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: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/news/labour-market/singapore-businesses-continue-face-challenges-elevated-wage-cost-pressures-dbs?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Singapore businesses continue to face challenges from elevated wage cost pressures: DBS</a>

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: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/news/labour-market/singapores-lawrence-wong-flags-structural-decline-without-migrant-workers?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Singapore's Lawrence Wong flags ‘structural decline’ without migrant workers</a>

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.

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.

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To stay ahead of Singapore and the region’s corporate and economic trends, <a class='gtm_see_also_3_inread' style='text-decoration: underline;' href='/section/latest?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>click here for Latest Section</a>

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.

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.

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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.”

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