Prevalence of Practice to Reset Workers' Wages upon Change in Service Buyer Contracts

Mr Desmond Choo asked the Minister for Manpower what is the prevalence of a practice of "wage resetting" to base salaries amongst resident workers where workers’ wages are reduced when a company changes its service buyer contract, especially in the outsourcing sectors.

Dr Tan See Leng: When a service buyer changes its vendor, the incoming vendor may rehire workers from the incumbent or hire new workers. Firms bid for contracts guided by what is sustainable for their businesses and regulatory requirements. We should not intervene in this market-driven process, as long as the employer complies with Progressive Wage Model (PWM) salary requirements and employment laws.

The Progressive Wage framework has served our lower-wage workers well in the past decade. PWM, the Local Qualifying Salary and the Progressive Wage Mark accreditation scheme collectively benefit up to nine in 10 full-time lower-wage workers. Real incomes of lower-wage workers at the 20th percentile have risen cumulatively by 30% from 2013 to 2023, faster than the median worker at 22%.

Thanks to strong the tripartite partnership among employers, unions and the Government, the wage requirements for PWMs in outsourced sectors, such as cleaning, security and landscape, will increase at a rate of up to 10.8% per year from 2022 to 2028. These wage increases for outsourced sectors are announced in six-year schedules, so firms can account for these future PWM wage increases when bidding for multi-year contracts.

With our tight labour market, employers who do not pay and treat their lower-wage workers well will have difficulties attracting and retaining workers, especially since PWMs are lifting the wages of jobs in key sectors. Workers should also upskill themselves, either to take on higher-rung jobs within the same industry or to have more career options across adjacent sectors.

If any worker feels unfairly treated, they may approach the National Trades Union Congress or the Ministry of Manpower for assistance.