EMPLOYMENT (AMENDMENT) BILL

Order for Second Reading read.

11.38 am

The Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The National Wages Council has recommended that our wage system should be reformed to make it more flexible and responsive to changing circumstances. The basic concept is that a variable payment should be introduced into our wage structure. Instead of paying out all the wage increases as a rigid increase to basic pay, part of it should be paid out as a variable payment. The variable payment can be built up with economic growth or cut back during a recession. Alternatively, companies may pay their workers an agreed share of the profits as a variable bonus. Such wage flexibility will enhance the viability of our companies and the job security of our workers.

Many employers and unions have proceeded in earnest to reform the wage systems of their respective companies. My Ministry has in the meantime reviewed, in consultation with the NTUC and the employers' organisations, the relevant provisions of the Employment Act. These provisions concern the payment of annual wage supplement (AWS), bonus and annual wage increases and are contained in sections 48, 49 and 50 of the Act.

These sections were introduced in 1972 following the recommendations of the then newly set-up NWC. The bonuses prevailing for existing companies then were converted and frozen into the AWS. The AWS was made non-negotiable and subject to a maximum of 3 months pay. New companies were allowed to pay up to one month of AWS, or what is commonly known as the 13th month payment. Unions and management could, in addition, negotiate for wage increases based on the yearly recommendations of the NWC.

Mr Speaker, Sir, the Bill seeks to repeal and re-enact sections 48, 49 and 50 of the Act so as to facilitate wage reform.

The new section 48 will allow the retention of existing wage systems including AWS at current levels until the employers and the employees or their trade unions agree to reform their wage systems. They may repackage the existing AWS if they wish. For companies which have never paid AWS before, they will be allowed to pay AWS up to one month's wages. For these companies, any payment above the one month AWS should be in the variable form such as bonuses. As in the existing Act, when companies are facing exceptionally poor business results, employers may negotiate with their unions for a lower quantum of AWS or for no AWS to be paid.

The new section 48 will also allow the introduction of a new variable payment, a basic feature of flexible wage systems. Employers and trade unions can negotiate for a bonus or other forms of variable payment based on trading results or productivity improvement or other criteria mutually agreed upon by the parties concerned. They may set their own upper limit to the variable payment if they wish as the Act will not stipulate an upper limit.

The new section 49 is a re-enactment of the existing provisions. It enables the Minister to make recommendations for wage adjustment based on the NWC guidelines. The wage adjustment can be upwards during a period of economic growth or downwards during a recession. These guidelines will form the basis for negotiation between employers and employees or their trade unions.

The new section 50 defines items used in the other sections. As in the existing Act, it also allows either the employer or the trade union to refer wage disputes to the Industrial Arbitration Court for arbitration.

Except for the provisions to allow repackaging of the AWS and the introduction of a variable payment, the new sections 48, 49 and 50 contain the same elements as in the existing Act. The amendments state them more clearly, simplify the old clauses and remove provisions that are no longer relevant.

Mr Speaker, Sir, this Bill will provide the legal basis for flexible wage systems. It will facilitate wage reform. The driving force for reform must, however, come from both employers and employees, who in their own best interests, should recognize the considerable benefits to be gained from a flexible wage system. I am glad to report that substantial progress has been made. Todate, 356 (or 38%) out of the 946 establishments monitored by my Ministry have implemented flexible wage systems in one form or another. Others are in various stages of study or negotiation.

I have on many occasions urged employers and unions to implement wage reform so that our wage system can be more responsive to changing economic situations. With these amendments to the Employment Act, I would like once again to urge employers, unions and workers to work together closely and harmoniously to bring about a flexible wage system which can see us through both good and bad times.

Sir, I beg to move.

Question proposed.

Mr Lim Boon Heng (Kebun Baru): Mr Speaker, Sir, I rise in support of the Bill.

This Bill has been discussed within the NTUC, among employers and by the GPC on Labour before it was introduced in this House. The process of consultation and discussion was confidential so the public at large did not know what views were expressed and how the original draft Bill was changed and altered. But it is a very important process. The Government has frequently adopted this approach before presenting Bills to Parliament. At least I know that where labour legislation is concerned, the Ministry of Labour normally seeks the views of the NTUC prior to raising the matter in Parliament and I assume that similar discussions took place with employer groups. So by the time a Bill is introduced in Parliament, Government has had the benefit of the views of people who may be affected by them or from people with the expertise on the subject.

In the case of this present Bill, the consultation process took about a year. Consequently, the original draft has been altered and the Bill is a balance between the views of unions and employers.

