SINGAPORE: Employees of the banking and finance sector will be laughing their way to the bank, so to speak, with the highest projected salary increases in the coming year.

Even as Mercer Human Resources Consulting's latest survey on Singapore salaries estimates that the banking and finance sector will see the highest wage rises at 5.1 per cent, industry sources such as wealth managers and investment bankers told Today they are expecting "easily five to 10 per cent" increases in 2007.

"And don't forget the bonuses - wealth managers can expect three to six months' bonus; investment bankers, even more," said an industry source.

According to the Mercer survey, the banking and finance sector "pays a relatively high (average) variable bonus as compared to other industry sectors at 26.8 per cent of annual base salary".

The industry average variable bonus is projected to be 18.2 per cent of annual base salary in 2007. This is higher than the 17.4 per cent paid out this year across the surveyed sectors.

The survey covered more than 500 companies in Singapore across 12 industries, and projects an average wage increase of 4.2 per cent for next year - slightly higher than last year's 4.1 per cent.

The property, life insurance and electronics manufacturing sectors are expected to have the lowest salary increase.

Mr Ajit Nambiar, who oversaw the Mercer survey, said no particular reason was noted for the slower rise in these sectors, though it may reflect the human resource policies of property companies that have chosen to position themselves in a certain manner to remain cost-competitive.

The manpower crunch in the finance and banking sector is seen to be a main driver of the salary spike. According to human resource company Adecco Singapore, the country faces skills shortages especially in the banking and finance, IT and engineering industries.

Ms Jenny Wong, UOB executive vice-president of human resources, said: "As the banking sector is experiencing fast growth due to business expansion and regionalisation, the demand for talent to meet such needs will definitely bring salaries up. Banks in general are expected to pay at least 4.5 per cent for salary increases next year."

Last year, Adecco's clients were offered salaries that were three to five per cent above their last-drawn pay. In recent months, this has risen to 15 to 20 per cent above the last-drawn salaries, and Adecco notes that salaries in the banking industry are increasing by as much as 25 to 30 per cent.

Wages for fresh graduates in some disciplines are also on the uptrend, said Mercer. Law graduates saw a starting pay increase of 6.2 per cent, and graduates in business administration as well as arts and social sciences enjoyed a starting salary that was 4.9 per cent higher than in the previous year.

Mr Nambiar expects next year's key focus for companies to be that of attraction and retention strategies - noting that the 6.5 per cent turnover rate for senior management and professional levels in the first six months of this year exceeded the whole of last year's turnover rate.

In addition to competitive compensation and benefits, UOB plans to retain its talent pool via learning and development opportunities. There will also be more opportunities for employees to take on regional postings as UOB expands, said Ms Wong.