About 65 percent of small- and medium-sized enterprises (SMEs) did not increase salaries for their employees in the fourth quarter of 2012, as they chose to survive tough times through controlling labor costs, a quarterly survey on 1,000 SMEs in China showed Tuesday.
Only about 35 percent of the surveyed firms said they raised employees' salaries in the past quarter, compared to 70 percent in the first quarter of 2012, the Standard Chartered Bank said in a report sent to the Global Times Tuesday.
The survey was conducted in the fourth quarter of 2012, covering 1,000 SMEs in 20 cities, mainly in the manufacturing and logistics sectors.
Fewer employers in central and western China raised salaries for their employees, compared to those in eastern and southern regions, where labor costs have kept rising, the report said.
The decrease in salary growth signals that SMEs cannot afford rising labor costs in the short term. If the sluggish global economy continues to weigh on China's exports, the country's business owners are less likely to raise salaries for employees, the report said.
"The moderate inflation in 2012 also relieved the pressure for salary growth," Feng Lijuan, chief consultant at 51job.com, a NASDAQ-listed human resources service provider, told the Global Times Tuesday.
Surveys from several human resources consultancies have shown the same tendency: employees' salary growth in China will slow down in 2013, along with the rest of the economy.
China's average salary level is expected to increase by 8.6 percent in 2013, lower than 9.8 percent in 2012, according to figures from 51job.com. Recruitment company Career International estimates the country's average salary level will rise by 9.43 percent this year, the lowest level since 2010.
"Business owners are more concerned about a salary hike in 2013, as most of them have seen a worsening business performance, and feel uncertainty about whether the Chinese economy will get better this year," Feng said.
But entrepreneurs still have to be prepared for the rising labor costs in 2013, or they may face a labor shortage or a talent drain, Feng noted.
"China's inflation is expected to pick up this year, pushing up living costs and thus pressuring employers to raise salaries to retain employees," Feng said.
"But the growth in salary always fails to meet employees' expectations as living costs rise faster," she added.
Some private entrepreneurs are taking a wait-and-see attitude on how much to raise salaries.
"Our company's salary growth rate for 2013 will depend on the demand and supply in the labor market after this year's Spring Festival holidays," Lou Zhongping, chairman of Soton Daily Necessities Co, a manufacturer of drinking straws in Yiwu, East China's Zhejiang Province, told the Global Times Tuesday.
Last year, Lou raised salaries by 12 percent for the factory's over 500 workers, which amounted to more than 2 million yuan ($321,200) and equaled one-third of his annual profit.
He expects salary growth will still stay above 10 percent in his company this year.
Human resources experts and business owners believe that salary growth is a long-term trend in China, as the country aims to double per capita income from 2010 for both urban and rural residents by 2020.
"To absorb rising labor costs, we will continue to make efforts to raise production efficiency and increase profit margins through product innovation," Lou said.
Feng said that beside employers' efforts, reform of income distribution is urgently needed to address income disparity in China.
Media reports said a long-awaited plan to reform the country's income distribution system is widely expected to be released later this year.
"Companies will also benefit from moderate salary growth, as Chinese residents with higher disposable incomes are likely to spend more in the future," Feng said.