s a delicate interplay unfolding between hope and hesitancy. According to data from Aon, 46% of firms in Southeast Asia expect a positive business outlook this year – a notable rise from 32% in 2024.

However, those predicting a tough year ahead have also increased sharply to 29%, up from just 9% last year. This divergence signals a business climate that is anything but predictable.

With uncertainty clouding visibility, many organisations are holding steady on workforce numbers. Aon’s survey shows 60% of firms expect no change in headcount, while just over a quarter (27%) foresee modest increases of 5% to 20%.

Notably, Malaysia and the Philippines (both 34%) and Indonesia (33%) are emerging as bright spots, with higher expectations for workforce expansion.

The productivity imperative: Fewer people hired but for greater impact

In an environment where companies are reluctant to add headcount, the spotlight shifts to productivity. It’s no longer about size but about speed, skill, and strategy.

Businesses are overhauling how they work: streamlining operations, embracing automation, and leaning into digital tools to stretch what their teams can achieve.

This focus on efficiency is reflected in HR priorities. Workforce planning tops the list, followed by the urgent need to recruit high-calibre talent in the face of continued shortages.

Headcount rationalisation is now a favoured lever for cost control – organisations are trimming fat, flattening hierarchies, and sharpening focus on roles that drive value.

Interestingly, sector dynamics are shaping hiring differently. Financial services firms, typically more risk-averse, are pacing themselves with more conservative expansion plans. In contrast, non-financial industries appear more bullish, especially in roles directly tied to growth.

Revenue-generating functions, such as sales, marketing, and customer-facing roles, are in the spotlight. Meanwhile, support departments such as finance, HR, and admin are feeling the pressure, as automation tools reduce their headcount relevance.

The takeaway is that roles that can’t directly prove their value are under greater scrutiny.

Upskilling as a hedge against irrelevance

The digital shift is well under way, and firms are betting on skills to secure their future. Traditional roles are evolving – or disappearing altogether – as tech-driven capabilities move to the fore. Data analytics, automation, and digital process management are fast becoming must-haves for today’s workforce.

Aon’s survey highlights the top five talent priorities in 2025:

• Planning and optimising workforce size (55%)
• Hiring high-quality talent (42%)
• Investing in upskilling and reskilling (30%)
• Modernising HR processes with tech (26%)
• Preparing staff to work with AI tools (26%)

Employees who invest in these areas will be better placed to ride the waves of change and help their companies stay afloat.

Cost pressures call for smarter incentives

Alongside these people priorities, the cost equation is growing more complex. Aon’s 2025 Client Trends Report pegs the global medical trend rate at 10%, signalling rising employee-related expenses.

With budgets under pressure, firms are getting creative and turning to differentiated pay to reward high performers and build high-output cultures.

However, money alone won’t keep the wheels turning. Many organisations are also funnelling resources into employee experience, ranging from wellness programmes to career growth initiatives. These aren’t just nice-to-haves but strategic investments in productivity and retention.

Flexibility gains ground, but hybrid is the sweet spot

Workplace flexibility is no longer a perk – it’s expected. That said, firms are being deliberate about how they offer it.

Aon’s data reveals that 80% of organisations provide flexible working hours, while just 35% offer teleworking or telecommuting. Only 25% support part-time roles.

The emphasis is on striking the right balance: maintaining flexibility without compromising collaboration, performance oversight, or organisational culture.

Interestingly, Aon’s 2025 Employee Sentiment Study reveals that hybrid workers report the highest levels of feeling valued. Fully remote employees are 52% more likely to feel undervalued, while office-based workers are 10% more likely to feel the same.

The implication is that flexibility must be tailored: one-size-fits-all won’t cut it in today’s complex work environment.

Strengthening the business core

If 2024 was about survival, 2025 is about sharpening the edge. Businesses are moving away from bloated structures and towards lean, high-impact models.

HR leaders are steering this transformation – reimagining workforce planning, doubling down on capability building, and ensuring every hire, tool, and policy pulls its weight.

In this age of caution, agility beats abundance. Firms face the challenge of channelling their energy not into growing bigger but into growing smarter.