Bosses urged to cap pay rises at 2.5pc next year

PUBLISHED : Thursday, 04 October, 2007, 12:00am
UPDATED : Thursday, 04 October, 2007, 12:00am

Gloom seen on economic horizon

Pay rises should generally be capped at 2.5 per cent next year in view of dimmer economic prospects, the Employers' Federation of Hong Kong says.

The figure is the same as the federation's suggestion for this year but higher than the 2 per cent average recommended for last year.

'Hong Kong is enjoying a period of almost unprecedented growth,' federation chairman James Ng Chi-ming said. 'Yet, across the Pacific, things are not so good and look likely to get much worse.'

Mr Ng cited the US home price index hitting a 10-year low and the vacancy rate for American homes at a record level.

He warned that an American recession may be looming.

'We are concerned that we will soon enter another, far less benign, global cycle.'

The federation advised its members to share the fruits of company success 'generously' with one-off bonuses and to give pay rises selectively to individuals where necessary.

'We are keen that our members share their success with employees. The best way to do so - and one we believe employees also prefer - is through appropriate bonuses.'

The federation's vice-chairman, Brian Renwick, suggested that business leaders should protect their companies against economic downturns.

'We must not be so foolish as to add to fixed costs today without being sure we can afford them tomorrow.'

But legislator Lee Cheuk-yan, of the Confederation of Trade Unions, said the employers' group was using the same old excuse in trying to force down wage levels.

'It always estimates the economy will go downhill,' Mr Lee said.

'Last year, it said the same thing but the economy is booming. The group has lost its credibility.'

He urged the federation to stop being 'an obstacle between workers and the fruits of economic growth'.

'For the sake of a harmonious society, companies should allow their employees to share the benefits.'

Mr Lee said a 2.5 per cent pay rise for next year may mean negative real wage growth, as the inflation rate could be as high as 3 per cent.

A federation survey found 43 per cent of companies raised pay by an average of 3.14 per cent in January and February.

The Census and Statistics Department says the average nominal wage rate rose by 2.6 per cent in June compared with a year ago. Discounting inflation, real wages rose by 1.8 per cent.

The wage data covered the manufacturing, trade and hospitality, transport, and financial and personal services industries. It excluded managerial and professional staff.

The personal services sector recorded the biggest rise in average wages - up 5.4 per cent - while transport services saw the smallest growth - just 0.8 per cent.