Companies in Hong Kong and on the mainland have adjusted their salary forecasts and a surge in redundancies is expected next year amid the economic downturn, surveys conducted by the Hong Kong People Management Association and Hong Kong Baptist University found.

In a survey conducted between July and September, 50 out of 83 Hong Kong companies expected a salary increment of about 5 percent in 2009.

However, in another survey by the association last week of 45 Hong Kong companies, about 20 companies said they will not give their staff as big a raise next year as they had expected, and eight companies said they will wait and see.

Meanwhile, the association said it expected more companies to lay off staff in the coming year.

Nearly 9 percent of the companies expected redundancy in 2009. Almost 20 percent of the companies with more than 1,000 staff said they will downsize.

The mainland is not spared from the financial crisis either.

Fifty-seven mainland companies were surveyed last week. Twenty-two of them said they will lower salary increment rates for 2009. Last month they expected as much as a 10.6 percent increment. The survey also found that 10 mainland companies will lay off staff.

Vice president of the association Pauline Chung said business is significantly affected by the credit crunch.

"The condition will get worse. The banking and insurance companies were dealt a severe blow. This means that banks will tighten their lending rules, resulting in cash flow problems in the market," she said.

Felix Yip, president of the association, said it will take a long time for the economy to recover.

"This is just the beginning. The economy is going to continue worsening, but it is hard to say for how long. It can be a 1,600-meter race, but it can also be a marathon," he said.

The labor market has already felt the pinch from the economic meltdown following the closures of fashion chain U-Right and electrical goods company Tai Lin Radio Service.

Another member of the association Rita Tsui, also human resources manager of shipping company Hamburg Sud which employs 120 workers in Hong Kong, said the average pay rise in the shipping industry for next year was previously estimated to be 5 percent, but many companies are now reviewing their salary adjustment plans.

"The industry needs to wait and see," she said.

Tsui said some shipping companies have even postponed their plans to buy new ships.

Vivienne Luk, associate professor of management from the Hong Kong Baptist University, urged the government not to legislate on a minimum wage at the moment so as not to impose more burden on companies.

(HK Edition 10/21/2008 page1)