SKILLS DEVELOPMENT LEVY (AMENDMENT) BILL

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SKILLS DEVELOPMENT LEVY (AMENDMENT) BILL: Order for Second Reading read.

5.51 pm

The Acting Minister for Manpower (Mr Gan Kim Yong): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, we announced during the Budget statement this year our intention to restructure the Skills Development Levy (SDL) as part of our strategy to develop a first-class Continuing Education and Training (CET) system in Singapore so that we will be better positioned for the future. This will broaden the base of SDL and strengthen the support for our workers to upgrade their skills through their working lives and to take advantage

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of new job opportunities. This Bill amends the Skills Development Levy (SDL) Act to achieve this.

Proposed change to SDL structure

At present, the SDL is levied on employers for workers earning up to $2,000 a month, at a levy rate of 1% of gross remuneration or $2, whichever is higher. We announced in February this year that effective 1st October 2008, the SDL will be applied to all employees instead. With the broader base, we will reduce the levy rate from 1% to 0.25 % on the first $4,500 of every employee's gross monthly remuneration or $2, whichever is higher.

The SDL was introduced in 1979 to encourage employers to upgrade their low-skilled workers. Levy collections were channelled into the Skills Development Fund (SDF), from which employers could apply for reimbursement of the cost of training. Employers can claim up to 80% of the course fees as well as a portion of the employee's salary when he goes for training. In the case of employees aged 40 and above, holding A-level qualifications or lower, the course fee subsidy is 90%.

The levy rate has been progressively lowered from 4% in 1979 to 1% presently, while the monthly salary ceiling has been raised from $750 in 1979 to $2,000 presently, in tandem with the rising wages and increasing demand for training reimbursements.

Building a CET Scheme for a globally competitive workforce

Sir, the need to invest in our low-skilled workers and upgrade their skills has not changed. In fact, it has become even more important as industries restructure and move up the value chain. At the same time, with economic restructuring, faster skills obsolescence

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and shorter job tenures, every worker, regardless of educational or skills level, must continually upgrade and update his skills in order to stay relevant and do his work better. Some may need to acquire new skills to change careers and seize emerging opportunities from the new growth industries. Hence, going forward, our CET system will have to cater to workers of all levels. In the past few years, we have already begun to broaden the scope of our CET system to cover not just the low-skilled workers but also those with higher qualifications.

The Workforce Skills Qualifications (WSQ) framework, a key component of our CET system, offers qualifications from the certificate level all the way up to the diploma level, and even graduate diplomas for certain industries. For example, under the Landscape WSQ, there are certificates in landscape operation for technicians and supervisors as well as diplomas in landscape management for managers. The Singapore Workforce Development Agency (WDA) has also recently introduced scholarships for adult workers to obtain a Masters in Landscape Architecture at the NUS, thus providing opportunities for aspiring landscape architecture professionals who wish to upgrade themselves further. This is what we mean by, in Chinese, "学无止境" ( xue wu zhi jing ).

Our CET system is also being progressively broadened to cover more industries. So far, WSQ courses are being offered in industries such as retail, tourism, business administration, interactive media, banking and finance, and supply chain management. Employers and workers can look forward to even more CET offerings in growth areas such as aerospace, precision engineering, process manufacturing, logistics, allied healthcare, and community and social services.

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Besides addressing the current needs of the economy, we need to also prepare for the future workforce. In 2020, we estimate that nearly 60% of our resident workforce will have at least a diploma qualification, compared to 36% today, and 22% just 10 years ago. Many entrants into the workforce will have degrees. This is already showing up in our statistics. In FY2007, 32% of the training places, supported by SDF, were for employees having at least a diploma qualification, up from just 20% in FY2000. This proportion will grow as more of our workforce become better educated and more highly skilled. It is, therefore, timely to restructure the SDL and ensure that employers contribute to the SDF for all their employees, so that we can have broad-based support for our CET framework and provide training opportunities for all workers.

The CET Masterplan - More opportunities for all

As mentioned in this year's Budget debate, we are on track to building a first-class CET system under the CET Masterplan. Our CET system will be a key institution that sharpens the skills of our workers, undergirds our competitiveness and creates new opportunities for our people to have better careers and better lives. It will cater to all workers from the rank-and-file to professional managers, executives and technicians (or PMETs). The number of training places will be quadrupled from about 60,000 currently to 240,000 in the next few years.

