Are we willing to match an offer from a competitor firm to retain a key employee?

"A key employee has just presented his business manager with a job offer for significantly higher pay from a competitor firm. The threatened departure of the employee catches the business manager by surprise. Alarmed, the business manager contacts the human resource manager seeking to counter the external recruitment effort. An impassioned plea is made to authorize an exceptional pay package to match the offer. Under pressure and constrained for time, the human resource manager accedes to the business manager’s request, retaining the employee and in the process undermines the integrity of the company’s overall pay policy and practice."

As practitioners, we encounter a dilemma when the extension of a counteroffer is necessary to retain key employees. On one hand, we are reluctant to participate in an upward pay spiral by matching competitors’ offers with counteroffers. On the other hand, the bidding may be justified when the potential contributions and/or the difficulty of replacing the employee are great. In addition, matching offers of competitor firms promulgate a 'greed is good' culture whereby opportunistic employees solicit bids from competitor firms to extort higher pay from the company.

Simply aligning employee pay rates with the market median rates may not be sufficient to keep the headhunters at bay. Also, it would be naïve to presume that adherence to a market median, or an upper quartile pay practice should automatically translates into employee retention.

It is time to focus on market pricing of jobs and institute retention tactics in anticipation of the prospect of employees receiving job offers from competitor firms. Regardless of perceived pay equity challenges, market pricing of jobs is individual centric.

In anticipation of competitive bids in the war for talented people, should we offer key employees salaries commensurate with the alternative jobs (real or hypothetical) they could hold, or can we afford not to?

A recent employment outlook survey suggests that the "barbarians are already at the gates" ...

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Employers see strong hiring in Q1 next year: survey
Business Times Singapore, 11 December 2007
By Chow Penn Nee
(c) 2007 Singapore Press Holdings Limited

THE hunt for talent shows no signs of abating, as Singapore employers will actively recruit qualified staff from January to March next year, according to a quarterly survey measuring employers' intentions to hire or fire employees.

Conducted by US-based Manpower Inc, the Manpower Employment Outlook Survey polled 52,000 public and private companies in 27 countries.

Of the 736 employers polled in Singapore, net employment outlook - the percentage of employers looking to hire minus those expecting a decrease in employment - was 51 per cent. This indicates that employers throughout Singapore will continue to hire at a vigorous pace, said Manpower. This is nine percentage points higher than in the fourth quarter of 2007.

Forty-five per cent of employers said they expect to hire more people during the first quarter of 2008, while 2 per cent expect to reduce staffing levels, and 24 per cent report no change in hiring intentions.

C K Goh Rosa, country manager of Manpower Singapore, noted that job seekers are more selective with job offers and are more demanding in negotiating salary packages. 'With the consistently strong hiring outlook, we may see a continuous trend of rising salary packages to attract and retain talent. This will drive up operating costs and is a source of concern for most companies.'

She added: 'It will be a good time to invest in training the mature workforce to narrow the gap of talent shortages.'

Employers in the public administration and education sector report the strongest hiring outlook of 70 per cent, which is a marked increase from the previous quarter, and from a year ago. The finance, insurance and real estate sector was the second strongest with a net outlook of 67 per cent, a slight drop from the previous quarter, and a fall from a year ago.

The mining and construction sector was the third strongest in hiring outlook, with 59 per cent, up from a quarter ago, but a drop year-on-year. Employers in the wholesale and retail trade sector report the slowest hiring pace with an outlook of 33 per cent, higher than a quarter ago but a fall from the previous year.

'The sharp increase in the public administration and education sector outlook is likely due to the increase in enrolments in training institutions and learning centres in Singapore,' said Ms Goh Rosa. 'More people are looking to invest in personal advancement and marketability. We are seeing signs of companies sending their mature employees to courses to improve their skill sets and knowledge in an effort to extend their employment.'

In the Asia-Pacific, hiring activity is expected to be positive, but employers in Australia, China, Japan, New Zealand, Singapore and Taiwan show a slower pace of hiring from a year ago. On a quarterly basis, however, net employment outlook improved in China, Hong Kong, Singapore and Taiwan.

Globally, the strongest first quarter hiring expectations were reported in Peru, Singapore, India, Argentina, Costa Rica, Hong Kong and South Africa. Employers in Ireland reported the least optimistic hiring plans.

Is mandatory annuity scheme for old age still palatable on the back of 8 years of poor health?

