Workers look forward to the end of the year, often not just for the holidays but also for the pay increases and bonuses, depending on the company’s performance for the year.
But in the last two years as the Covid-19 pandemic dominated headlines, badly hit companies have been forced to freeze hiring and retrench workers while other firms struggle to stay afloat.
Andrew Tjioe, managing director of Tung Lok Restaurants (2000), says Covid-19 is by far the worst his company has faced — far worse than the outbreak of severe acute respiratory syndrome (Sars) in 2003. The company was forced to retrench 200 workers and cut salaries across the board. “With the several on-and-off restrictions last year, our business was really hurt and if we didn’t do anything, I would not be here speaking to you.” he says.
With Singapore opting to “live with the pandemic” by treating Covid-19 as endemic, the outlook for its economy looks brighter. Its GDP, coming off the low base of a contraction of 5.4% in 2020, is likely to surge by 7.2% in 2021 and moderate slightly to between 3%–5% this year.
Still, the damage has been done. For workers in badly affected industries who have endured two years of wage freezes, could this year be different? That is a possibility, say industry watchers.
In line with the better economic prospects, human resources consultancy firm ECA International sees Singapore wages rise by 3.5% for 2022, compared to 2.8% in 2021.
See also: 83% of CEOs expect a full return-to-office within the next three years: KPMG CEO Outlook survey
This year, just 6% of companies will implement a pay freeze, significantly down from the 22% that have done so in 2021. “This all points to a much-improved outlook for workers in Singapore,” says ECA’s Asia regional director Lee Quane.
However, the city-state’s headline inflation, which refers to the total inflation in the economy, hit 4% last year. This marks the fastest pace of increase in the price gauge in nearly eight years.
Apart from mitigating the effects of inflation, the wage increment will also help local workers cope the impending goods and services (GST) tax hike. It is expected to be raised to 9% from 7% soon. Along with supply-driven inflation, it seems that workers can use all the extra padding they can get to power through an eventual increase in the cost of living.
See also: Are you a good employee? Let’s check with the team
Human resource consulting firm Mercer Singapore expects the pace of salary hikes in the city-state this year to return close to pre-pandemic levels. At an average increase of 3.5% for 2022, the increase was incrementally better than 2021’s 3.3% but marginally lower than 2019’s 3.6%.
“This gives you a sense that we’re not seeing all of a sudden employers saying, ‘oh, you know, we need to double everyone’s salary increments,” says Lewis Garrad, a career business leader at Mercer.
Manpower crunch
However, the disparity is pronounced across sectors because not all companies cope with the pandemic the same way. Sectors that have been doing well throughout the pandemic include medical equipment makers, semiconductor service handlers, and other technology companies. However, the most hard-hit industries were sectors that relied on tourism, such as aviation and hospitality.
Mercer’s survey revealed that workers in sectors like the high tech, life sciences and aerospace sectors are expected to see the highest salary increases in 2022, while sectors with the lowest increments are in the logistics, chemicals and lifestyle retail segments (See Figure 1). These figures exclude salary freezes.
Fig 1:
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Source: Mercer Singapore
Lam Yi Young, CEO of the Singapore Business Federation (SBF), notes that overall, “businesses are in a better state and more optimistic than a year ago.” Citing SBF’s National Business Survey 2021, the proportion of companies hurt by Covid-19 has halved from 63% in 2020 to 32% in 2021, which means that two-thirds of respondents reported no impact or a positive impact from the pandemic in 2021.
Ang Yuit, vice-president for the Association of Small and Medium Enterprises, says SMEs are confronted by a mixed picture that is changing rapidly. Nevertheless, there are two constant threads: Cost pressures and staff retention.
While the various government schemes have made it more conducive for SMEs to hire older workers, it has also fuelled more aggressive hiring in certain sectors where competition for talent is intense, such as the digital industry. This has led to salary inflation and job churn as employees leave their jobs and take up roles elesewhere. While SMEs are cautiously optimistic, they are unlikely to actively raise salaries unless there is a specific need to retain important positions and roles, says Ang.