To support the CET Masterplan, the Government have topped up the Lifelong Learning Endowment Fund (LLEF) by another $800 million this year, bringing the LLEF to $3 billion currently. We will continue to invest more, by topping up the LLEF eventually to reach $5 billion. These additional resources for the CET demonstrate Government’s firm commitment to invest in the future of our

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workers, our companies and our economy. However, as the Government devotes more resources to CET, it is important that employers also play their part in supporting CET. The SDL institutionalises employers’ commitment to the CET.

Impact of the change in SDL structure and benefits to employers and workers

Sir, the restructuring of the SDL is to position our workforce for the future. These changes will be broadly revenue-neutral. That is why with the restructuring of SDL to cover all workers, we have also lowered the levy rate from 1% to 0.25%. This is a significant cut which we have calibrated so that the total SDL collection will remain approximately the same as under the previous formula.

I urge employers to tap on the SDF to send their workers for CET, so that the workers can improve their skills and productivity, thereby enhancing their employability. This will eventually translate into better overall business performance of the companies.

Sir, the SDL is an important framework that institutionalises the role of employers in CET and embodies the principle of tripartism with the Government, employers and workers each playing their part in the CET. With the changes, the SDL will be repositioned to better support the CET system that we are building - one which will help all workers, regardless of age, skill or education level, to upgrade and seize new opportunities as they progress in their careers.

Sir, I beg to move.

Question proposed.

5.59 pm

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Deputy Speaker, Sir, the

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amendment to the Skills Development Levy Bill is timely as it complements the various initiatives put in place to expand adult training and education under our 10-year National Masterplan. I believe it will further strengthen the message of how important it is for our workforce to be continually trained, skilled and re-skilled to meet the changes and demands of a continually changing economic landscape.

In terms of dollars and cents, the amendment will particularly benefit small and medium-sized companies while bigger companies, especially those with higher qualified employees with salaries higher than $2,000, will have to shoulder higher levies monthly. However, the amount will not be drastically high as the levy rate has been reduced from 1% to 0.25%, as the Minister has clarified, and is subjected to the first $4,500 of an employee's salary. This signals a shift towards recognising the need for training to cover all levels of working personnel and not just the rank and file. This is critical as our labour productivity rate declined by 0.9% in 2007. This is unhealthy and needs to be arrested as quickly as possible to prevent it from sliding further in the coming years.

So far, a lot of emphasis has been given to lower-income and lower-skilled workers to go for training and skills upgrading programmes. I agree with the Minister that this should continue and, in fact, should continually be emphasised. However, the increasing shift of the economy towards higher-end and value creation activities has also made it necessary for higher paid skilled and educated workers to attend training and retraining programmes. In line with this, I would like to know what plans the Ministry of Manpower has in changing the mindsets of professionals that being better educated and having higher skills do not preclude them from having to regularly upgrade their skills as they too may face the prospect of becoming

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irrelevant in the face of a fast changing economy.

While skills training and upgrading clearly contribute to the well-being of both workers and employers, it often also translates to employers, especially the smaller ones, having to make do with less manpower for the period their employees undergo training. It may also lead to higher turnover rates as losing their employee to another competitor in the industry does happen after the employee undergoes training and becomes more qualified. I would like to ask the Minister if specific mechanisms could be put in place to help employers, especially smaller ones, retain their trained staff after the investment they put in to develop their employees. Having such mechanisms will certainly go a long way in uplifting the productivity of the companies and, correspondingly, the nation.

Widening the base of workers needing to go for training may also mean that higher skilled and salaried workers may have even higher expectations than the quality of training programmes. It is imperative that the Ministry and the WDA closely monitor the quality of training programmes conducted by training institutions. Naming and honouring good training providers and blacklisting bad ones could be one way.

Sir, I join the call for the setting up of Lifelong Learning Accounts which are portable in Singapore. These accounts, such as those in the United States, encourage employer-employee contributions and can be used for education and training throughout one's lifetime. The Government then steps in by giving tax incentives to both working individuals and employees who make their contributions to the fund. However, we must not forget that as we broaden the base to encourage higher skilled workers to go for training, it

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is most critical for training to reach those who need it most. It is ironic that these categories of workers, which include those who are lower skilled, elderly and have low incomes or living on a hand-to-mouth existence, are often the ones who find it most challenging to go for training, as doing so would mean a loss or reduction of their income. Many of these people work but continue to struggle paying for their families' basic necessities.

