Salary increments to surpass pre-pandemic levels, says Mercer
Singapore, 14 November 2022
Salary increases in Singapore are expected to surpass pre-pandemic levels with increments to average 3.75% in 2023, compared to 3.65% in 2022 and 3.60% in 2019. This year, Mercer’s Total Remuneration Survey (TRS) also saw higher projected increments across most of the 181 industries surveyed.
Across industries, Logistics (4.40%), Banking & Finance (4.27%), High Tech (4.06%) have the highest salary increments while the sector with the lowest increments is Real Estate (3.25%). 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.
Mansi Sabharwal, Reward Products Leader, Mercer, Singapore says, “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.”
Ms Sabharwal adds, “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.”
Mercer’s flagship annual compensation and benefits benchmarking study, the TRS identifies key remuneration trends and predictions for hiring and pay for the year ahead. This year, over 1000 companies participated in Mercer’s Singapore survey.
Companies remain cautious amid rising inflation
Due to heightened inflation in Singapore, the real wage of employees is projected to fall by 2.95% in 2022. Despite the negative real salary increase, only 22% of organizations in Singapore are increasing salary budgets to combat rising inflation while nearly half (45%) have no plans to make further adjustments.
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.
Ms Sabharwal comments, “Employers remain cautious about bumping up wages to match inflation and many are turning to less permanent solutions such as benchmarking competition to stay competitive in the market (70%), focusing on total rewards communication (69%) and increasing wages of lower-income employees (55%).
It’s important to note that salaries is 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.”
Using compensation as a means to high voluntary attrition
Inflation challenges aside, companies are also facing a global talent shortage with higher levels of voluntary attrition. In Singapore, the projected voluntary turnover rate is 15.2% by the end of 2022, surpassing pre-pandemic levels of 12%.
Across industries, Lifestyle Retail (21%), Aerospace (20.5%) and Logistics (18.7%) have the highest voluntary attrition rate. Top reasons for 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, highlighting greater employee wellbeing needs in the workplace.
To attract and retain talent, companies in Singapore have turned to higher promotional increments up to 9.6% and retention bonus for employees with specialist skill sets or at flight risk, but continue to lose out to the companies who are offering higher pay. A majority of companies (87%) reported that talent are leaving to join direct competitors while 28% are switching to other industries.
Ms Sabharwal says, “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 SGD 44,850.
Four steps to win the talent war with total rewards
In today’s hot labour market, employees are looking beyond salary and bonuses. They are equally as driven by job security, enhanced benefits, work-life balance, flexible working as well as career progression.
Ms Sabharwal says, “Instead of addressing all talent challenges at once, companies should re-prioritize and focus on what matters to employees by listening, reviewing, resetting and communicating. Listen to what your employees want, review your employee value proposition, reset your rewards philosophy and communicate reward enhancements to your workforce.
As companies reset their rewards strategies, they should also consider a play on different compensation elements such as pay segmentation, collaboration incentives, innovative benefits and wellbeing solutions. When done right, companies will build stronger and more trusted relationships with employees and see a more loyal workforce, winning the talent war in the long-run.”
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 86,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.