FLEXIBLE WAGE SYSTEM (Progress of implementation)

Mr Chng Hee Kok asked the Minister for Labour what is the progress of the implementation of the flexible wage system recommended by the National Wages Council in 1986.

The Minister for Labour (Dr Lee Boon Yang): Mr Speaker, Sir, Members may recall that the Economic Committee formed in 1985 had recommended that our wage systems should be made more flexible to cope with both good and bad years.

In response to this, the National Wages Council (NWC) had, in 1986, recommended that companies should implement flexible wage systems. It also recommended that for Singapore to remain competitive, wage increase must always lag behind productivity growth and that it should be closely linked to company and individual performance. Implementation of flexible wage systems began in 1987.

Since then, Sir, we have made significant progress in implementing flexible wage systems. The unionised sector, in particular, has taken the lead with more than 80% of companies having implemented some form of flexible wage systems. In the non-unionised sector, the extent of implementation has also reached 70%.

The NWC envisaged a phasing-in period of five years for companies to develop their flexible wage systems. We are at the end of the 5-year phasing-in period. It would be timely to carry out a review to study whether the objectives of the flexible wage system have been achieved, and to recommend improvements to the system. For this purpose, my Ministry will be requesting the NWC to set up a tripartite Review Committee when the NWC is convened early next year.

Mr Chiam See Tong: Sir, does the Ministry of Labour take into account wages given in terms of bonuses?

Dr Lee Boon Yang: Bonus forms part of the wages.

Mr Chiam See Tong: All right, bonus forms part of the wages. Does the Ministry object if a firm gives as much as six months' bonus?

Dr Lee Boon Yang: Mr Speaker, Sir, I just said in my answer that NWC has recommended that wage increase must be linked to company and individual performance. Therefore, if a company performs exceptionally well and chooses to give its workers a big bonus, I think the Ministry will not object to it.

Mr Chng Hee Kok (Tampines GRC): Sir, my first question is: will the Minister confirm that the Ministry has no objection to legal firms paying more than six months' bonus to their employees? My second question is: has the implementation of the flexible wage system been affected by the recent ruling of the Industrial Arbitration Court on SIA and its unions, and whether there are any adverse effects on the further implementation of the flexible wage system?

Dr Lee Boon Yang: Mr Speaker, Sir, the recent Industrial Arbitration Court's (IAC) decision on the SIA case has given rise to some concern that the IAC might have delinked wage increase from productivity gains. In giving its award, the IAC had reiterated "parties adopting a flexible wage system should bear in mind the NWC's recommendation that built-in wage increases must lag behind productivity growth." This shows that the IAC did not abandon the principle of flexible wage system. In the SIA case, the court was of the view that the annual increment of SIA employees should not be linked to a minimum productivity increase to be achieved by the company because of "exceptional circumstances".

Sir, the IAC ruling should be accepted as a specific decision on the appropriate quantum of annual increment for certain employees of SIA. The IAC ruled that the quantum which SIA had already decided on earlier was fair and should not be reduced by subjecting it to a minimum productivity growth. The IAC decision in the SIA case, therefore, cannot be viewed as a deviation from the principle of linking overall wage increase to productivity growth and to the profitability of the company. In my view, the IAC ruling will not impede the implementation of flexible wage system. If it were to do so, the Government will have to re-establish the principle in a more formal and legally binding manner.