Issues on the ground
To get a sense of what companies are actually facing, The Edge Singapore contacted companies across Singapore to understand some of their issues.
Locally-listed restaurant chain Japan Foods Holdings has been doing what it takes to keep itself in a “good position”. Since the outbreak in 2020, its earnings have experienced volatility.
In FY2020 ended March 2020, Japan Foods’ earnings dropped 66.1% y-o-y to $1.4 million but recovered strongly in FY2021 with a jump of 203.1% y-o-y to $4.2 million. In the current FY2022, it expects to suffer a dip again, due to a smaller quantum of government support. For its 1HFY2022 ended September 2021, it recorded a loss of $1.6 million.
In an email interview, Takahashi Kenichi, Japan Food’s executive chairman and CEO, admits that the F&B industry has been hit hard because of restrictions on dining-in and safe distancing requirements, which have reduced the capacity per store. While drawing customers back and winning over new ones is an ongoing issue, the larger challenge is staff attraction and retention.
He also expresses concern at how the tight border controls have resulted in a shortage of foreign labour. “This is the current trend and Japan Foods will do what is needed to ensure that we remain operationally efficient and sustainable,” says Kenichi, who adds that the manpower shortage issue has always been around, but the pandemic has just worsened the issue.
Kenichi explains that the company’s investment in its central kitchen and self-ordering systems in some of its restaurants have helped reduce headcount per store. In this sense, Tung Lok’s Tjioe agrees that a central kitchen is a good investment for F&B players as it is “necessary for standardisation and for saving on manpower [costs]”.
Meanwhile, other companies that have enjoyed a momentary boost at the height of the pandemic are also now facing cost pressures, as market demand starts to normalise.
One example is glove manufacturer UG Healthcare, which saw a spike in demand at the start of the pandemic. This led to record earnings for its FY2020 ended June 2020 as well as in FY2021.
However, the company did not enter FY2022 with the same growth spurt, due to a combination of production stoppages, and demand heading back to normalised levels, thereby putting pressure on selling prices.
In 1QFY2022 ended September 2021, UG Healthcare reported revenue of $60.1 million, down 15.5% y-o-y. However, because of thinner margins, earnings dropped by a steeper 53.3% y-o-y to $10.6 million.
Lee Jun Yih, executive director and finance director of UG Healthcare, acknowledges that average selling prices have dropped but “it does not affect the fundamental structure and budget that the group has been building over the decades”. Lee, without disclosing if the group would be adjusting the wages of staff, maintains that the company carries out “regular reviews” on its remuneration and benefits to ensure they are in line with the industry.
Mercer’s Garrad adds: “While we are seeing some upward pressure in terms of wages, and in some key industries, it’s not really driven by the cost of living, it’s more supply and demand for talent. There are increasing wages faster in things like tech and financial services.”
He also points out that workers in the tech sector are expected to see their salaries rise, in tandem with the growth the sector has seen in the pandemic.
Source: Nodeflair
According to a Feb 14 release by tech talent platform Nodeflair, tech job salaries, such as that of software engineers, are at an “all-time high”, having climbed 32% over the last 12 months. The median salary for junior software engineers stand at $4,750, while managers pull in a median of $12,000 a month.
In contrast, global professional services firm Aon estimates that the median salary in Singapore will be $4,850 in 2022. To put this into perspective, junior software engineers with two years of experience could draw almost the same pay as the Singapore median.
A clutch of familiar tech names stands out. According to Nodeflair, the likes of Grab Holdings, Shopee, Bytedance, Facebook, Amazon and Google pay up to 25% above the market median.
But rather than just look at salaries in isolation, these companies also say that the wider challenge is staff attraction and retention.
Garrad says workers are asking themselves “is the job that I do and the deal that I get from my employer worth the money I’m earning, the benefits I get, and the career development opportunities that I’ve been able to receive.”
“We’ve actually seen in the last couple of years, people taking a much more holistic view on their package over and above just pay.”
