More than half of Hong Kong's small and medium-sized enterprises (SMEs) will not make salary adjustments this year, a recent survey shows. The survey, conducted by the Hong Kong Productivity Council (HKPC), found 55.5 per cent of SMEs would not adjust their employees' salaries. About a quarter of the companies would hand out pay increases ranging from 3-5 per cent, while 2.2 per cent said they would consider pay cuts. The latest of the business operating environment index for SMEs was conducted in December. A total of 1,024 firms were interviewed - 575 from the service sector and the rest from the manufacturing sector. HKPC general manager Vincent Li said the findings on salary expectations showed that firms were adopting a prudent approach. 'The fact that more than half of the companies interviewed did not expect to make pay adjustments prove they are cautious about containing costs,' he said. The survey also showed that 57 per cent of companies saw Mandatory Provident Fund (MPF) contributions as an important factor when considering changes in their employees' pay. Mr Li said it was difficult to estimate how MPF contributions had affected salary movements. 'It is hard to make an estimate because some companies have been organising occupational retirement schemes before MPF contributions became mandatory,' he said. Despite modest projections for salary increases, companies were fairly optimistic about the business environment in Hong Kong, the survey showed. In the survey, 51.9 per cent of the firms expected the business environment in the next three months to improve, which was a negligible decrease from the September figure of 51.94 per cent. About 55 per cent believed they would control costs more effectively, up 1.37 per cent from the September figure. However, 54.32 per cent of companies expressed concerns about fewer market opportunities, up from 52.06 per cent in September. Mr Li said this reflected a wait-and-see approach among SMEs, as the United States economy was expected to slow this year. While 47 per cent of respondents expected an increase in business volume this year, 43.5 per cent believed sales would remain the same, the survey found. According to the Trade and Industry Department, SMEs refer to manufacturing companies with fewer than 100 employees, and non-manufacturing firms with fewer than 50 employees. As of last September, there were 300,000 SMEs in Hong Kong, which accounted for 98 per cent of total enterprises.