Annuity made palatable
Straits Times Singapore, 11 December 2007
Review - Editorial
(c) 2007 Singapore Press Holdings Limited

BIT BY bit, the probable final shape of the compulsory annuity scheme for old-age support is emerging. Two features of the proposal which a good many people found objectionable may be modified, according to the principals working on the plan. These are the sequestering from the policyholder's heirs of surplus sums left upon death, and the seemingly ambitious age of 85 at which payouts from the annuity are to begin. Under modifications being studied by a government-appointed panel headed by Professor Lim Pin, the unused portion will revert to the family. This will be welcomed and should remove the one impediment that stands between voluntary and grudging acceptance of the old-age protection idea.

Just as cognisant of public unhappiness expressed is the concession that policyholders could have a choice of starting ages at which they will begin receiving payouts. Manpower Minister Ng Eng Hen, who is steering the annuity scheme, mentioned by way of illustration a range from age 65 up to 90. The base is obviously too low. A credible number could be 75 or 80. Senior Minister Goh Chok Tong has said he favours age 80. The original access age of 85 on the face of it is scaled too high. All that the Government has said of longevity projections is that half of those Singaporeans who attain age 62 will go on to live beyond 85. How many would that be? The incredulity with which this was received by many people was undoubtedly a visceral response, but it was enough to dump controversy on a proposal which by rights should get easy passage, as about half of CPF members simply would not have enough money in their accounts to support themselves if they lived to extreme old age. The Government will now engage private actuaries to verify data on projected life spans. This preferably should have accompanied the announcement of the original proposal, but better late than never.

Two points arising are worth recording. First, the Government has taken on board views and criticisms that clearly are deeply felt, even if these should eventually turn out to be not completely justified. The receptiveness will be welcomed by the people. But they should be prepared to pay higher premiums, and consequently have reduced CPF balances, for the relaxed criteria. Second, it should be remembered reform of old-age pension proposals had begun in the 1980s. Data showed Singaporeans were living longer and outstripping their modest savings. Life expectancy was only 61 years when the CPF was started in 1955. As those who need help most are least able to accumulate enough in voluntary savings, a mandated plan is unavoidable.
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S'poreans live longer but suffer 8 years of poor health
Straits Times Singapore, 3 December 2007
By Salma Khalik, Health Correspondent
(c) 2007 Singapore Press Holdings Limited

MOH study shows main causes of sickness are diseases that could be prevented early on

IF YOU needed another reason to lead a healthy lifestyle, here it is: A study shows that Singaporeans may be living longer now, but they are also sick for more years than people in some other countries.

The main culprits are heart disease and stroke, cancer, diabetes and even mental illness.

Now, the average Singapore woman should live to 81.8, but she will spend eight of those years ill or disabled. Men too will spend eight of their 78 years in poor health.

So while Singapore does well on life expectancy charts, a different picture emerges when good health is tracked.

The Ministry of Health study confirmed that a lot of suffering and premature deaths come from diseases that could be prevented - such as heart attacks, stroke and diabetes. Some cancers too could be caught early.

The prevalence of such diseases also suggests that more should be done to tell people what they can do to save themselves from becoming ill, said Dr Lam Pin Min, a member of the Government Parliamentary Committee for Health.

He called for more public education on how these ailments can be prevented, and screening to catch problems like diabetes and cancer early.

He added: 'With early detection of diseases, prompt medical treatment can hopefully minimise illness and medical complications.'

But health authorities can only do so much, argued unionist and Health GPC head Madam Halimah Yacob. People must take ownership of their health if they want to keep such illnesses at bay.

Her advice: 'Go for regular screening, eat more vegetables, less salt and do more exercise. That could cut the number of years you suffer from ill health.'

Dr Derrick Heng, deputy director of the Ministry of Health's non-communicable diseases branch said the study will guide the authorities on how to spend health resources.

But though it 'shines the torch' on diseases that cause the most suffering, the ministry will have to see which actually benefit from preventive measures.

The study will be repeated every three years, to track if the main causes of disability change, or are reduced, as the ministry puts in more effort to tackle them.

A surprising finding was how mental disorders count as much as diabetes and stroke for the wasted years. Mental health is getting a boost as the ministry has committed $80 million over the next five years to improving it.

Zooming in on problem areas could help Singapore catch up with countries that fare best - such as Japan, the top country in the world for long, healthy lives.

Japanese women live an average of 77.7 years in good health, compared to only 71.3 years for women here. Japanese men have 72.3 years of good health, compared to 68.8 years for Singapore men.

