Paying the way forward

There are many factors that help attract and retain talent and a major one is the salary and compensation that organisations offer to employees. According to the Michael Page Employment Index Singapore for the fourth quarter of 2011, employers are positive of the business environment but 29% of surveyed employers stated that the rising cost of salaries is a key business concern.

Recruitment firms and experts say that although Singapore will experience business growth in 2012, with economic uncertainty around the globe, salaries will increase minimally or even remain stagnant except in industries that have a serious shortage of talent. However, they note that with the tightening of qualifications of foreign workers next year, organisations are expected to increase wages as well as benefits to attract foreign talent.

Packages in the new year

Global economic slowdown mixed with a cautious approach adopted by organisations will be a major reason for offering low pay increments for the upcoming year, say recruiters. According to the latest statistics, Singapore has an estimated inflation rate of 5.5% (in September) but salaries are lagging behind and are expected to do so in 2012.

“Salary trends are expected to be stagnant or be below inflation across the region for 2012 due to the global economic slowdown,” explains Christina Ng, Associate Director, Financial Services & Legal Divisions, Robert Walters Singapore. He adds that companies are looking to keep business costs lean and would probably adopt a cautious approach before adjusting salary levels.

However, some other experts say that despite global woes, Asia employees will receive higher wages in 2012. Andrew Norton, Regional Managing Director of Michael Page, South East Asia, says that in the recent 2011/2012 Salary Employment Forecast Report for Singapore, 42% of employers revealed that they will be awarding 4–6% increases to their employees over the next 12 months.

However, he does add that these wage increases will not be sustainable in the long run. “We would advise our candidates to be realistic about salary expectations and instead, place greater emphasis on building the necessary skills and experience to better manage their careers,” says Norton.

Conversely, recruiters agree that in sectors and levels that have a shortage of skilled talent, organisations will offer increased wages and extra benefits to attract and retain talent. Karin Clarke, Regional Director, Singapore & Malaysia for Randstad, says that “companies will need to keep their salary packages at a competitive level to retain professionals as the battle for talent tightens.”

She expects that at skilled professional and managerial levels, where talent remains short, salaries will be under pressure and not likely to ease over the next year. Moreover, Clarke says that sectors such as banking & financial, services and manufacturing will see a reduction in salary pressures but construction, engineering and R&D will see a continued rise in salaries as she says that they are “chronically talent short.”

Ng notes that vendors from industries that are closely tied to government-related spending such as transport, housing and the supply chain would probably fare better than others in Singapore, as the government is keen to boost the economy.

Foreign offers

According to figures by Ministry of Manpower, non-residents formed nearly a third (30.3%) of the labour force in Singapore in June 2010. The tighter control of foreign workers through new qualification categories for the employment pass (EP) that is to come into effect in 2012 will have an impact on salary packages for skilled foreign employees.

The Michael Page Employment Index Singapore for the fourth quarter of 2011 revealed that 70% of surveyed employers have recruited foreigners in the last six months of this year. Experts say that there will be a continuing need for foreign talent and organisations would need to pay competitive salaries to attract these people.

Clarke says “with a third of the current working population foreign, wages and salary packages will need to increase in order for employers to effectively staff their companies and facilitate business growth.” She says that the tighter control will drive salaries up which would lead to organisations having to pay more for skilled and semi-skilled workers.

Under the new EP qualification, the qualifying salary for the Q1 Pass will be increased from S$2,800 to S$3,000, while for the P2 Pass it will be raised from $4,000 to $4,500. Pan, on the other hand, notes that there could be only a small proportion of salaries raised to qualify for EPs to bring in foreign talent. Subsequently, he adds that there has been “an increasing number of employers looking at alternatives such as the S-Pass, which allows mid-level skilled foreigners who earn a fixed monthly salary of at least $2,000 to work in Singapore.”

Recruiters say that besides monetary benefits, organisations could also offer other forms of compensation in order to attract foreign workers. Clarke points out that additional leave benefits, more travel incentives and offering education courses or subsidies for furthering education could help attract skilled foreign workers.

The bonus packet

Bonuses are expected to be moderate given the economic climate and especially in specific industries compared to others, say recruiters. According to Pan, the US and European investment banks’ bonuses will closely mirror the post-GFC period, with Asian institutions paying slightly better bonuses.

Clarke predicts that bonuses for the upcoming year will be more modest than the ones paid in 2011 (from 2010) largely due to uncertain economic times in Europe and in the US, which are economies that Singapore relies on.