By Elizabeth Wilmot

SINGAPORE companies would consider freezing salaries rather than axing staff when dealing with the financial crisis.

The approach of firms here differs from that of other Asia-Pacific territories, according to a survey conducted last year by global consulting firm Watson Wyatt.

'In terms of salary freeze and slowdown in salary increment, the percentages from Singapore companies are higher than the Asia-Pacific average,' said Associate Professor Mak Yuen Teen, the firm's Asia-Pacific regional research director. The survey found that 38 per cent of Singapore respondents would opt for salary freezes. The average across the Asia-Pacific was just 16 per cent.

'There are also relatively fewer Singapore companies (32 per cent) that consider layoffs as a contingency plan, compared to Taiwan (44 per cent), the Philippines (61 per cent) or Malaysia (50 per cent),' added Prof Mak, who presented the survey findings at the Singapore Marriott Hotel yesterday.

He said employers in the Asia-Pacific as a whole are more prepared to take on contingency measures, including hiring freezes, organisational restructuring, slowing the pace of salary increments, layoffs and salary freezes.

About 84 per cent of employers in the Asia-Pacific have established such plans, compared with 67 per cent in the United States and 80 per cent in Europe.

Prof Mak warned that established contingency plans may have decreased employee engagement, which may lead to increased human capital risks. These risks are related to issues such as loss of key personnel, skills shortage, know-

ledge management and succession.

He said it was important to ensure cost-cutting measures were done fairly.

'Continuous employee engagement requires fair human resource practices and processes. Fairness and communication are a large part of what's important in employee engagement,' he said. 'Employers need to explain the reasons behind major decisions such as layoffs.'

He added that rewards should be linked to performance, and that strong strategic direction and leadership from top management would be needed during difficult economic times.

'While companies may need to take immediate measures in response to the crisis, they also need to carefully manage the long-term implications of these measures,' he said.

Prof Mak will be speaking at the one-day Careers@Singapore forum tomorrow at the Singapore Marriott Hotel.

The forum is organised by accounting body CPA Australia and will examine the employment market.

This article was first published in The Straits Times on January 16, 2009.