The ministry has already made the treatment and prevention of chronic disease a priority. People can now use money previously reserved for hospitalisation to treat diabetes, high cholesterol, high blood pressure and stroke.

The intention is to treat those conditions early before complications set in.

Unfortunately the programme has not been popular, said Madam Halimah. She suggested expanding the use of Medisave money to include an annual health check.

Men should also take a leaf from their wives.

Women all over the world live longer and healthier lives. The World Health Organisation (WHO) attributes it to their smoking less, exercising more and being more health conscious than men. As for Japan, its explanation is the low rate of cardiovascular diseases comes from their high-in-fish diets.

Madam Halimah said: 'We should also start eating more fish and less meat.'

salma@sph.com.sg

Can we moderate economic performance with superannuation contribution rates?

Fight inflation with CPF, GST: economists
Business Times Singapore, 10 December 2007
By Siow Li Sen
(c) 2007 Singapore Press Holdings Limited

Cool labour demand by raising employer contribution, roll back July GST hike

(SINGAPORE) The government should restore some of the CPF employer contribution cuts as a way to cool labour demand, which in turn will moderate growth.

That should help ease inflation and help people cope with runaway prices that are biting into the lives of most Singaporeans, said Chua Hak Bin, Citi economist.

Another way to help people cope with higher prices is to target the punitive 2 percentage point increase in the Goods and Services Tax, other economists added. This is because when the 2 per cent GST hike was pushed through on July 1, the government had not reckoned on food and energy prices shooting up the way they have done.

'Higher CPF (Central Provident Fund) contribution rates will help cool labour demand and moderate growth,' said Dr Chua.

Economists expect the government to soon announce more specific measures to help the poor, who are especially hard hit by inflation.

But Dr Chua thinks more has to be done for the wider population, and restoring CPF employer contribution cuts will go a long way towards tackling the problem.

Inflation jumped to a shocking 3.6 per cent in October - a 16-year high - and the projection is that it could go as high as 5 per cent early next year, before easing.

Standard Chartered economist Alvin Liew said while the policy of having a stronger Singapore dollar can 'quite effectively deal with import inflation, it is less effective against domestic price pressures such as rising rents and higher wage expectations'.

'We are likely to see more government measures to moderate rental increases, business costs and wage expectations,' said Mr Liew.

Some measures could be to increase property tax rebates and raise the corporate tax exemption threshold, said Mr Liew.

Dr Chua thinks it's strong growth that must be tackled, and one way would be to restore the CPF contribution cuts by one percentage point and more for older workers.

'Job growth is running at too strong a pace, given such a tight labour market,' he said.

Job growth is running at 200,000 a year, or at an 8 per cent pace and the unemployment rate is now down to below 2 per cent. Easing the rules on hiring foreigners is not the solution, he said.

'Where will you house the foreigners?' Dr Chua asked.

Higher CPF rates will also help the middle class cope with rising living costs, by giving them more cash to pay for things which have become too expensive, he said.

When the CPF rates were cut, many had to dip into their disposable income to help with their monthly mortgage payments.

CPF cuts over 2003-06 (which brought the employer's rate to 13 per cent) were probably overzealous, especially for older workers, Dr Chua said.

This year, the government restored by 1.5 percentage points the employer's rate to 14.5 per cent, bringing the total CPF savings to 34.5 per cent for younger workers. But for employees past 50, the contribution rates are much lower to encourage employers to hang on to these older workers.

Suan Teck Kin, economist at United Overseas Bank, thinks the government will not restore CPF rates because it will add on to the wage pressure.

And companies enjoying strong growth will just hire more, he said.

To reduce some of the cost pressures, the government should do more to defray the punitive 2 per cent hike in GST, Mr Suan said.

Dr Chua agrees.

'With the benefit of hindsight, hiking the GST by 2 percentage points was probably unnecessary, given the fiscal windfall and inflation impact,' he said.

Dr Chua listed the windfalls.

The Ministry of Finance had projected tax revenue to increase by only 7.9 per cent, according to the 2007 Budget, but actual tax revenue increase may be more than double that rate.

The government projected income taxes to rise by 7.5 per cent. But income taxes for the first 6 months of the fiscal year actually rose by about 20 per cent.

The government expected GST revenue to rise by about 23 per cent. But GST collected (for the first 6 months of the fiscal year) has risen by about 49 per cent.

