HONG KONG: Hong Kong employees are expected to receive a 0.6 percent increase in their base-pay this year, the lowest gain in four years, as companies remain cautious on salary amid ongoing economic uncertainties, according to a survey the Hong Kong Institute of Human Resource Management (HKIHRM) released yesterday.

"During this period of uncertainty, cost control is a vital challenge among companies fighting to survive. Pay strategy is now more focused on rewarding those employees delivering outstanding performance," said Lai Kam-tong, Co-Chairman of the Remuneration Committee of HKIHRM.

The institute conducted the survey with 103 companies, employing over 135,000 full-time staff, between January and October 2009, with 36 percent of the companies having reported a salary increase in 2009, while 64 percent opted for a pay freeze.

Of the 37 companies that provided their budget data for next year, 29 companies expect an overall pay raise, while eight companies forecast a pay freeze, with an average 2 percent increase in wages anticipated in 2010.

"Having regard to the business uncertainty and against a backdrop of worldwide economic stagnation, companies now take a more conservative approach towards pay adjustments for next year," Lai said.

He added that high-technology, telecom, oil, chemicals, insurance and engineering are the sectors budgeting for a higher pay increase in 2010.

Meanwhile, around 95.1 percent of the companies said they will provide a non-guaranteed bonus plan to some or all of their employees in 2009.

The average non-guaranteed bonus for this year was 1.09 months of pay, significantly lower than the 1.57 months recorded last year.

Among the 16 business sectors, financial services will distribute the largest non-guaranteed bonuses, representing, on average, 3.63 months of pay, followed by shipping/terminals and engineering with 2.65 and 1.76 months of pay respectively.

Lawrence Hung, another Co-Chairman of the Remuneration Committee, said the level of non-guaranteed bonuses has dropped to a seven-year record low, as the global financial crisis whittled business performance and revenue of local companies.

"The most affected are those at senior levels or above, with incentives being awarded only very selectively to high performers," Hung said.

With the unemployment rate stuck at 5.3 percent, the institute expects employers to remain very cautious in making decisions on pay increases and bonus distribution.

Despite the 0.1 percent drop in the latest unemployment figure, economists said the downward trend is unlikely to continue.

Irina Fan, a senior economist at Hang Seng Bank, said employers may remain hesitant in hiring new workers, given the slow pace of economic recovery.

"The unemployment rate could revert to an uptrend and climb to over 6 percent by the year-end," she said.

(HK Edition 11/06/2009 page3)