As Singapore moves into a knowledge-based and highly-skilled economy, impaired by an ageing population and low birth rate, businesses are caught in between higher wage demand and a drying pool of talent. Yet wage growth continues to outstrip productivity growth for a large part of the last decade, according to data from the Manpower Ministry’s Statistics Yearbook. The real median wage of Singapore employees grew by 7% last year while productivity shrank by 0.1%.1
Despite wage increment, the recruitment of top talent remains challenging. Highly skilled industries such as engineering and technology, are facing skill shortages and talent pools are too small for employers to pluck from. As more skilled positions are left vacant and productivity stagnates, employers will need to focus their attention on other innovative strategies, not just wage increment, to remain sustainable.
Being the primary source of labour, highly skilled employees are more confident about moving. There is an unavoidable dilution in productivity when an employee leaves. An experienced employee knows the business like the back of his hand, and may have established strong ties with stakeholders and customers. The company’s productivity plummets along with the resignation of the employee. Further operation costs will be incurred in the recruitment and training of new employees.
Understanding every employee’s needs can help to customise employee retention strategies, and avoid hurting a company’s bottom line. According to a candidate survey by global recruitment firm Hays, the strongest reasons for employees in Asia to stay with a current employer are work-life balance (45 per cent) and salary or benefits (40 per cent). Specifically in Singapore, work-life balance is even greater valued at 60 per cent, as salary and benefits take a backseat at 40 per cent.
The observation that “work-life balance” has been rated highest sheds valuable insights for employers to tap on when reviewing their employee retention strategies. While salary continues to take up a big slice of the pie across emerging markets, talent management plans should also include other retention attractions such as flexitime, home-working and telecommuting.
Creating a positive working environment not only lowers employee turnover, it increases the company’s attractiveness to potential employees. Plagued by skill shortage and wage pressure, experts advised employers in Singapore to attract and retain millennials. Interestingly, the millennial workforce attach more importance to an overall positive work environment than the company’s ability to offer increased salary, when choosing a job. This can include supporting work-life balance, personal growth, and meaningful recognition.
Visit any McDonald's outlet these days and be greeted by automated ordering services—a strategy employed to decrease the global chain’s workforce. Likewise, as companies seek ways to improve productivity and performance, automating and outsourcing non-core business processes, for example the accounts payable (AP) processes, is an emerging cost-saving trend.
Recent trade agreements, both in the ASEAN Economic Community (AEC) and the Trans-Pacific Partnership (TPP) provide growth opportunities to venture into new markets through reduced tariffs and quotas, and free flow of goods, services and skilled labour. These open doors to regional collaboration on tech automation and outsourcing by easing the flow of services trade, while protecting cross-border data flow.
The government, on its part, has introduced strong initiatives to support businesses in managing rising labour costs. In 2013, the Wage Credit Scheme (WCS) was introduced as part of the 3-Year Transition Support Package, co-funding 20 per cent of wage increment offered to Singaporean employees who are earning a gross monthly wage of $4,000 and below.
In an announcement during Budget 2015, firms are given more time to adjust to rising wages in a talent tight market with a two-year extension of the WCS to include 2016 and 2017. Businesses receiving payouts can free up resources for making investments in productivity. Better yet, employees can share the business’ productivity, building up employee loyalty and support.
All is not gloomy for businesses caught in the race against wage pressure. The aggregate labour market tightness is likely to ease further in the coming years with government initiatives like the SkillsFuture Qualification Award helping to upskill workers and support businesses’ infrastructure development.
Internally, adopting strategies to reconfigure organisational processes, structure and talent management can help alleviate productivity stagnation. A good place to start would be the implementation of a better work-life balance. Consider the two-pronged Work-Life Grant, which financially supports businesses who include such efforts.