The 2 percentage point GST hike was expected to raise $1.5 billion, and the government was projecting a primary deficit of about $600 million (with the 2 per cent GST hike).

'But even without the $1.5 billion proceeds from the 2 percentage point GST hike, back-of-the-envelope calculations suggest the government will likely run a small primary fiscal surplus,' Dr Chua said.

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Interest rates not the only monetary policy lever
Wednesday, 28 Nov 2007 11:51AM
By Alex Dunnin
www.financialstandard.com.au/index.php?id=11421

With Australia’s super system looking more and more like Singapore’s every day, maybe it’s time we also followed their lead in using contribution rates as a de facto monetary policy tool.

The Singapore Central Provident Fund (CFP) is their A$100 billion national provident fund that helps Singaporeans save for retirement, to buy a home, for medical expenses and to build wealth though a series of non-retirement investment schemes.

But where it gets interesting is that while the only official lever Australia uses to slow down an overheating economy is raising interest rates, in Singapore they sometimes use the CPF contribution rates.

Contribution rates being up to 36 per cent of wages means changes these rates are likely to have much more impact controlling surplus discretionary spending anyway, especially as Singaporeans buying their home through the CFP account are only paying interest rates of 2.6 per cent anyway.

“With the economy doing well, it is timely to retune the balance of our CPF contribution rates towards the upper end of the 30-36 per cent range. A modest CPF increase will not erode our economic competitiveness and will allow us to better meet the needs of an ageing population.

“To enable our workers to benefit from economic growth and to help them build up their CPF savings, effective 1 July 2007 the Government will raise the employer's CPF contribution rate by 1.5 percentage points,” said a statement from the CFP back in February this year.

While a 2.6 per cent mortgage rate compared to the 8+per cent paid by Australians is incredibly attractive, the cost for this low rate is that returns paid by the CFP are generally only 2.5 per cent because the overwhelming majority of CPF assets are held as government bonds.

Another trade-off is that if Singaporeans use their CFP-funded mortgage to buy their initially publicly funded home they are not allowed to sell it for more than three years and they have to live in it themselves, a policy that Australia might consider as a means to limit house price speculation amid our housing affordability crisis.

While it would an administrative nightmare, if Australia really wanted to take the heat off our currency and mortgage rates, we could introduce floating superannuation contribution rates and really watch savings rates go through the roof too, just like in Singapore.

But with the “economic conservatives” now running the country, the chances of policy as radical as this aren’t even worth thinking about.

Will bonuses be pegged to (sub-prime) performance?

Singapore bankers upbeat about fatter bonuses
Business Times Singapore, 8 December 2007
By Chow Penn Nee
(c) 2007 Singapore Press Holdings Limited

(SINGAPORE) Despite market volatility stemming from the sub-prime crisis in the United States, Singapore-based bankers are counting on higher bonuses this year, and are optimistic about next year as well.

So says a worldwide survey of 20,270 employees working in financial services, conducted by eFinancialCareers.com, a global financial careers website.

The study found that slightly over half of Singapore bankers expect to receive higher bonuses than last year, and only about 17 per cent expect their bonuses to be lower than the bumper payouts of 2006.

Sarah Butcher, editor of eFinancialCareers.com, said: 'The expectation of swelling bonuses may be linked to the fact that Singapore-based bankers are paid less than their global counterparts. She added that the survey revealed that the average Singapore banker received a bonus equivalent to 44 per cent of salary last year, compared with 76 per cent in Hong Kong and 58 per cent in the US.

Hong Kong bankers share similar optimism about bonuses, with also slightly more than half of them expecting to receive higher bonuses than last year, and only 14 per cent anticipating lower bonuses.

In contrast, 60 per cent of UK bankers believe bonus levels will be down next year.

Globally, the survey showed that equity capital markets and M&A bankers are the most optimistic when it comes to predicting this year's bonuses. A BT report said investment banks in Singapore earned over 45 per cent more in the year to date than in the corresponding period last year, driven by growth in fees in mergers and acquisitions, equity capital markets and debt capital markets. Due to sub-prime woes, debt capital markets and credit-focused bankers are the most pessimistic, said the survey.

Bonuses are not the only thing Singapore bankers are upbeat about, as 42 per cent expect business to improve in the coming year. Bankers from China and Hong Kong are similarly upbeat, with 56 per cent and 41 per cent respectively, forecasting a better 2008.

By comparison, about 40 per cent of UK bankers expect business to worsen next year, while about one-third of US, French and German bankers also predict that conditions will deteriorate.

