SINGAPORE: More businesses are announcing wage cuts or nudging employees to go on no-pay leave amid the ongoing COVID-19 pandemic, which has cast a dark cloud over many industries and the economy.
The Singapore central bank earlier this week warned that the country will enter a recession this year, and cautioned that wages, instead of jobs, will “bear the brunt” of the downturn in the near term as companies tighten their belts on the back of declining revenue.
Already, some companies have done so in recent months.
With the aviation industry under severe turbulence, national carrier Singapore Airlines announced a slew of cost-cutting measures in March, including wage cuts for its management team and compulsory no-pay leave for employees.
READ: MAS expects more job losses, wage cuts as economy deals with ‘large, abrupt shock’ from COVID-19
BreadTalk Group is also cutting senior and middle management’s pay by 10 to 50 per cent for three months until June, affecting about 137 employees across Southeast Asia.
A survey conducted in March by human resources consultancy Mercer Singapore showed 3 per cent of firms here having cut workers' salaries and another 5 per cent mulling this option.
Eleven per cent of those surveyed have, meanwhile, reduced salary increment budgets, with another 22 per cent planning to do so.
Among the latest, UK-based insurance broker Aon announced on Monday (Apr 27) that 70 per cent of its staff worldwide will take a pay cut of about 20 per cent from May 1, while salaries of its chief executive and other senior executives will be halved.
In a memo to employees, CEO Greg Case said the firm has opted for wage reductions, instead of layoffs, to “protect jobs”.
The pay cuts will be “temporary”, said Aon, without specifying a time frame.
Mr Case said it might be “too early in this economic crisis to determine how (the company will) ultimately mitigate these action”.
Touching on how the pay cuts were derived, Aon’s top boss said they were based on “a set of criteria, including the cost-of-living” in the countries the company operates.
“Based on that analysis, we have set a floor in each country. This means that approximately 30 per cent of our colleagues will see no reduction,” he said, adding that salary cuts for the remaining 70 per cent will be done in “accordance with local practices”.
When contacted, a company spokesperson declined to comment on how many workers in Singapore will be affected.
According to one employee, a video conference was held this week for staff in Singapore to raise questions about the company’s latest move.
Another who spoke to CNA on condition of anonymity said employees have been told to wait for more details. Aon employs about 808 people in Singapore.
READ: Retrenchments and withdrawn job offers: Singapore's labour market shows signs of COVID-19 strain
Over at Grab, staff in Singapore have been encouraged to go on voluntary no-pay leave, and the salaries of its senior management have been cut by up to 20 per cent.
In a note to its drivers – signed off by Grab Singapore’s head of transport Andrew Chan and a copy of which was sent to the media on Wednesday – the ride-hailing giant said it has been “badly hit” by the coronavirus outbreak, with ridership numbers continuing to fall by double-digit percentages.
With even the big boys struggling, smaller businesses, particularly those in industries that have been hit hardest by COVID-19 measures, are mulling their options.
Mr Lim Wee Hsien, who co-owns Wursthans Switzerland at the new Paya Lebar Quarter shopping mall, said revenue at his 40-seater casual diner has plunged by 90 per cent since the circuit breaker rules were enforced.
The six-month-old restaurant remains open during this period, although for shorter hours, so as to keep the new brand going and earn whatever it can from deliveries to cover operating costs.
Government policies such as the Jobs Support Scheme to subsidise local employees’ salaries, have helped to alleviate cash flow concerns but with the circuit breaker extended until Jun 1, the outlook remains “bleak”, said Mr Lim.
Mr Lim said he has since discussed the possibility of a 20 to 30 per cent pay cut with his five full-timers during the circuit breaker period, given the shorter operating hours.
READ: Events postponed, restaurants ‘near empty’: F&B industry on the chopping block as COVID-19 measures bite
3,000 FIRMS NOTIFIED MOM ABOUT COST-CUT MOVES
Under new rules in place since Mar 12, employers are required to notify the Ministry of Manpower (MOM) if they take cost-saving measures that affect workers’ monthly salaries.
The ministry has since received notification from 3,000 firms with about 100,000 employees, said Manpower Minister Josephine Teo during a virtual media briefing on Wednesday.
Companies with at least 10 employees that intend to cut salaries by 25 per cent or more during the circuit breaker period must inform the Manpower Ministry.
Some of them have taken “sharp cuts”, said Mrs Teo.
“There have been quite a lot of discussions between employers and their workers to moderate the wage costs in order to tide through this period,” said Mrs Teo.
BRACE FOR MORE WAGE CUTS AFTER APRIL, MAY: ECONOMIST
The Monetary Authority of Singapore (MAS), in its latest half-yearly macroeconomic review released this week, warned that firms are likely to reduce labour costs via a combination of wage and headcount cuts as revenues fall.
Despite support from the Government, some firms affected by COVID-19 may still have to undertake cost adjustment measures, such as putting workers on shorter work weeks or no-pay leave.
“This could occur as wage subsidies and other support may still be insufficient to cover revenue losses for some firms,” it said.
Some companies may also ask workers to take pay cuts, and bonuses could also be reduced in some sectors, resulting in a decline in overall remuneration, MAS added.
Across industries, wage cuts are likely to happen “swiftly and sharply” in the transportation and storage, and financial services industries, where remuneration is highly responsive to changes in business cycle conditions.
Remuneration in financial services is also expected to suffer, while “significant” monthly wage declines can be expected in the accommodation and food services industry due to lower hours worked, the central bank pointed out.
READ: Singapore will enter a recession this year, ‘significant uncertainty’ over duration and intensity: MAS
Maybank Kim Eng economist Lee Ju Ye told CNA that she expects more companies to announce wage cuts in June, when Government support through the Jobs Support Scheme – a 75 per cent wage subsidy for firms in all sectors in April and May – will end for most firms.
In June and July, the larger subsidies of 50 per cent and 75 per cent will apply only to sectors most affected by the outbreak, such as aviation, tourism, and F&B. Employers from other sectors will get a 25 per cent wage subsidy.
Ms Lee said with other sectors unlikely to see a return to business as usual immediately after the circuit breaker is lifted, “normalisation will take time”.
“Once the Jobs Support Scheme ends and many sectors see support falling to 25 per cent, they may start to find labour cost as a very burdensome component hence wage cuts could only come then, rather than now,” said the economist, noting that this could happen across a broad range of sectors given the impact of COVID-19.
Analysts have said that the labour market will continue to weaken during the COVID-19 crisis, although Singapore’s first quarter employment figures were better than expected.
Overall wage growth for 2020 could even see its first decline since the global financial crisis in 2009.
"Back then, wages declined by an average of 2.7 per cent for the full year," according to Ms Lee.
“There has never been a period after that where wage growth turned negative. I think this time round it’ll be a steeper decline, as it affects more sectors and given how we will see more pay cuts starting from the second quarter,” said Ms Lee.