The main objective of the Bill is to facilitate wage reform. When the NWC Sub-Committee on Wage Reform presented its report in November 1986, unions asked for the Employment Act to be amended to allow negotiations on variable payments based on trading results or productivity because the previous provision in the Employment Act was considered to be rather restrictive and our unions did not want to run foul of the law and wanted the law to spell out very clearly that they are entitled to negotiate with the employers for variable payments based on trading results or productivity. With the new section 48(2) it is very clear that unions and management can negotiate for variable payments without infringing the law.

The original draft of the Bill contained a provision to place an upper limit on the amount of variable payment that may be paid. The unions felt that specifying a maximum would be against the spirit of flexibility that wage reform aims to achieve. I am glad that the Minister for Labour is persuaded by this view and has removed the original provision of a cap on variable payments from the Bill. I know that some employers had wanted this cap to remain but in his wisdom the Minister for Labour has concurred with the workers.

Changing our wage system is not an easy task. Workers must not feel that hard-won gains could be wiped out overnight. In this respect, the annual wage supplements that have been agreed to in collective agreements are protected by this Bill. This is particularly important to workers who are receiving more than one month annual wage supplements, eg, those workers in the banking industry or the insurance industry. These workers will continue to be paid the same amount of annual wage supplements unless they reach a new agreement with their employers.

On this issue of annual wage supplement, the current provision of a 13th month payment has been forced since 1972 and is still in force, that is to say, any new agreement cannot specify more than one month annual wage supplement. In the discussions on this subject, some employers had wanted the annual wage supplement also made variable. But here, I think the arguments in favour of retaining the 13th month payment has been taken heed of by the Minister because at the end of the year most workers depend on this 13th month payment to pay for various expenses such as children's education, school textbooks, school fees, and also for festival expenses. So the provision remains the same.

This issue of the annual wage supplement highlights the fact that wage reform cannot be done overnight. Employers cannot simply turn the annual wage supplement into a variable payment. Negotiations have to take place between unions and workers. Of course, by this, I refer to annual wage supplements of more than one month. Only when it is mutually agreed by both parties, can the annual wage supplement be converted into a variable payment. In the course of negotiations, there will certainly be differences of view and differences in preferences on the form of flexibility.

Over the past month or so, we have dealt with one important issue - what sort of wage adjustment can workers look forward to from year to year? Is it only 2% service increment? How should this be treated in a booming economy and a tight labour market? I believe that we have reached a proper understanding of the two main concerns. From the employers' viewpoint, wage pressures in a booming economy and tight labour market should not cause wage levels to be pushed up to uncompetitive levels. This is the main concern of employers. From the workers' viewpoint, wage increases should be an equitable distribution of the wealth generated to meet their aspirations for a better quality of life. There is general agreement, I believe, that we can meet both points of view by paying part of the wage increases as a wage adjustment, an adjustment to basic wages, and part of it as a variable payment. Since the economy is performing very strongly this year, we can give workers a reasonable adjustment to basic wages and a better bonus at the end of the year. Indeed, we have this opportunity to take a big step forward in implementing a flexi-wage system generally in the economy, if all companies follow this principle.

Whilst there has been good progress in wage reform and more than 300 companies have already implemented wage reforms, I think we still have a long way to go. I share the Minister's concern that we should continue to press on with wage reform so that we are all prepared, not only those companies with wage reforms or flexi-wages in place but also all companies in Singapore are prepared for any possible future recession.

Encik Abbas Abu Amin (Pasir Panjang): ( In Malay): Mr Speaker, Sir, the main purpose of the Employment (Amendment) Bill 1988 is to facilitate the implementation of a flexible wage system. It lays down the procedure for payment of the variable annual bonus and annual wage supplement to our workers. Clearly, the Bill provides us with a framework to be used by unions and employers in their wage negotiations. In recent years, as Singapore went through the recession, the pattern of our wage negotiations have undergone some changes following recommendations by NWC. These changes were to enable employers to make quick adjustments whenever a severe financial difficulty arises, in order that our workers' jobs are not affected. Thus, instead of large service increments tied directly to the basic salary, we now have a wage system of three components: service increments at a lower rate, a variable component based on profits or productivity, and the annual wage supplement, or AWS.

The 1988 Employment (Amendment) Bill gives a clear picture of these changes. It would certainly facilitate negotiations between employers and employees on the implementation of a flexible wage system, as the Bill also eliminates several ambiguities that existed in the present Act. I am glad that in drafting this Bill, the Ministry of Labour observed this fundamental point. I believe both sides, employers and the trade unions, have been consulted beforehand and all their views have been duly considered.

