It’s been an “employee’s market” — a third of Asia-Pacific’s companies have offered higher salaries to attract talent, according to Mercer. But the tables may be turning as fears of recession grow, said the consulting firm.

“Companies are starting to get cautious, especially [in] the second half of the year,” said Puneet Swani, Mercer’s career business leader for Asia, Middle East and Africa.

He told CNBC’s “Squawk Box Asia” on Thursday that one in five companies in Asia-Pacific have issued hiring freezes, with 40% hiring for just critical roles.

“There’s another 30% of organizations which are saying that the hiring decisions require another layer of approval,” Swani said.

“With all the fears of recession … the tide might turn [for employees].”

However, companies are still facing talent shortages. According to Mercer’s global survey in July, 70% of 181 companies in Asia-Pacific were struggling to attract talent, especially those in Japan and China.

That has driven companies to get “creative” in talent attraction, said Swani, through attractive salaries to counter higher costs of living and inflation.

Mercer found that salary raises for 2022 are higher than 2021 across all industries and markets in the region, with some even above pre-pandemic levels.

To retain talent, 42% of companies are also providing retention bonuses, up from 31% in 2019, said Mercer.

However, competing for talent on compensation alone won’t be sustainable, said Swani.

“Organizations will need to look at this as a marathon rather than a sprint … [and] look at the broader employee experience.”

He added, “If you look at the top three drivers of disengagement in employees, part of it is the ability to work flexibly remote or hybrid.”

Training opportunities are another way for companies to differentiate themselves from the competition.

“[That’s] been a very strong agenda, especially as companies came out of the pandemic, their business models have changed,” he said.

Swani added that companies have increased automation and outsourcing, leading to skill gaps within organizations.  

“That’s [on] employees minds as well, how do you help me upskill and reskill?”

In another study, Mercer found that 95% of employees in Asia reported recently picking up a skill. Despite that, the study said, 97% of companies reported significant skill gaps in their organization.

For countries that rely a lot more on foreign talent, increased mobility as pandemic restrictions ease will help to manage talent shortages, said Swani.

“For those countries, the whole supply and demand dynamics really changed [during the pandemic], and which triggered a lot of salaries moving upwards as well because you have very limited talent.”

He added, “A lot of countries are open … and business visas are being [issued]. And I think that’s going to help manage some of those talent demand shortages from that perspective.”