Published January 5, 2009

Wage hike pendulum swings the other way

Pay rises in S'pore now projected to be among the lowest in Asia

By CHUANG PECK MING

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(SINGAPORE) It's a reflection of how fast the Singapore economy is turning down.

In barely three months, the projection for salary hikes here has gone from bad to worse - from among the highest in Asia to one of the lowest.

Pay increases in Singapore are tipped to average 3.7 per cent in 2009 - down from the 5.6 per cent actual rise in 2008, and the 5.9 per cent first projected in July last year, according to the latest poll of 761 companies last November.

The chances are that the increments will be even lower when they are paid out.

Conducted by compensation firm HR Business Solutions (HRBS), the poll - which covered 20 economies in Asia - showed the projected pay rise for Singapore is higher than only that for Hong Kong (3.3 per cent), Macau (3.1 per cent), New Zealand and Japan (2.3 per cent).

According to an HRBS poll three months earlier, when inflation was raging, the more developed economies in the region - Japan, Australia, New Zealand, Hong Kong, Singapore and Taiwan - were expected to see salary hikes of 3.5-5.9 per cent in 2009, with Japan at the lower end and Singapore at the top.

Elaine Ng, HRBS's managing principal and director, says the sharp decline in Singapore's relative pay hikes is not the working of a flexi-wage system, as one might have thought. 'The fact is that Singapore is expected to be the worst performing economy in Asia as a result of the financial crisis,' she says. 'And the Singapore government has been taking the lead to reduce top honchos' salaries in the government sector.'

Yet bonuses in Singapore this year - while projected to be smaller than the amount dished out last year (which was 17.9 per cent of annual base salary) - are tipped to be among the largest in the region, according to the HRBS poll.

At 15.1 per cent of annual pay, the projected average bonus for Singapore in 2009 is exceeded only by Russia, which is included in the poll.

Still, Ms Ng says salary increases and bonus payouts this year are likely to fall below projections. 'This is data from our poll from Nov 17 to 27, 2008. I expect that with the projected deteriorating economic crisis worldwide, the actual increases or bonus to be awarded in 2009 can be lower.'

According to her, most employers are cautious about the year ahead. 'Some are expected to defer their increment date due to business uncertainty,' she says. 'Bonuses will be lowered as companies fail to meet their revenue and profit targets.'

Significantly, mirroring the pessimism of many companies, Ms Ng points out that the median figures forecast tend to be higher than the average figures in the latest poll.

'This is the first time in my many years of consulting that I see the average lower than median figures,' she says. 'In past years, the average figures tended to be higher than the median figures.'

She says the reversal suggests some employers intend to freeze salary in 2009. 'The exercise of zero increase is happening not just in Singapore or Hong Kong, but (also in) hot economies like China and India. And even in Vietnam, where inflation shot up to 23 per cent recently.'

Apart from banks, the semiconductor industry is likely to see the biggest cut in bonuses in the coming months, Ms Ng says, with the amount reduced to 14 per cent of annual salary.

'Smaller-sized organisations tend to be more badly hit than the juggernauts,' she says. 'Consumer companies, including those high-end brands, are likely to see poorer business after Chinese New Year. These companies are among those hit too.'

The healthcare sector - selling nutritional health products and medical devices for healthcare and heart surgery - seems to be only mildly affected by the economic slump.

'They can still provide good bonuses,' Ms Ng says.