HR experts say most firms will still give out bonuses this year

SINGAPORE: Salary experts have put the pay increment forecast for end—2008 at anything between zero and 3 per cent, on the back of a weakening economy. However, bonuses should still be on the cards for most companies.

Human resource consultants said companies may slash their year—end pay increments or even cut salaries.

Paul Heng, managing director, Next Career Consulting Group Asia, said: "The companies are at liberty to either freeze the monthly variable component (MVC) or they can actually reduce the quantum that is put in the MVC to keep the company afloat."

But even at an optimistic 3 per cent pay hike, real wages are expected to shrink, with inflation coming in at between 6 and 7 per cent this year.

"I think a budget has already been set for 2008, so companies may still go ahead with the 13th month. Many companies peg their variable components to performance targets.

"If performance targets are met, I think it’s difficult for companies not to pay off bonuses. But for any kind of bonuses in terms of profitability, I think companies may be wise to actually hold back to see how things may pan out in 2009," said Heng.

But experts have warned that if the global economy slides further south, then 2009 is going to look much worse.

The current situation is very different from the SARS period in 2003 and the 97/98 Asian financial crisis. This time round, analysts said it is a global challenge and both businesses and governments are not quite sure how to react.

The government is expected to implement the third phase of salary adjustment for civil servants, including ministers, at year’s end to close the gap between public and private sector pay.

The target, for example, is to move the pay of staff under the MR4 grade to 88 per cent of the benchmark by the end this year. MR4 grade officers include permanent secretaries and ministers.

The Staff Grade 1 (MR4) benchmark is pegged to two—thirds of the income of the 24th highest earner, among a group comprising the top eight earners from six professions — bankers, lawyers, engineers, accountants, local manufacturers and MNCs. The benchmark is currently S$2.2 million.

But given the current economic climate, human resource experts said the government may just hold off any pay revision for now.

Derek Berry, Mercer’s business leader, Human Capital (ASEAN), said: "The need to adjust salaries comes in attracting and retaining talent, and how much competition there is to do that. If there’s a softening in the economy, that will go down and therefore, there will be less need.

"I think the Singapore government... would likely, from a messaging point of view, either reduce it or defer it. And given that we’ve got a very bumpy economy at the moment, I’d probably want to see it more stable before I’d want to push through with something like that."

The Public Service Division has said it would need some time to study the private sector data and salary trends before coming to a decision on any pay increment.

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