ANNUAL BONUS INCENTIVES FOR FACTORY WORKERS

Mr Yeo Toon Chia asked the Minister for Finance if he will request factory owners to set aside a certain percentage from the factory's annual profits so that the amount set aside can be given to workers as annual bonus incentives.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, section 46 (1) of the Employment Act, 1968, (No. 17 of 1968) already provides that the contract of service or collective agreement between an employer and his employees may contain a provision for the payment of an amount not exceeding the equivalent of one month's wages of an employee as bonus or ex gratia payment. In addition, section 46 (2) of the Act states that nothing in subsection (1) of section 46 shall be construed as preventing an employer at his discretion from paying as bonus or ex gratia payment an amount that exceeds the equivalent of one month's wages as an incentive to his employees to increase their productivity or as a reward for their services. Bonus up to one month's salary is now therefore a negotiable item between employer and employee. And it is not necessary to request factory owners to set aside a certain percentage from the factory's annual profits to be given as an annual bonus incentive. In fact, the wise factory owner will also usually make an allowance for incentive or reward bonus in his calculations without being told to do so, although some timely urging on the part of the unions always helps.

I have already stated in the debate on the Government financial policy that when the effects of the accelerated military run-down have been clearly overcome, we shall have to consider how best workers should be enabled to share in any increased profits where they result from increased productivity or from a general expansion of the economy. One of the ways would be to make bonus payments negotiable beyond the present limitation of one month's salary. This has been legislated for in certain countries and is the practice in others. In our own situation, however, this could be against our main policy of attracting middle technology industries. We want more capital intensive high skills and high value added industries in Singapore. They come mainly from the Western industrial countries where the payment of bonus is not a practice. West European and American companies prefer to pay higher wages rather than bonuses. They want concealed benefits reduced to a minimum so that they know where they stand from year to year. This philosophy treats profits as the result of efficient management, and losses as the result of the ineffective use of expensive labour, since all employers pay their workers the same rate for the job. We shall make a decision after carefully weighing the pros and cons. Our decision must advance our purpose, namely, to raise the living standard of Singapore workers through higher skills and higher productivity.

Mr Ng Kah Ting (Punggol): Sir, will the Minister for Finance consider requesting established factories which have over the years made good profits to make ex gratia payments to their employees?

Mr Hon Sui Sen: I have already stated that there is in the law a provision for unions to take this up. Although bonus is not negotiable beyond one month, I said that some timely urging on the part of the unions always helps in making payments beyond what may have been negotiated.

Mr Ng Kah Ting: Sir, it may be true that such practice may be going on. But I am told that many employers make use of the Employment Act as a lever in their negotiations with unions on the question of bonus.

Mr Hon Sui Sen: Mr Speaker, Sir, I have nothing to add to what I have said. The position is that the employers will negotiate on bonus payments up to one month's wages in their collective agreements. Beyond one month, this is at present discretionary.

Dr Augustine H. H. Tan (Whampoa): Mr Speaker, Sir, does the Minister for Finance not think that foreign investors should do in Singapore what the Singaporeans do in respect of bonus payments? In other words, should they not try to adopt a simple practice like that?

Mr Hon Sui Sen: Sir, that is a philosophy which we cannot adopt in all cases. For example, Singaporeans have not carried out industrialisation previously, and if you apply that very simple philosophy to what Singaporeans have been doing in the past, then there would be no industrialisation. In the same way I do not think that the fact that some companies pay bonuses means that Western industrialised companies should do the same.

Dr Augustine Tan: Sir, does the Minister for Finance realise that he has thrown a red herring into the whole issue?

Mr Ng Kah Ting: Mr Speaker, Sir, the Minister for Finance has mentioned just now the word "discretion" used by employers in respect of bonus payments. Is he or is he not aware that a good number of commercial firms make good profits and the Employment Act prevents the unions from asking for better bonus payments?

Mr Hon Sui Sen: Sir, I am aware of the provisions of the law and I am aware that some companies make profits and some companies quote the provisions of the Employment Act. I have already said that this is a matter which is being very carefully considered. There are pros and cons and a decision will be made after a study of all the factors. Whether we should legislate for bonus payments, or whether we should encourage companies so that they consolidate bonus payments into wages and then stimulate higher productivity, is a very controversial matter and requires very careful consideration.

Mr Ho See Beng (Bras Basah): Sir, is the Minister aware that some of the American firms pay bonus?

Mr Hon Sui Sen: Yes, I am aware.