Employers' group warns firms to keep an eye on fixed costs next year in the face of a slower economy Salary increases should generally be no more than 2.5 per cent next year and granted only where necessary, according to the Employers' Federation of Hong Kong. The figure is higher than the federation's 2 per cent average suggested for this year. But the federation, which has about 600 members, warned of dimmer economic prospects for next year and recommended its members exercise caution and flexibility so as not to increase fixed costs like salaries. Economists generally expect world growth, especially in the US, to moderate later this year and next year and have an adverse impact on the volume of goods imported from major trading partners like Hong Kong and the mainland. 'We are urging our members to collect as much market data as possible and make selective pay increases only where necessary,' federation chairman James Ng Chi-ming said. 'Of course we want all employees to share in the benefits of success and higher profits. The way to do this is through cash bonuses, which most employees prefer.' But Ha Chi-hung, chairman of the Hong Kong Telecommunications Industry Employees General Union, said 2.5 per cent should be the minimum amount salaries increased next year, and more profitable companies should share the benefits with their staff. 'Our hope is that salary increases at least follow inflation,' Mr Ha said. 'The 2.5 per cent recommendation is already quite conservative.' According to Census and Statistics Department data, the average nominal wage rate rose by 1.1 per cent in June compared with a year ago. Stripping out inflation, which rose to 2.5 per cent in August, real wages actually fell by 0.7 per cent. The wage data covered the manufacturing, trade and hospitality, transport, and financial and personal services industries but excluded managerial and professional staff. The financial services sector recorded the biggest rise in average wages, up 2 per cent, while transport services declined 1.7 per cent. Last month a global survey of 60 countries by British consulting firm Mercer Human Resource Consulting found salaries were expected to increase an average of 5.9 per cent next year, 1.9 percentage points above inflation. According to the survey, Hong Kong salaries are forecast to rise 3.6 per cent, with inflation projected to be about 2.1 per cent, meaning a real increase of 1.5 per cent. Singapore is expected to see wages jump 4 per cent before inflation of 1.9 per cent. The survey covers operations personnel, clerical and technical staff, managers and senior executives. Lai Kam-tong, president of the Hong Kong Institute of Human Resource Management, however, said salary increases could vary widely. The institution will compile its pay-rise forecast early next month.