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Civil service salary revision: Private firms largely unfazed, say they've already raised wages as economy reopened

SINGAPORE — Employers in the private sector have been revising their workers’ salaries and doling out wage increments since the start of the year as the economy reopened further in the midst of the Covid-19 pandemic. This is why the move by the Public Service Division (PSD) to raise the salaries of civil servants is timely, economists and human resource professionals said. 

Civil service salary revision: Private firms largely unfazed, say they've already raised wages as economy reopened

Office workers out and about in the financial district of Singapore.

  • About 23,000 officers in the civil service will get a pay raise
  • Some employers in private sector did not indicate plans to respond directly to this move in the public service
  • They said that they have already raised the pay of their workers in the first half of 2022
  • Economists said that there may still be pressures on private firms to increase starting salaries
  • This is because the labour market will get tighter

SINGAPORE — Employers in the private sector have been revising their workers’ salaries and doling out wage increments since the start of the year as the economy reopened further in the midst of the Covid-19 pandemic. This is why the move by the Public Service Division (PSD) to raise the salaries of civil servants is timely, economists and human resource professionals said

A check with some private companies showed that they have increased the salaries of their employees through the first half of the year, with one firm saying that the increment has been as high as 20 per cent.

On Sunday, PSD announced that about 23,000 officers in the civil service’s generic schemes and related schemes will get a pay raise of between 5 per cent and 14 per cent from Aug 1. 

The adjustments were to ensure that the the civil service is "able to continue to attract and retain its fair share of talent", it said.

“The civil service periodically reviews salaries and adjusts them when necessary to broadly keep pace with, but not lead, the market,” it added.

Economists may agree with the need to keep salaries competitive especially in the midst of rising inflation, but they also expressed concern at how this might result in a tighter labour market. 

However, most companies interviewed by TODAY did not indicate plans to respond directly to PSD's move, saying that they had already bumped up the salaries of their employees.

Last week, the Ministry of Manpower said that companies here have become more profitable, with seven in 10 employees receiving wage increases in 2021, up from just under six in 10 in 2020.

KPMG Singapore, which provides audit, tax and advisory services, announced in a statement last month that as part of a salary adjustment exercise, it will raise the starting pay for entry-level professional workers by up to 20 per cent. 

This will be on top of the S$25 million the firm is investing into salary increments this financial year. 

The company also recently announced a S$30 million investment over five years into a lifelong learning programme for its 3,200-strong workforce.

Responding to queries by TODAY, Ms Janice Foo, head of people at KPMG Singapore, said that "despite current global geopolitical and economic uncertainties, the firm continues to pay out bonuses competitively at the market rate".

One consideration for increasing salaries is to “keep the talent pipeline strong” for accounting graduates in particular, as the number of students studying these courses at the university level in recent years is lower than before, she added.

For the new hires, they are looking for more flexibility for work-from-home arrangements... they also want more flexibility on time off, so that could be our winning strategy in attracting talent.
Mr Adam Piperdy, founder of events company Unearthed Productions

Similarly, Mr Adam Piperdy, founder of events company Unearthed Productions, said that in April, there was already a company-wide salary increase of 5 per cent to 10 per cent for the team of 30 workers.

"Once the (economic) reopening was announced, we did renegotiate everyone's pay package."

Therefore, the firm will not be looking at “any kind of salary increment”. 

Instead, to compete for talent in the wake of PSD's move, he will provide other non-monetary benefits for his employees, including more flexible work arrangements and honour-based sick leave. 

"For the new hires, they are looking for more flexibility for work-from-home arrangements... they also want more flexibility on time off, so that could be our winning strategy in attracting talent."

Mr Piperdy added that feedback on work policies can result in relatively more immediate improvements, as compared to the civil service where there may be more levels of clearance and approvals. 

Another firm that already has salary increases planned out is Integrated Health Information Systems (IHiS), the health technology agency of the Ministry of Health.

Its chief human resource officer May Wee said that all eligible IHiS employees have "already received a corporate-wide salary market adjustment earlier this year, in addition to the upcoming annual salary increment cycle".

Agreeing with Mr Piperdy, Ms Wee said that in addition to competitive remuneration, IHiS also focuses on "looking after the professional and career development of our staff", and has a "full hybrid-work arrangement". 

PAY RISE TO ATTRACT HIRES A ‘SHORT-TERM MEASURE’

The Singapore National Employers Federation and the Singapore Business Federation told TODAY in a joint statement that the wage increases by PSD is not one intended to "lead the market".