I would like to ask if Lifelong Learning Accounts are set up, whether special consideration could be given to this group to make up for their loss of income when they seek skills upgrading opportunities. Such incentives can be in the form of credits being made into their CPF accounts or Government-subsidised make-up pay while they go for training. Other considerations can be by way of offsetting their utilities bill or subsidising the cost of other basic necessities.

With that, Sir, I support the motion.

6.05 pm

Dr Fatimah Lateef (Marine Parade): Mr Deputy Speaker, I support the Skills Development Levy (Amendment) Bill.

I do, however, have four issues to raise.

(1) How do we ensure that all employers with eligible employees or workers comply with the Act? Will there be certain guidelines that they can follow through?

(2) It will be beneficial and helpful to have the employers list the development courses which the employees would qualify for. We heard from the Minister that there are various forms of funding available and including even Masters courses which are being funded. Of late, I have had many emails from individuals asking for clarification if they are

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applicable and eligible to study certain courses and to take up certain skills as well. Certainly, this would vary according to the jobs and nature of work. But, perhaps, there may be a category which covers general courses applicable to all general employees. So I think there needs to be a bit more clarification.

(3) Companies should consider some form of awareness creation programme or education of their employees to enhance their understanding of the need and advantages of skills development, especially with our globalised economy. This would represent a more proactive approach by the companies and employers.

(4) What would happen to the skills development levy for an employee when he leaves a company or have his services terminated? Will there be a possibility for the accumulated funds or amount to be carried forward with him as he moves to a new company, or would this have to be considered on a case-by-case basis and, if so, what are the criteria to be considered?

This Amendment Bill is in line with the upgrading of our workers' skills and capabilities. It would take the triple partnership of the Government, employers and employees to make this work. We heard the CET Masterplan but it would not be good if we do not create the maximum positive impact it was created and set up to do.

6.07 pm

Mr Gan Kim Yong: Mr Deputy Speaker, Sir, let me thank Dr Fatimah Lateef and Dr Ahmad Magad for their views as well as their support for the Bill. I would like to take this opportunity to clarify some of the issues that they have raised.

Firstly, Dr Fatimah asked if funding from SDF could be used by individual employees when they leave their

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company and Dr Magad also suggested whether we could set up an individualised lifelong learning account. Today, let me explain that all Skills Development Levies that were collected go into a common pool, that is, the Skills Development Fund. The SDF then in turn supports both employer-based training as well as employee-initiated training programmes. There is really no need to set up an individualised learning accounts since the workers are already able to tap on the SDF fund for their training. This will also benefit the low-income workers who may have problems accumulating sufficient savings in their own individualised account.

I would also like to assure Dr Ahmad Magad that WDA will continue to monitor the quality of the various training institutions as well as the CET programmes to ensure that we provide and offer quality programmes for our workers. However, I agree with Dr Fatimah and Dr Magad to some extent that we can certainly do more to reach out to workers as well as employers to create greater awareness of the CET opportunities that are available for their workers as well as for individuals, including opportunities that are available for professionals, PMETs. I think WDA will be launching a national outreach programme some time later this year to raise the awareness, including the PMETs. Companies and individuals who would like to find out more about CET opportunities can also approach WDA and we would explain what is available for them. They can also approach the Career Centres at the various CDCs and of course this information is also available on WDA's website. They can also approach our tripartite partners, SNEF and NTUC, for information if they need to.

Dr Magad also suggested we put in place specific mechanisms to help employers retain their staff when they go for training. I think Dr Magad will agree

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with me that employers are generally very creative people. So instead of imposing rigidity into the employment landscape, it is probably better to leave it to the employers to do what is best for them.

I want to also assure Dr Fatimah that certainly, we intend to enforce the requirements of this Act and errant employers will be taken to task when it comes.

Sir, in summary, I think the SDL and the SDF will institutionalise the continuing role of our employers in the CET framework, and the proposed amendments to the SDL Act are timely in view of the changes in the economy and the workforce.

Assoc. Prof. Kalyani K Mehta (Nominated Member): Sir, I would like to raise a point that we do not have a quorum.

Mr Deputy Speaker:

Mr Deputy Speaker: Will the Clerk please take a count? Please ring the division bell?

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Members summoned into the Chamber as if for a division .

Mr Deputy Speaker: Order. We do have a quorum now.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Gan Kim Yong].

Bill considered in Committee; reported without amendment; read a Third time and passed.