Singapore firms planning wage rise

Salaries set to go up 4.5% on average as cost of living increases: Survey

By Yasmine Yahya, The Straits Times, 22 May 2012

WHILE the prices of everyday goods are expected to rise this year, Singaporeans should not feel too much of a pinch as their bosses plan to raise their salaries in tandem.

A survey of 143 firms by human resource consultancy Towers Watson found that, on average, employers are planning to increase wages by 4.5 per cent.

The Government has forecast that headline inflation will be between 3.5 and 4.5 per cent this year, while core inflation, which excludes accommodation and private road transport costs, will be from 2.5 to 3 per cent.

The survey, carried out in February and March, found that the greatest wage increases are being planned by companies in the financial service sector, with rises of 5.1 per cent on average.

Pharmaceutical companies come next, with planned salary increases of 5 per cent, followed by automotive firms on 4.9 per cent.

Companies in the energy sector are planning a 3.9 per cent wage rise, while firms in the high technology industry are budgeting salary increases of 4.4 per cent.

The survey also took in responses from over 1,300 firms across the Asia-Pacific, and found that in all but one of the 18 countries studied, companies plan to offer wage increases that outpace projected inflation rates. The only exception was Vietnam.

Towers Watson's global data services practice leader for Asia Pacific, Ms Rachelle Arcebal, noted that, as the cost of living rises, workers tend to expect higher salaries or will start looking for better-paying jobs.

However, she added that companies must also find the balance between meeting these expectations and practising prudent financial planning.

'While it is important to keep wages competitive and retain talent, it is also imperative that compensation levels do not increase to unsustainable levels,' she said.

'Companies should also explore other ways to increase productivity, possibly through redesigning jobs, upgrading skills and optimising work processes.'

Barclays Capital economist Leong Wai Ho agreed, saying that it would be better for firms to peg salary increases to productivity gains rather than inflation.

'The risk is that when prices rise, wage expectations would be fuelled too, so people think they should be paid more and when they do, they'll have more to spend and this will cause prices to rise further,' he said.

Instead of using inflation as a means to determine how much salaries should rise, firms should instead look at how its revenue per employee or operating profit per employee has grown, he added.

But Aon Hewitt's South-east Asia managing director for consulting, Mr Na Boon Chong, noted that wage increases have stood at between 4 and 5 per cent for the past several years, despite fluctuating inflation rates.

'The tough competition in the talent market is a major factor that companies consider. I wouldn't say that inflation is the main or only thing they look at.'