By Chuang Peck Ming

WITH the economy turning around, companies plan to up pay to retain restless staff - and pay back the 'sweat debt' they incurred in the past year of sacrifices by employees.

A poll of 265 companies taken here last month by global management consultancy Hay Group shows that while companies are cautiously upbeat about prospects for next year, they are willing to invest to keep high performers.

The poll shows the median salary is likely to rise 2.3 per cent this year, up from Hay's projection of 1.5 per cent in March.

For the coming year, the pay increase is tipped to be 3 per cent - higher than the 2.6 per cent forecast by consultancy firm Hewitt Associates and 2.8 per cent by HR Business Solutions.

Variable bonuses, excluding the annual wage supplement, are expected to be 1.8 months for this year and 1.5 months for 2010.

'As bonuses are usually calculated based on a formula of individual and company performance, companies are choosing to be conservative when forecasting business targets next year,' Hay Group says in its report.

The results of the Hay's poll, released yesterday, come on the heels of recent reports by the private sector and government that jobs - after two quarters of declines - are coming back to the market as the economy recovers.

According to human resource consultancy Hudson two weeks ago, a sharp pick-up in hiring in the current quarter has pushed the shortage of local talent issue to the fore again.

The Ministry of Manpower's preliminary finding released last Friday - that jobs churned out in the third quarter more than reversed the losses in the previous two quarters - has put the rising restlessness of workers in the spotlight.

'Many Singaporeans who have wanted to look for new employment opportunities over the past year have opted for job security and held back, waiting for the economy to show signs of improvement before they make their move,' says Karin Clarke, regional director of recruitment firm Randstad.

'But 12 months is a long time to stay in a role where you may be unsatisfied. Combine this with positive indicators pointing towards recovery and I would expect to see a change in worker behaviour as employees decide they can't wait any longer to change jobs and seek new career development options.'

A study of the impact of the recession on Singapore workers in the past year by Hay Group Insight found that 29 per cent of employees feel frustrated, 35 per cent feel detached and 20 per cent feel ineffective.

Only 16 per cent of employees are feeling effective.

Stephen Choo, regional director of Hay Group Insight, says that employees here feel they have had to stretch themselves to the limit to help companies in the downturn.

'With only 16 per cent of employees feeling effective, companies are not realising the potential performance of their work force,' he says.

'These figures also indicate that companies may soon face a talent exodus as soon as the economy strengthens, if nothing is done to reward and recognise the 'sweat debt' that employers have accumulated over the past year.'

Hay Group's country manager for reward information services, Christian Vo Phuoc, says that companies anticipate a rise in job hopping.

'As signs of recovery appear in the economy, companies are bracing themselves for staff attrition,' he says. 'By boosting their salary increase to 3 per cent and thus taking an immediate hit on their 2010 bottom line, companies are signalling their willingness to invest to keep their staff.'

For a start, many companies are un-freezing pay hikes and reversing pay cuts imposed earlier to contain costs and save jobs.

The Hay Group poll shows the number of companies with a pay freeze or cut in place dropped from 58 per cent in March to just 18 per cent last month.

This article was first published in The Business Times.