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Rising inflation putting pressure on S’pore firms to raise pay by over 5%

Current budgets may allow for measly 0.5%-1% hike in real wages

THE higher inflation tipped for next year is pressuring companies to raise wages by more than what they are currently prepared to give, according to human resources services company Hewitt.

Companies have, on average, budgeted a 5 per cent wage hike for next year, according to an April-May survey conducted by Hewitt covering 180 companies across sectors like hospitality, energy, retail and logistics.

About 11 per cent of the firms polled were Singapore-based; the rest are from overseas. Ninety are units of United States-based firms.

Inflation next year was expected to hit around 2.5 per cent when the survey was carried out. Recent data, however, suggests prices could shoot up by as much as 4 per cent to 5 per cent in the first half of next year.

If companies keep to their budgeted figures, real wage increases could come to only a measly 0.5 per cent to 1 per cent, at least during the early months of next year.

That may, in turn, spark a fresh round of musical chairs for junior and middle managers, especially in talentstrapped, high-growth sectors such as financial services, said Ms Tan Yee Deng, a Hewitt executive covering remuneration issues in Singapore and Malaysia.

These employees, who have typically worked two to five years and earn $3,000 to $5,000 a month, will be hit hardest by escalating costs of living.

‘These people are the most likely to move to other jobs which offer much higher pay hikes than 5 per cent.

So, we may see turnover rates much higher than the current 8 per cent to 12 per cent range for these positions in the first half of the year,’ Ms Tan said.

In the last few years, real wage increases among Singapore companies averaged about 3 per cent and closely tracked gross domestic product (GDP) growth and inflation.

The spectre of a US economic slowdown that could hit Singapore’s GDP growth next year, however, has placed Singapore companies in a quandary.

They must lift wages to retain talent in a tight labour market but they need to keep a lid on business costs, given the prospect of a slowing economy.

A senior executive of a US-based multinational electronics company said his firm ‘may revise the wage budget to address concerns about rising inflation’.

But retaining talent, rather than factoring for inflation, was the key element pushing Singapore companies, like power outlet maker Eubiq, to raise wages for most employees by between 7 per cent and 20 per cent.

‘We offer competitive wages to retain talent. It is also clear that living expenses are rising, so the minimum wage increase for our staff is 5 per cent,’ said Mr Ng Joo Kok, the firm’s director of global business.

Hewitt’s Ms Tan said companies could make their junior and middle-management staff feel more reassured in their current jobs by enlarging the fixed portion of their annual pay, so that they get a higher salary every month.


Source: The Straits Times 7 Dec 07


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