Tripartite involvement has become a characteristic of our system of good industrial relations. Consensus between the Government, employers and the unions has ensured our stability and progress. During the recession years, the unions had swiftly and courageously adjusted by accepting wage restraint. The time has now come for employers to adjust to our rather strong economic performance and tight labour market. We have just accepted wage reform as a means to more flexible wage system. Many employers have adjusted their companies' salary scales, but there are still others who have deliberately delayed such adjustments. It is hoped that the Ministry of Labour would urge these procrastinating employers to be more positive in their attitude; they must show confidence in the leadership of the unions by implementing fair and appropriate salary adjustments. Only with cooperation and mutual trust between unions and employers can the good relations between them be maintained and agreement achieved, quickly and amicably, in negotiations on the implementation of a flexible wage system. This Bill is a document that should be adhered to, in the best and most judicious manner possible, by both parties, employers as well as unions.

I support the Bill.

Mrs Yu-Foo Yee Shoon (Yuhua): ( In Mandarin): Mr Speaker, Sir, I rise in support of this Bill. For several months past, many people have been asking for this amendment and I am very happy that the Minister has now brought up this Amendment Bill. A just, comprehensive and timely employment law is very important.

Today, in Singapore, we are having economic prosperity and industrial stability. It is because all along we have a very fair and reasonable Employment Act, and the Government has also been adopting a very flexible policy about amendments to the relevant law, so that our industrial relationship has now entered a stage of maturity. So now the employers and the employees can negotiate about salary and bonus in relation to business condition and productivity. This is very reasonable. The old law restricts the quantum of bonus. The new legislation promotes wage reform and flexibility through negotiation in relation to a company's performance and workers' productivity. I believe all our unions would support this legislation. But here I would like to ask the Minister and officers of the Labour Ministry to note one thing, that is, wage flexibility should not mean that during a recession only the workers are asked to get less wages and tighten their belts, but when the companies have recovered and are making good profit the employers need not necessarily or,indeed, would usually be rather unwilling to adjust the wages and pay more to their workers.

So I hope the officers in the Ministry of Labour and the employers would pay attention to this so that when the companies are in good position, they could be more magnanimous in negotiating with the workers and be able to pay the workers more fairly. Having said so, here I would like to express my support for the Bill.

Mr Lee Yock Suan: Mr Speaker, Sir, I wish to thank hon. Members who have spoken in support of the Bill. Much has already been said and reported in the media regarding the implementation of this year's NWC guidelines and wage reform. There appears to be a better understanding now between employers and unions on how to proceed. I wish merely to make the following comments.

Firstly, as some Members have mentioned, we must maintain the momentum of wage reform towards more flexible wage systems. The concept of flexi-wage is sound and has been accepted by employers, unions and the Government. The ability to adjust wages and bonuses according to the economic situation will make our companies more viable and help to preserve jobs during a recession. Those companies which have yet to reform their wage systems should do so without further delay. We should not be discouraged by initial teething problems in the wage reform process.

Secondly, in implementing flexible wage systems, we need to be flexible in our approach. Different models may suit different companies and industries. The basic concept is to build up a flexible component in our wage structure. If initial models or formulas are found to be too rigid or unrealistic, they may have to be reviewed.

Thirdly, the concept of flexi-wage is to try and keep basic wages relatively stable and adjust as far as possible through the variable component such as bonuses. Workers should look at the total wage package for the year and not just the monthly salary.

Fourthly, companies that have concluded flexi-wage pacts with their unions should keep their employees informed of the performance of their companies. They should also, wherever possible, give some preliminary indications of the variable bonuses that their employees are likely to receive at the end of the year based on the performance so far. In this way, workers will be assured that their wage increases as a whole will not be lagging behind those of other companies.

Fifthly, our workers have accepted two years of wage restraint to help the economy to recover. Now that the economy is doing well, they deserve a fair share of the economic rewards. However, we should avoid building in excessive increases in basic pay which cannot be sustained in the long run. We must guard against a wage spiral because of a tight labour market affecting certain types of workers in some sectors. The implementation of the NWC guidelines will depend on the performance of the industry and the company concerned.

Finally, there must be good sense and goodwill all round during wage negotiations this year. There must be mutual trust and confidence to preserve our excellent industrial relations climate.

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 Lee Yock Suan.]

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