Singapore - Salary increments and variable bonus payouts for Singapore-based local and global companies are set to dip further in the next 12 months.

According to global management consultancy Hay Group's survey, projected salary increment forecasts is at 1.5%, the lowest recorded since 1997. Out of 300 companies polled, 43% plan to put salary increments, which include promotion raises, on hold for the next 12 months while another 21% will defer pay increases instead.  

Likewise, variable bonuses such as performance-based incentives, but excluding annual wage supplements and contractual bonuses, have dropped by 54% since the first quarter of 2008. While 20% of respondents have an intention to freeze bonus payouts, 5% have already done so. Nearly four in ten companies will however take a tentative approach by deferring bonuses in the next 12 months.

Christian Vo Phuoc, country manager for Hay Group Singapore's reward information services, says companies are increasingly tying their pay packages to performance and business strategy in order to cope with a smaller salary budget. Although this might put a dent in morale, Vo Phuoc says companies should look at non-cash measures to increase employee engagement and productivity.

He suggests companies can start by removing the levels of bureaucracy within the organisation and provide better support for employees to get the job done. "In other words, if we want our employees to complete the marathon and emerge from it intact, let's be sure that they have good running shoes and water to stay the course."

That said, lower-level employees will be better-cushioned against the downturn. Companies polled have said salary increases were preferentially given to these employees to help them cope with the high inflation, which is hovering at 1.6% in March 2009.