WAGE RESTRUCTURING

WAGE RESTRUCTURING:

(Update): 17.

Ms Irene Ng Phek Hoong asked the Minister for Manpower (a) if he can give an update on the pace of wage restructuring, including the percentage of companies which have moved away from a seniority-based wage system; and (b) what percentage of companies is required to do so before the Ministry will consider restoring the CPF cut for workers above 50 years old.

18.

Mdm Ho Geok Choo asked the Minister for Manpower (a) of those companies that have moved away from a seniority-based wage system to a flexible wage system, what percentage of these companies do the small and medium-sized enterprises (SMEs) constitute and what does this percentage translate into for the SMEs as a whole; (b) what percentage of the workforce is employed by SMEs and what percentage of the workforce in the SMEs will have to be moved to the non seniority-based wage system; and (c) what programmes are in place to help SMEs adopt flexible wage systems and what time duration is the Ministry working on.

The Senior Parliamentary Secretary to the Minister for Manpower (Mr Hawazi Daipi) (for the Minister for Manpower): Sir, may I take Question Nos. 17 and 18 together?

Mr Speaker: Yes.

Mr Hawazi Daipi: Sir, Ms Irene Ng and Ms Ho Geok Choo asked for an update on the pace of wage restructuring. The Tripartite Taskforce on Wage Restructuring had made three key recommendations to make wages more flexible and performance-based:

(i) move away from seniority-based wage system and narrow the maximum-minimum salary ratio to an average of 1.5 or less;

(ii) build up the Monthly Variable Component; and

(iii) implement variable bonus linked to Key Performance Indicators.

Our data shows that as at December 2006, 83% of the private sector workforce worked for employers who had implemented at least one of the three measures.

As at December 2006, 60% of the workers worked for firms that had narrowed or were narrowing the wage ratio to 1.5 or less, an improvement from 52% in June 2004. SMEs that employ more than 25 and less than 200 workers were under-represented in this group. Although the SME workforce is about 41% of the total workforce in the private sector, SME workers who worked in firms that had narrowed or were narrowing the salary ratio comprise only 24% of the total workforce in the private sector.

A similar pattern can be seen when looking at the level of adoption by firms. 62% of workers in large firms, compared to 58% of workers in SMEs, had narrowed or were narrowing the salary ratio.

More effort is required to help SMEs understand how a flexible and performance-based wage system could be implemented. For example, the Ministry and the Singapore Chinese Chamber of Commerce and Industry, in partnership with other employers' organisations, recently organised a Mandarin Seminar on Wage Restructuring specifically for SMEs. An easy-to-read handbook was published in both English and Chinese and distributed to SMEs through various employers' organisations as a reference guide in implementing flexible wages.

Ms Irene Ng asked about the restoration of CPF cut for workers above 50 years old. Employers' CPF contributions are important in providing social security to Singaporean workers. However, this must be balanced with the impact on the overall employability of locals and the cost competitiveness of our economy. These considerations underpin our calibration of CPF rates.

These were also the reasons why in the 2003 CPF retuning exercise, the House agreed that the long-term target CPF contribution rate should be reduced from 40% to a range of between 30% and 36%, depending on economic performance and for workers not more than 50 years old, with the employer contribution varying between 10% and 16%. To improve the employability of older workers, a further reduction was made for those aged 50 to 55 which was lowered over two years to range from 24% to 30%, with the employer contribution varying between 6% and 12%. There were no changes to the employer contribution rates for workers above 55 in 2003.

In view of the buoyant economy and labour market, the employer CPF contribution rate was increased for all employees by 1.5% in July this year, except for older low wage workers above the age of 35 and earning up to $1,500.

For older low wage workers, employers' CPF was instead reduced to further enhance their employability. This reduction, however, will be more than made up for by the Workfare Income Supplement (WIS), starting in January 2008. Workers above 45 years of age, earning between $500 and $1,000 inclusive, will receive $1,200 in total WIS, which translates to about 10%-20% increase in annual income.

Ms Irene Ng Phek Hoong (Tampines): Sir, given that we have a tight labour market with wages going up quite rapidly, is it not a good idea to divert some of the wage rise into CPF savings by restoring some of the cuts for those above 50 especially? Besides helping our workers to save for their retirement, will this not also help to dampen inflation rate trends?

Can I also ask the Senior Parliamentary Secretary whether he is aware of a recent survey which found that middle aged and older workers in the past two years had found it easier to find jobs because of the stronger employment market? For instance, in September 2006, 74% of retrenched degree holders aged 50 and above found re-employment in six months, up from 64% in September 2005. Does it not show that the CPF cut for workers aged 50 and above, especially for the higher skilled, is not a key factor in keeping them employed?

Mr Speaker: Ms Ng, are you making a speech or are you asking a question?

Ms Irene Ng Phek Hoong: Does it not show that the CPF cut for workers aged 50 and above, especially for the higher skilled, is not a key factor in keeping them employed in good times?

Mr Speaker: Do you have a question, Mr Hawazi?

Mr Hawazi Daipi: Yes, Sir. I wanted to ask what was her question.

Mr Speaker: Mr Hawazi asked what is your question, Ms Ng?

Ms Irene Ng Phek Hoong: Sir, we are all for re-employment for older workers. But I am arguing that, given the surveys done, it shows that older workers find it easier to get employment. Is it quite irrelevant for us to keep harping on cutting CPF for the older workers as a tool for them to get employed, especially with schemes like the Advantage Scheme and the flexible wage system coming in?

Mr Hawazi Daipi: Sir, all the measures that have been taken by MOM together with our stakeholders - the unions and employers' organisations - are meant to help workers who are likely to have more problems of getting jobs, and these include older workers and low-educated workers. We must look at the long-term employability of these workers. We can always be encouraged by the short-term buoyancy and employment rate of all our workers, including older workers, but we must take into consideration the long-term viability of their employment. With that in mind, we decide very cautiously on the CPF rates, including the rate at which increases are made.

Mdm Ho Geok Choo (West Coast): Sir, three supplementary questions. First, what are the reasons for the rather slow progress among the SMEs moving on to the non-seniority wage based system? Second, what can the Government do to speed up this conversion? Third, why is the CPF restoration for those above 50 years of age incumbent on the company and the employee being on the non-seniority wage system?

Mr Hawazi Daipi: Sir, SMEs may be slow in subscribing to the flexible wage system, because they may not have the full information. That is why MOM, together with the Chambers of Commerce and employer organisations, is working closely to reach out to them to explain through seminars and workshops on the workings of the flexible wage system - the three components that I briefed the House earlier. More can be done, of course, to reach out to them, including detailed explanations on how they can implement the monthly variable component of the wage system.

On CPF restoration for older workers, we have many ways to help older workers, including the WIS. We should not look at just one component of the wage system. We are looking at a comprehensive way of helping through income supplementation too.