However, more than half of employers surveyed (54%) are adopting a wait-and-see approach to tackle the impact of inflation on the wage bill.
Good news and bad news for Singapore's labour landscape - whereby salary increases in 2023 are expected to surpass pre-pandemic levels at an expected of 3.75%, compared to 3.65% in 2022 and 3.60% in 2019. However, the threat of inflation looms over wage bill decision makers.
With inflation expected to fall in 2023, more than half of companies in Singapore (54%) are adopting a wait-and-see approach to factoring inflation into their 2023 salary increase budgets. This data comes from the 18 industries and 1,000 companies in Singapore surveyed in Mercer’s Total Remuneration Survey (TRS) that overall saw higher projected increments across most sectors.
For this year however, heightened inflation continues to be a dampener, because of which the real wage of employees is projected to fall by 2.95%. Despite the negative real salary increase, only one in five (22%) of organisations in Singapore are increasing salary budgets to combat rising inflation while nearly half (45%) have no plans to make further adjustments.
Mansi Sabharwal, Reward Products Leader, Mercer, Singapore, noted that employers remain cautious about bumping up wages simply to match inflation. In fact, many are turning to less permanent solutions such as benchmarking competition (70%), focusing on total rewards communication (69%), and increasing wages of lower-income employees (55%).
She clarified: "It’s important to note that salaries are based on cost of labour and not cost of living. Responding to inflation with increased compensation will only drive up people cost, increase pressure on margins, and create permanent damage to pay lines as inflation fluctuates."
Sectors with highest and lowest increments
Across industries, the sectors with the highest salary increments in 2023 are expected to be:
- Logistics (4.40%),
- Banking & finance (4.27%),
- High tech (4.06%).
Sabharwal explained: "Logistics has taken the lead in salary increments primarily due to the return of international trade flows and supply chains post-pandemic and the accelerated growth of eCommerce activities which boosted the demand for shipping and delivery.
"We’re also expecting overall pay increase budgets to reach as high as 5% of total payroll cost in 2023, surpassing pre-pandemic levels of 4.7%. This suggests companies are willing to spend more, offering not only higher annual merit increments, but also mid-year promotions as well as market adjustments."
The sector expected to see the lowest increments is real estate (3.25%). Meanwhile, the aerospace industry is forecasted to see the largest improvement, with salary increments expected to rise from 3.09% to 3.52% in 2023 as global travel continues to pick up pace.
Quiet quitting vs actual quitting: High voluntary attrition
Inflation challenges aside, companies in Singapore are also facing the brunt of the global talent shortage. The projected voluntary attrition rate is 15.2% by the end of 2022, surpassing the nation's pre-pandemic levels of 12%.
The highest number of employees quitting are expected in the following sectors:
- Lifestyle retail (21%),
- Aerospace (20.5%), and
- Logistics (18.7%).
Reasons for this voluntary turnover this year include a lack of clear career path and opportunity to grow (64%) followed by low pay competitiveness (50%). High stress levels (16%) continues to make the list.
To attract and retain talent, companies in Singapore have turned to higher promotional increments of up to 9.6% and retention bonus for employees with specialist skill sets or at flight risk, but they continue to lose out to the companies who are offering higher pay, in Mercer's analysis. A majority of companies (87%) reported talent is leaving to join direct competitors while 28% are switching to other industries.
Sabharwal broke down the data: "Overall, there continues to be more leavers than joiners, but we’re seeing a smaller employment gap this year due to a change in pace at which people are leaving and companies are rehiring as well as borders opening for foreign talent to return. Having said that, a gap still remains and with a tight labour market, we will continue to see more opportunities opening up, leading to higher attrition."
Fierce competition for talent is not only seen across senior roles, but also junior positions. Starting salaries for bachelor graduates saw a 7-9% increase this year compared to pre-pandemic levels, resulting in an average starting salary of S$44,850 per annum.
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