It said that the civil service's salary increments as a result of the salary adjustments are likely to be higher than the average wage increase in the private sector for this year. However, it is "important to keep in mind the context of the civil service’s adjustment".

"The last salary adjustment for civil servants was back in 2014… the intent of the adjustment (this year) is to keep pace with the market and not to lead the market." 

Raising salaries as a short-term response to labour tightness may work in attracting employees in the short term, but reskilling and upskilling employees is critical to ensure the sustainability of these salary increases.
The Singapore National Employers Federation and Singapore Business Federation

The federations' advice to companies that have recovered from the pandemic or are recovering is that they should restore salary cuts and build in salary increases to reward their employees.

At the same time, the federations also said that it is important to increase salaries sustainably. 

"Raising salaries as a short-term response to labour tightness may work in attracting employees in the short term, but reskilling and upskilling employees is critical to ensure the sustainability of these salary increases." 

‘WAGE WAR’ IN TIGHT LABOUR MARKET

Considering the rising costs of living and the tight labour market now, the move by PSD is a timely one, economists noted.

Mr Song Seng Wun, an economist from CIMB Private Banking, said that since the civil service's last salary revision in 2014, inflation had been "negligible". Now, though, inflation has been at historic highs.

"It is timely for the civil service to (make this move) as we know the cost of living has gone up," Mr Song added. "It is also to keep pace with private sector wages, which is expected to rise more significantly." 

Even though PSD’s move may be intended to level the playing field between the private and public sectors, it may still result in a "wage war" given the tight labour market.

Mr Chua Hak Bin, a senior economist with Maybank, said: "The civil servants' wage increase reflects a broader market adjustment and stretched labour market.

"Higher civil servant wages will shrink the labour pool available for the private sector and increase market wages further, especially if the flow of foreign workers remain tight."

The public service sector is one of the largest employers in Singapore, and when it is increasing salaries... this is going to push all salaries upwards.
Mr Vaibhav Dabhade, chief executive officer of e-commerce platform Anchanto

One firm that adjusted its starting salaries in response to PSD's move was e-commerce platform Anchanto.

It has increased by 20 per cent its starting salaries for the five to seven job roles it is looking to fill.

Its chief executive officer, Mr Vaibhav Dabhade, explained that competition for talent, especially those with tech capabilities, will only be stiffer with PSD's move. 

"This is going to increase pressure (on the labour market). The public service sector is one of the largest employers in Singapore, and when it is increasing salaries... this is going to push all salaries upwards," he said

Mr Vaibhav is looking at the "bigger picture" of how PSD's move will help his business profitability. 

"The cost of living has increased in Singapore, so I think this is an appropriate measure that is going to help the economy," he added.

"The more money in the pocket, the more spending happens, and the more commerce and transactions will flow.

People walking past a fashion retail outlet along the Orchard Road shopping belt in Singapore.

Human resource experts said that private sector employers may not need to worry about competition when hiring because the roles within the civil service may not always have transferrable skills from the private sector.

In general, the bumped-up civil servant salaries may still lag behind as well.

Mr Adrian Choo, founder of career consulting company Career Agility International, said that private-sector pay is generally still higher than what the civil service can provide despite the salary adjustments, which is why workers will prefer to stay in the private sector. 

"The government sector does not pay super high, because there is a certain public service element to it and there is a certain (financial) security element to it," he said. 

"The only time we see a mass exodus of people switching from private to public sectors is during a crisis." The Covid-19 crisis was one such example, as workers turned to jobs in the civil service when private sector roles suffered, Mr Choo added.

Ms Carmen Wee, founder and chief executive officer of Carmen Wee & Associates, a human resource advisory services firm, said that employers in the private sector do not necessarily compete with the public sector for talent. 

"The private sector companies do not tend to compare (wages) with the public sector."

Private firms normally look to other factors such as inflation numbers, the kinds of applicable skills that the candidate has, and the pay packages of private firms within the same sector, rather than civil service wages. 

"There is no knee-jerk reaction from the private sector the minute they see this announcement from the public sector," she added. 

Ms Foo of KMPG Singapore attested to this as well, saying that the pay structures and salary adjustments for the professional services sector “can never just be determined by the pay scales set by the Government or by national inflation”.

“The talent pool for professional services is limited and so, while cognisant of various benchmarks set for salaries, KPMG typically needs to pay higher than market and higher than inflation to attract the quality of talent needed to deliver impactful outcomes."

Attracting talent will take more than just salaries, she added.

“Working for a purpose-driven company and doing work that positively impacts the environment and society continue to be an important factor for talent wanting to join KPMG.”

Related topics

salary wages employer employee civil servants cost of living business

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