Pay rise to surpass pre-Covid-19 levels; inflation to eat into wages

Salary increments in Singapore are expected to surpass pre-Covid-19 levels, but inflation will eat into the real wages of employees, a survey published on Tuesday (Nov 15) reveals.

In 2023, the average pay rise in Singapore is expected to reach 3.75 per cent, more than the 3.65 per cent seen in 2022 and the 3.6 per cent of 2019.

These were among the findings of Mercer’s total remuneration survey for Singapore. The annual survey by the consultancy firm polled over 1,000 companies from 18 industries.

Among the participating sectors, the logistics industry was found to offer the highest pay rises, followed by banking and finance, and high technology. On the other hand, the real estate sector was surveyed to offer the lowest salary increments.

The survey identifies key remuneration trends and predictions for hiring and pay in the year ahead.

“Logistics has taken the lead in salary increments primarily due to the return of international trade flows and supply chains post-pandemic, and the accelerated growth of e-commerce activities that boosted demand for shipping and delivery,” said Mansi Sabharwal, reward products leader for Mercer Singapore.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

She added: “We are also expecting overall pay increase budgets to reach as high as 5 per cent of total payroll cost in 2023, surpassing the pre-pandemic level of 4.7 per cent.

“This suggests companies are willing to spend more, offering not only higher annual merit increments but also mid-year promotions as well as market adjustments.”

However, the real wage of employees is projected to fall by 2.95 per cent in 2022 due to heightened inflation in Singapore.

Despite the negative real salary increase, the survey found that only 22 per cent of organisations here are increasing salary budgets to combat rising inflation, while nearly half – 45 per cent – have no plans to make further adjustments.

With inflation expected to fall in 2023, more than half – 54 per cent – of the polled companies here are adopting a wait-and-see approach to factoring inflation into their 2023 salary increase budgets.

Employers remain cautious about bumping up wages to match inflation, and many are turning to less permanent solutions such as benchmarking competition to stay competitive in the market, said Sabharwal.

That means they are focusing on total rewards communication and increasing the wages of lower-income employees.

“It is important to note that salary is based on cost of labour, not cost of living. Responding to inflation with increased compensation will only drive up people cost, increase pressure on margins, and create permanent damage to pay lines as inflation fluctuates,” she added.

Businesses are also facing a global talent shortage, with higher levels of voluntary resignations.

In Singapore, the projected voluntary turnover rate is expected to be 15.2 per cent by the end of 2022, surpassing the pre-pandemic level of 12 per cent. Lifestyle retail has the highest voluntary resignation rate, followed by aerospace and logistics.

The main reasons reported for voluntary resignation in 2022 are lack of clear career path and opportunity to grow (64 per cent) and low pay competitiveness (50 per cent).

High stress levels (16 per cent) continue to make the list, highlighting greater employee well-being needs in the workplace.

To attract and retain talent, companies in Singapore have turned to higher promotional increments of up to 9.6 per cent and retention bonus for employees with specialist skill sets or at flight risk.

However, these companies continue to lose out to the ones offering higher pay, according to the survey. A majority of companies (87 per cent) reported that talented workers are leaving to join direct competitors, while 28 per cent of those who resign are switching to other industries.

In today’s hot labour market, employees are looking beyond salary and bonuses. They are equally driven by job security, enhanced benefits, work-life balance, flexible working and career progression, said Mercer in its media statement on Tuesday.

Said Sabharwal: “Instead of addressing all talent challenges at once, companies should re-prioritise and focus on what matters to employees by listening, reviewing, resetting and communicating.

“Listen to what employees want, review employee value proposition, reset your rewards philosophy and communicate reward enhancements to your workforce.” THE STRAITS TIMES