Local firms unable to adjust wages as inflation bites

With inflation continuing to be a growing problem for the economy, only a few companies have adjusted wages as they struggle to stay alive amid a difficult environment.

A survey by leading global consulting firm Watson Wyatt Worldwide showed that around 17 percent of the total 102 respondent Philippine companies have hiked workers’ salaries given rising prices of oil and basic commodities, especially rice. These companies adjusted employees’ wages by an average of 2.57 percent.

“While inflation is a factor in determining wages, it is not the only item companies consider.  Other factors considered are supply and demand for needed talent, individual performance of employees and affordability,” Watson Wyatt said.

Of the 102 corporations that reviewed their benefit policies for the past year, only 10 to 15 percent made adjustments on rice, transportation, gasoline allowances and subsidies in response to the second quarter surge in prices.

Patrick V. Marquina, data services manager of Watson Wyatt, said most firms surveyed are planning to grant salary increases next year, averaging 9.7 percent.

Marquina pointed out while companies have acknowledged the economic pressures bearing down on their employees, they are constrained to effect any salary hike as profits are squeezed by higher commodity prices and a slowing global economy.

“They understand that workers have been hit hard by inflation but at the same time they must also manage their operating costs since these have also been seriously affected by rising prices,” Marquina disclosed.

The survey covered five major industries – hi-tech, consumer and manufacturing, pharmaceutical and animal health, banking and financial services and business process outsourcing and call centers.

Another survey conducted by Watson Wyatt Worldwide showed that Asia Pacific employers are better prepared to handle an economic downturn compared to their counterparts in the United States. The poll said 84 percent of employers in Asia Pacific have contingency plans, while in the US only 67 percent have prepared one.

The survey said 46 percent of Asian employers plan to slow the rate of salary increases, which ranked third in the contingency planning activities of the employers.

Companies with contingency plans have a better chance of weathering storms and recovering when the national or global economy improves, said Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. 

Rising inflation raises concern that households will curtail spending on non-essentials as they fork over more for rising food and energy prices.