How will the tumbling economy affect salary increases and bonuses in the new year? Lee Xieli reports
The tumbling economy may have yet reached the bottom but many HR professionals have raised their concerns on the salary projections for next year. With most businesses hurting from the credit crisis, salary increments and variable bonuses across various industries are expected to take a big hit, according to human resources consultancy firms Mercer and Watson Wyatt.
Sean Paul Darilay, Watson Wyatt’s consultant and data services manager, says figures for 2009 projections indicate a more subdued market sentiment next year. Based on the continuing volatility in the financial markets and spreading slowdown of economic activity across different sectors, the average salary increase is now projected at 4%, while variable bonus projection is at 1.8 months. Darilay says, “These figures are all downward revisions from our earlier forecast of 4.9% for salary increase and 2.1 months for variable bonuses in 2009.”
Depending on the negativity of company’s outlook for 2009, CEO of The GMP Group Annie Yap says, “The raise could be an absolute figure or a certain percentage or even a mix of both.”
This means a glimmer of hope may not be in sight as the real impact of the recession is anticipated to hit closer to home. With Singapore being one of the most open economies in Asia, Darilay says it is also one of the most susceptible to any global economic downturn. Citing the figures of 3.4% salary increase and 1.5 months variable bonus from year 2002 following the 9/11 incident, he predicts new salary figures to easily breach these figures if the crisis worsens.
As top line revenue targets become harder to forecast, Darilay says companies will turn to more “controllable” levers such as headcount and salary costs to achieve decent profitability, if not manageable losses, next year.
Nonetheless, recruitment firms expect the salary percentages to be readjusted for the better if the economy picks up. Yet employees should always brace themselves for the worst if the recession prolongs, says Yap, as companies would definitely explore cutbacks to keep the business afloat.
Joanne Chua, manager of Robert Walters Human Resources specialist recruitment division adds prudency may be observed as some companies might look to follow in the civil service’s footsteps to reduce bonus payouts this year.
Even though data collected before 1 July and 1 October showed companies across all industries were overly optimistic in paying 4.6% to 4.8% average salary increases, employees can still look forward to a little Christmas cheer. Darilay says some companies would be paying out 2.2 months worth of variable year end bonus as projected previously for 2008.
Singapore might officially be in a recession, explains Yap, but profitable companies would give out at least one month bonus.
