Economists said the Council, due to meet later this month, could recommend cuts of at least six percent in line with the guidelines issued during the 1997-98 Asian crisis.

But some analysts say that in order to give firms the flexibility to offer competitive salaries in areas where there is a skills shortage, it is possible the council may prefer to call for wage restraint.

"If we are to restore labour competitiveness to levels of 1994, it would mean that there is a need to reduce total wage costs by around six percent," said Tan Kang Yong, economist with UOB Kay Hian, noting 1994 was the benchmark for wage cuts recommended in 1998.

The Wages Council's recommendations, when accepted by the government, serve as the basis for negotiations between employers and unions in the city state.

As the body comprises representatives of employers, unions and the government, its suggestions are normally accepted quickly and implemented widely.

The Council's recommendations generally vary according to a company's performance so that profitable and unprofitable firms do not have to implement the same policy.

Tan said under Singapore's wage system, three percent of total wage cuts could come from NWC's proposals, while the other three percent could come from a reduction in employers' contributions to the nation's pension scheme.

WAGE CUTS RARE

The anticipated wage cut recommendations will only be the second time in the council's 29-year history -- and the second time in three years -- that it has had to ask for such measures.

During the Asian crisis in 1998, the council proposed that wages be cut five to eight per cent.

It also recommended halving employers' contributions to the mandatory Central Provident Fund (CPF) scheme to 10 percent, which has not been fully restored. The rate now stands at 16 percent.

The NWC, which normally meets once a year, is reconvening as its latest guidelines in May were made before the economy slumped into recession. At that time it proposed that wage increases in July 2001 to June 2002 be given based on company performance and should be lower than that of the previous year.

The economy has since been hit by the slowdown in the United States and the September 11 attacks. The government has responded with two off-budget stimulus packages worth a total of S$13.5 billion (US$7.4 billion).

Government leaders have said that a CPF cut, while a last resort, cannot be ruled out.

"We cannot guarantee that we will not need to cut CPF contribution rates at some point in this crisis," Deputy Prime Minister Lee Hsien Loong told parliament.

Lee added over the weekend that he expects the council to now recommend "some very severe restraints as the minimum."

RESTRAINT RATHER THAN REDUCTION?

Restraint could mean no increase in salaries and a possible cancellation of the variable bonus payment at the year-end.

But adjustments to the variable component might not be sufficient to help companies weather the crisis.

Rajeev Malik, economist with JP Morgan Chase, said the most relevant recommendation would be a 10 to 15 percent cut in wages.

Recession-hit Singapore's export-driven economy is headed for a three percent contraction this year after 9.9 percent growth in 2000, reflecting harder times for businesses and workers.

A poll by Remuneration Data Specialists (RDS) late in October showed 28 percent of 174 Singapore companies surveyed saying they planned to freeze wages in 2002 in anticipation of worsening economic conditions.

This was in line with the government's call that companies should lay off only after other measures had been considered, such as shorter work weeks and salary freezes and cuts.

"The NWC will probably give a set of qualitative guidelines based on a company's performance...basically they don't want wages to go up," said Peter Lee, RDS' managing consultant.

"They cannot tell companies to cut wages and not raise wages for skills that are in demand."