Slower increase for private sector wages in 2014

SINGAPORE - Employers continued to give wage increases amid the tight labour market in 2014, the Ministry of Manpower said on Thursday.

Total wages, including employer CPF contributions, in the private sector rose by 4.9 per cent in 2014, slightly slower than the 5.3 per cent rise in 2013.  Real total wages rose at a faster pace of 3.9 per cent in 2014, compared with 2.9 per cent in 2013.

Low-wage workers also continued to see wage increments last year. A total of 59 per cent of private establishments with employees earning a monthly basic salary of up to $1,000 gave or intended to give wage increases to these employees in 2014, lower than the 77 per cent in 2013.

Since the introduction of the National Wages Council (NWC) quantitative guidelines in 2012, the proportion of full-time resident employees earning a monthly basic salary of up to $1,000 is estimated to have decreased from 9.8 per cent to 6.8 per cent in 2014. Of the remaining private establishments that did not grant wage increases, about half (20 per cent) indicated that they were already paying market rate, while others indicated that their business was not doing well.

Basic wage increase averaged 14.2 per cent for those who were given the built-in wage increase in 2014. This is higher than the 8.4 per cent received by all rank and file employees.

Randstad country director Michael Smith  said that while wage increases amid a tight labour market can build employee morale and drive productivity, it may also lead to inflationary pressures and disadvantage organisations which are unable to meet their employees’ growing financial demands.

"An important thing that employers should take note of here is that employees have many different motivations, including flexible work options, training opportunities and clear career progression pathways. Only by understanding these motivations can employers reward their staff in ways that will keep them engaged and satisfied for the long term," Mr Smith said.

MOM also said in its report that firms continued to respond positively to tripartite recommendations on wage restructuring in 2014. Most employers have adopted some form of flexible and performance-based wage system, with the proportion hitting a decade-high in 2014.

About 89 per cent of employees in the private sector were under some form of flexible wage system in 2014, the highest since June 2004.

Flexible wage restructuring allows employers to remain cost-competitive and preserve jobs, Mr Smith said. This in turn motivates staff during tough business times as the immediate retrenchment or restructure of workers is not an automatic solution or foregone conclusion, he explained.

Having a narrow maximum-minimum salary ratio remained the most common wage recommendation adopted, with two in three private sector employees working in such establishments in December 2014.

The second most common recommendation adopted was linking variable bonus to Key Performance Indicators, and the third was having the Monthly Variable Component  in the wage structure.

ljessica@sph.com.sg