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Lower pay increases expected this year

Firms likely to refrain from giving generous increments in view of economic uncertainty

Lower pay increases expected this year

THE looming economic uncertainty has made employers more cautious, but workers can still expect a pay rise this year.

Economists and human resource consultants estimate that the average nominal wage increment, not taking into account inflation, will be about 4 per cent this year - a dip from last year's 6 per cent.

Inflation is expected to be between 2.5 per cent and 3.5 per cent this year.

Economists say that, with a slowdown expected, companies will pull back on giving generous increments, although they would have done well with the strong growth in 2010 and last year.

CIMB regional economist Song Seng Wun said increments could be up to 5 per cent, depending on a company's and the individual worker's performance, but some workers may not get any pay rise.

Last year, the economy grew 4.8 per cent, coming in at the lower end of the forecast of 4 per cent to 6 per cent.

Prime Minister Lee Hsien Loong, who revealed this last Saturday in a New Year's Day message, also warned of a difficult year ahead for the global economy and that Singapore will be affected.

Economists predict that sectors more dependent on external demand - such as manufacturing and wholesale trade - will be harder hit in a global downturn.

DBS economist Irvin Seah said pay increments, if given out in these sectors, are likely to be more modest.

Sectors still likely to grow and thus likely to hand out bigger increments include the construction and service sectors.

Mr Song said: 'There's still plenty of work going on in construction. Workers in the service sector, such as in hospitality, should also see their wages increase, although the growth there is slowing.'

Companies that have seen their businesses contract are taking a wait-and-see attitude.

Mr Josh Goh, an assistant director at human resource consultancy GMP Group, said some employers have already frozen their staff headcount.

'I expect hiring to slow down in the first quarter,' he said.

Mr Kurt Wee, vice-president of the Association of Small and Medium Enterprises, said that companies that did well last year are likely to pay out bigger bonuses in lieu of higher wage increases.

He added that depending on their individual performances, employees could take home bonus payouts of between one and three months.

If an economic crisis is averted, companies can then consider raising salaries.

'There are some good reasons for wage increases because businesses here did see a pickup in momentum after the last financial crisis in 2008 and 2009,' said Mr Wee.

This is in line with the recommendation by the National Wages Council last April that employers give bigger wage increases and, if they are unable to do so, to give at least a special lump-sum payment to help workers cope with inflation.

Member of Parliament Zainudin Nordin, who chairs the Government Parliamentary Committee for Manpower, said employees should expect things to be tougher this year and so should temper their expectations of wage increases.

He added: 'The relationship between employers and their workers should be such that during good times workers are rewarded, and during bad times they understand that wages will stagnate. After all, employees also do not want their companies to get into financial trouble.'

But labour MP Zainal Sapari pointed out that companies that did well and are able to raise wages should give their workers a fair shake.

'Any increment should take into account inflation. We do not want a situation where companies give wage increments that do not even cover that,' he said.

Retail adviser Harinder Kaur hopes for a pay increment of between 5 per cent and 7 per cent, on top of a bonus.

She said: 'I'll try to save some of the bonus because sales are definitely going to slow down if the economy is hit.'

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