SINGAPORE — Salaries in the private sector rose by 4.9 per cent last year, a slightly slower pace than in the preceding year, which saw wages grow by 5.3 per cent.

However, inflation eased to 1 per cent from 2.4 per cent in 2013. As a result, real total wages increased at a faster pace of 3.9 per cent last year, compared with 2.9 per cent in 2013, said the Ministry of Manpower (MOM) in its latest report on wage practices.

In the report, the MOM wrote: “As the labour market remained tight, wages continued to grow in 2014. Although the pace of increase moderated, real wages grew more quickly over the year after accounting for lower inflation.” The salaries include employer Central Provident Fund contributions.

According to the report, the proportion of employers adopting some form of flexible and performance-based wage system was at the highest in a decade last year.

Eighty-nine per cent of private sector employees were under some form of flexible wage system last year, particularly in the transportation and storage sectors as well as those in community, social and personal services.

The construction sector, with its heavy reliance on foreign workers, had the smallest proportion of employees having some form of wage flexibility at 81 per cent, but this was an improvement from the preceding year (77 per cent).

As of December, two in three private-sector employees were working in establishments that adopted the wage recommendation of having a narrow maximum-minimum salary ratio to minimise differences in salary between the highest-paid and lowest-paid in the firm. The recommendation was one of several made in 2004 by the Tripartite Taskforce on Wage Restructuring, which was formed in 2003 to look into such issues.

Other wage recommendations adopted included linking variable bonus to KPI and including the monthly variable component (MVC) in the wage structure.

The MOM noted that smaller firms were more open in narrowing the maximum-minimum salary ratio, while larger companies led in adopting the MVC and linking variable bonus to KPI.

The MOM also flagged that labour productivity growth has lagged real wage increases over the longer term. Labour productivity declined by 0.8 per cent over the year, after a flat 0.3 per cent growth the year before.