"The government agrees with the need for companies to take steps to reduce wage costs," the ministry said. "This will help to save jobs and enable more companies to survive the downturn."

The NWC on Saturday reconvened its annual meeting for an unprecedented second session to revise its recommendations in the face of a deteriorating outlook for the trade-reliant economy, particularly after the September 11 attacks on the United States.

In its 29-year history, the tripartite body, staffed by representatives from government, employers and labour unions, has only once before backed pay reductions.

During the regional financial crisis in 1998, the NWC asked workers to accept wage cuts of between 5 per cent and 8 per cent.

Singapore has fallen into its worst recession since independence from Malaysia in 1965, with the economy expected to contract by 3 per cent this year after 9.9 per cent growth last year.

The ministry said the government strongly supported a call from the NWC for management to lead by example.

It said companies "that are profitable and performing well should reward workers with appropriate wage increases", preferably in the form of a "monthly variable component" or special payments.

The revised recommendations, which are non-binding but usually are followed by employers and the unions in wage negotiations, did not give specific guidelines on the size of possible wage cuts.

Companies were advised to consider retrenchments only as a last resort and to use the period of uncertainty for training their workforce for better times.

As Singapore's economy has worsened this year, news of redundancies, pay freezes and pay reductions has mounted.

Several high-profile companies, including Singapore Airlines and DBS Bank, have already announced symbolic pay reductions for their executive staff.

Senior civil servants have faced a pay cut, while ministerial salaries are linked by a pre-set formula to the performance of the national economy.

A recent survey quoted in the Straits Times revealed that 18 per cent of Singapore-based companies had already frozen pay levels this year and 28 per cent planned to do so next year.

The NWC's first round of advice was issued last May and was intended to cover the 12 months beginning in July.

At that stage, the influential body recommended that employees accept more modest pay rises than last year or take pay freezes or salary cuts if they worked at loss-making firms.

NWC chairman Lim Pin said the main thrust of the revised guidelines was "severe wage restraint".

"And this is in order to save jobs, control wage costs to enable companies to remain viable and of course, overall, to enable the economy to cope with the recession," he said.

In the first nine months of this year, more than 17,000 workers were retrenched and this figure is expected to swell to 25,000 by the end of the year. Unemployment rose to 3.8 per cent in September from 2.6 per cent in June and is expected to reach 4 per cent this month.

The government expects another 15,000 jobs to be axed next year.

The National Trades Union Congress and the Singapore National Employers' Federation endorsed the guidelines, which cover next calendar year.

To help its citizens ride out the recession, the government has already set out a S$11.3 billion stimulus package of tax rebates, infrastructure projects and cash handouts.