Bonuses likely to be cut in half but observers tip small pay rises

Salaries might rise slightly on average this year to match inflation but bonuses are likely to be slashed by at least a half as the financial crunch takes its toll on corporate earnings, human resources and recruitment firms say.

With all but a handful of companies expected to report poor full-year earnings results over the coming months, businesses are looking at ways to control costs.

Last month, staff at real estate giant Henderson Land Development were told they would receive salary rises of between 1 per cent and 2 per cent as well as bonuses. Swire Group said it would raise staff pay by 2 per cent this year. Cathay Pacific and affiliate Dragonair cut staff bonuses by a half but announced average pay rises of 2.3 per cent.

Matthew Bennett, director of recruitment firm Robert Walters (Hong Kong), said that pay, on average, would probably rise by 2.5 to 3 per cent, although many companies would freeze salaries. Bonuses for top performers were down from a year ago by about 50 to 75 per cent on average, he said. 'Some of the budget for bonuses may have been left over from the 2008 pool and will be paid in 2009. But bonuses will still be worse year on year.'

Nigel Cumberland, chief executive of STG Group, a regional human resources consulting company, warned that bonuses would suffer as companies were likely to have missed their sales targets in the third and fourth quarters of last year.

Sources familiar with the real estate sector said bonuses at five major property developers would range between two and four months' salary, down from three to six months. Four of the five companies planned to increase salaries by between 3 and 5 per cent while one would freeze salaries, they said.