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Singapore Employees Can Expect to Receive the Fourth-Lowest Pay Rise in 2017

October 11, 2016

Slowing economic growth would have its effect on salary increase and this affects employees in Singapore. They can expect to receive the fourth-lowest pay rise in the region, according to findings from advisory firm Willis Towers Watson’s (WTW) 2016 Asia Pacific Salary Budget Planning Report.

Before factoring in inflation, both Hong Kong and Singapore can expect to see similar overall growth of 4%, however Hong Kong’s inflation forecast is much higher than that of Singapore (0.8%), so salary increases in real terms are set to be much lower in Hong Kong (1.7%), than Singapore (3.2%) respectively.

With tighter budgets, organisations very discernibly prioritise their top performers. It shows that 37.6% of the budget for salary increases goes to the top performers. Another 33.7% is shared by above average performers while the remaining 29.2% of the budget goes to average performers. Only Australia and New Zealand (3%) and Japan (2.3%) are expected to see lower pay increases.

Salaries across Asia Pacific are projected to rise 5.9% in 2017, up a fraction from 5.8% this year but in fact reflecting broader downward pressure on salary increase budgets in the region, as employers seek to keep costs down amid slowing economic growth.

Salaries were projected to rise 6.4% in 2016, but in reality rose just 5.8% – the first time below 6% since 2012 (see figure 1 below). If that pattern continues in 2017, actual increases will be well below the 5.9% forecast by the companies surveyed. It will also mark the third year in a row that salary increase budgets have declined.

The findings from Willis Towers Watson’s 2016 Asia Pacific Salary Budget Planning Report show that once average inflation for Asia Pacific of 3% is taken into account, the projected increase in real terms for 2017 will be 2.9%, down from 3.5% in 2016.

The report looks at a range of job grades across various industry sectors. It is designed to provide companies with guidance for their annual salary forecasting for the year ahead. The industries covered include technology, financial services, pharmaceutical and health sciences, chemical, energy and natural resources, media, retail, construction and engineering, transportation and consumer goods.

Among the 22 Asia Pacific markets covered in the report, only six are expected to see higher base salary increases in real terms during 2017 compared to 2016: Sri Lanka, Indonesia, China, Cambodia, Hong Kong and Taiwan (see figure 2).

“We are seeing lower salary increase budgets across much of the region,” said Sambhav Rakyan, Data Services Practice Leader – Asia Pacific, at Willis Towers Watson. “Back around 2012 and 2013, companies in Asia pumped a lot of money into their salary budgets and drove salaries up, but they didn’t see the revenues rise in tandem, so it made such increases unsustainable. Now these companies are being much more prudent.”

Rakyan added that, as the available budget shrinks, companies need to be smarter about how they use them to retain talent. “It’s important to prioritise the best performers and also to review how employees are rewarded with other incentives, such as more attractive benefits,” he said.

The highest salary increases in 2017 will be in Pakistan (10.2%), Bangladesh (10%) and India (10%), though in real terms growth will be 5% for Pakistan, 4.2% for Bangladesh and 4.3% for India.

In East Asia and South East Asia, before inflation is factored in, Vietnam will see the highest base salary increases at 9.6%, followed by Indonesia (9.0%), and China (7.0%), while Japan will have the smallest (2.3%).

“The data clearly shows a greater emphasis on rewarding high performers rather than across-the-board increases for all. Without such differentiation, companies will face pressure in attracting and retaining talent, especially for in-demand areas, such as sales and digital roles,” said Rakyan. “Employers have to think beyond inflation-linking and look at more nuanced factors such as affordability, growth expectations, both employee and company performance, and specific talent and skills needs.”

Maggy Fang, Head of Talent and Rewards, Asia Pacific, at Willis Towers Watson, said: “It is important for companies to improve transparency in their communications with employees about salary increases. Then, even if they don’t like the outcome, employees will at least understand the rationale behind it. Our experience is that they appreciate this.”

Companies need to rethink whether annual base salary increases are the best way to reward employees. There may be better alternatives worth considering that meet employee needs and reflect their contribution.

“Nowadays people are looking for other options besides a standard annual pay rise. Employees are looking at how and when their performance is rated, and also for more flexibility in their benefits packages. Therefore companies need to adopt a more holistic approach and consider total rewards factors such as career development opportunities, recognitions, ongoing communications, and flexible working arrangements,” Fang added.

 

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