Ms Butcher explained: 'The notable optimism of finance employees in Asia is no surprise as the growth of industries amid China's economic boom has led to increased business activity and a climate of promise throughout the entire region.'

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Asia Big Bonus Swindle

eFinancialCareer.hk, 3 December 2007

Asian bankers account for a growing proportion of bank's profit. But they are still short-changed at bonus time.

This year, the situation looks set to be worse than ever. Most US banks have lost packets through the US sub-prime crisis, meaning profitable local bankers are in danger of subsidising their struggling American colleagues.

Gary Lai, manager of front-office banking at recruiter Robert Walters Singapore, says Hong Kong and Singapore bankers employed at US and European houses are already prepared for the fact that their bonuses will be negatively affected as a result of the sub-prime fallout.

But is the situation really this dire? A recent study by international search firm Options Group found Asian bonuses are likely to rise by up to 5% this year. By comparison, payouts in the US and Europe are predicted to fall 10-15% and 5-10% respectively.

There are rumours that Asian bonus pools have been ring-fenced and won’t be reallocated to subsidise struggling divisions elsewhere. Nader Farahati, director at consultancy Oliver Wyman, told Financial News recently that Asian bonuses will not be reallocated.

John Jessen, the Singapore-based group CEO of headhunter Smith & Jessen, also doubts that Asian bankers will have to subsidise colleagues in the US and Europe.

Jessen says banks want to protect assets where they make the most money: “Asia is in such a build-out mode that no one wants to let their competition leave them behind.” He expects most hiring investments to flow eastwards in 2008, with trading floors in India set to double or even quadruple in size over the next two to three years.

The sentiments of bankers in other emerging Asian economies such as Indonesia, Thailand and Malaysia also remain positive, says Lai: “The general consensus seems to suggest that their bonuses will be healthier than previous years, as many of these economies started off from a low base and are experiencing strong domestic growth.”

Is Singapore still attractive to expats?

According to a Mercer Cost of Living (COL) survey, Singapore (SG) is the fifth most expensive city in Asia, after taking into consideration the costs of housing.
The COL Index for Singapore in March 2007 is 100.4, as compared to an index of 92 a year ago. The base city is New York, USA with a COL Index of 100.
The survey result reveals that it is cheaper for expats to live in the Big Apple (NY) than it is to live in the Tiny Red Dot (SG).

www.mercer.com/costofliving [accessed date: 4 Dec 2007]

On 1 July 2007, Singapore increased its goods and services tax (GST) rate from the current 5% to 7%.

Is Singapore still attractive to the global expatriate workforce even if it is ranked third best in terms of personal tax climate in the region?

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Business Times Singapore, 4 December 2007
Tax climate in S'pore ranked third best in region for expats
By Anna Teo, (c) 2007 Singapore Press Holdings Limited

UAE, Russia, HK are among world's most benign personal tax environments, says Mercer survey

FOR expatriates considering a posting to Asia, the personal tax climate in Singapore is third best in the region, behind Hong Kong and Taiwan. And unlike elsewhere, it makes little difference here whether the taxpayer is single or married, with or without kids.

According to Mercer's survey of 32 'expatriate hotspots', the United Arab Emirates, Russia and Hong Kong are among the world's 'most benign' personal tax environments, while Belgium, Denmark and Hungary are the most onerous.

The findings also show that in general, married employees are better off than single employees tax-wise, and married employees with two children fare the best.

But the difference in tax liability is not too great in a few countries, including Singapore, while employees in China and India pay the same tax regardless of marital status.

Says Guo Xin, deputy regional head of Mercer, Asia: 'Within Asia, Hong Kong and Taiwan have the most gentle tax systems regardless of marital status. The toughest personal tax regimes can be found in India and Australia, with Indians paying more tax than Australians if they are married with two children.'

And through its Central Provident Fund scheme, Singapore has one of the highest social security contributions - second only to Japan - at 11.4 per cent. Social security payments in Hong Kong, for instance, amount to barely 2 per cent.

'If you exclude the mandatory CPF contributions, Singapore's tax rate for middle managers would be 5 per cent, making it the lowest rate in Asia,' Wong Su-Yen, managing director of Mercer Asean notes.

Except for Russia, European countries fill the bottom rungs of the rankings.

Apart from taxation, other key considerations for expatriate allowances are housing, private schooling and local cost of living adjustments - all of which can add up to the high cost of a global expatriate work force.