Singaporean Firms Have No Plan for Retrenchment, But Reduce Recruitment Budget and Focus on Employee Training

April 3, 20206:17 pm2186 views

Singaporean Firms Have No Plan for Retrenchment, But Reduce Recruitment Budget and Focus on Employee Training

Companies in Singapore are decreasing recruitment budget while enhancing training and development initiatives to cope with the impact of the coronavirus pandemic (COVID-19) on businesses.

This is according to Mercer’s new Pay & Bonus Pulse Survey, which provides an overview on how COVID-19 has impacted human resources budget allocation as well as salary and bonus implementation among companies in Singapore.

Compared to the budget allocated in 2019, 47 percent of companies surveyed are likely to reduce spending on recruitment in 2020. More than half (51 percent) said they will only hire for replacements this year, while another 22 percent are planning a hiring freeze. Only 1 percent are considering retrenchment.

On the other hand, some companies are also taking this opportunity to invest in their people by introducing more training and development initiatives. 12 percent of those surveyed are planning to increase their budget allocated in this area, and 13 percent are enhancing work-life balance programs to enable more flexible and adaptive work arrangements.

“With the impact of the COVID-19 outbreak on the economy, it is not surprising that manpower costs can be a key target for cuts when companies are heading into a downturn. Our survey has shown that while recruitment budgets are set to reduce, companies remain committed to protecting the livelihood of their employees. This is a reflection of the government’s stringent standards for responsible retrenchment and the impact of the job support measures introduced during the Resilience Budget,” said Kulapalee Tobing, Career Products Leader, Mercer Singapore.

The survey also looked at the impact of COVID-19 on salary increment and found that only 3 percent of companies in Singapore have implemented a salary cut while 5 percent are considering the option. However, 22 percent of companies are considering a reduction of increment and 11 percent have already done so.

Across industries, companies in the hardest-hit sectors such as real estate, construction and engineering have indicated the largest reduction in salary increment by 0.8 percent, from an average of 4.1 to 3.3 percent. This is followed by the transportation equipment sector at 0.5 percent (4.0 to 3.5 percent) and retail and wholesale (3.5 to 3.1 percent) and logistics (3.6 to 3.2 percent) at 0.4 percent each.

“Given the fluidity of the COVID-19 outbreak, it is not surprising that most companies are adopting a wait and see approach for any future salary and bonus payouts. While the current outlook remains positive, any escalation of the situation could further impact business decisions and dampen the pay and reward of employees, especially across sectors that are worst hit by the outbreak,” Kulapalee Tobing continued.

Peta Latimer, CEO, Mercer Singapore concluded that there remains opportunities for employers to strengthen their culture in this situation: “Employee-centric measures such as enhanced training and flexible health and wellness initiatives can put companies in a better position ahead of recovery. Listening to employee concerns and providing support during these challenging times is a good way to build loyalty and goodwill, and we have an opportunity to drive collaboration and creativity with the introduction of split team arrangements and adaptive working. Seeing and taking advantages of such opportunities will pay dividends when business demand returns.”

Other Key Findings

Salary increments: More than half (59 percent) of companies have already given out their salary increments to employees. Of the remaining companies who have not implemented their increments, 8 percent have decided to delay or are considering delaying their increment cycle by three months, while 7 percent have indicated a salary freeze. The remaining companies are adopting a wait and see approach as they have payout cycles later in the year.
Variable bonuses: Results are similar for variable bonus, with 78 percent of companies already given out their planned bonuses. Only 11 percent have revised down their budget, from the average variable bonus of 15.8 to 14.5 percent.
Bonus budget revisions: The retail and wholesale sector has experienced the highest bonus budget revision of 1.5 percent, from 9.5 to 8.0 percent. This is followed by real estate, construction and engineering companies at 1.1 percent (15.5 to 14.4 percent). Companies in sectors such as healthcare, medical or educational institutions, public services and professional services have revised down their bonus budget by 0.9 percent (from 16.4 to 15.5 percent).
Adjustments to sales incentives: Looking at the adjustments of incentives for sales teams, only 10 percent of companies surveyed have modified, or are modifying their sales incentive plans. Most companies (34 percent) said the adjustments will be made based on sales target, followed by threshold (18 percent) and commission ratio (12 percent).

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