RETIREMENT AGE BILL

[Mr Speaker in the Chair]

Debate resumed.

Dr Lee Boon Yang: Mr Speaker, Sir, I am gratified by the response from Members of Parliament to this Bill. Of the 11 Members who spoke, I think all of them, in principle, support the move towards a higher retirement age. They all support the need to get more Singaporeans who are now retiring at age 55 to continue working because of the need for the economy to stay competitive in view of the tight labour market. Members have raised quite a number of questions. I will attempt to go through them and answer the points that were raised.

Let me begin with the question raised by Mr Goh Chee Wee, Chairman of the GPC for Labour. Mr Goh asked whether part-time workers and temporary workers would be covered under the new minimum age requirement because he is concerned that some employers may try to go around the law by converting permanent full-time employees to part-time employees. The way we look at it, Sir, is that part-time employees who are working on a regular basis will also be covered by the Retirement Age Bill. The intention is to cover all workers, including part-time workers. Since part-time workers are going to be covered, it will be less likely that employers would find it attractive to try to circumvent the law by just converting their workers from full-time employees to part-time employees.

With regard to temporary or casual workers, it is not necessary to cover them under the law, as the nature of work for the casual workers is often of a short-term or irregular basis. This will allow some flexibility to employers who may need to employ casual workers for short periods, for example, during festive seasons where demand is high for a particular service. I believe that this approach will help people who need such casual jobs to supplement their income. It will also help people who are prepared to spend part of their spare time on a casual job to make extra income. If even such casual workers are included, ie, covered by the retirement age law, then I think our labour market will become much less flexible and adaptable. This is not in the interest of both employees and employers.

Mr Goh is concerned about the possibility of abuse by employers using fixed term contracts as a means of dismissing or terminating the service of the employee before the age of 60. Sir, it is the intention of the Ministry to exempt workers who are on fixed term contracts. The reason is to provide flexibility to employers who may need to employ workers for a specific project. In the event that an employee complains to the Ministry, after the law has come into force, that his employer has in fact abused the fixed term contract mechanism to retire him before the minimum retirement age, then the onus will be on the employer to justify to the Ministry that in fact the employee who is on such a fixed term contract is only required for a specific project. This would mean that an employer would not be able to continually renew short fixed term contracts and when the employee reaches 55 years of age he just refuses to renew such contracts.

In fact, at the investigation stage, the Ministry officials will be able to determine that the employee carries on doing the work although he is on a short-term contract and that even after the contract is renewed, he still carries on doing the same kind of work. So there is no justification for him to actually be employed on a fixed term contract. We can then conclude that the fixed term contract is a disguised means to circumvent the requirement of the retirement age law. So, in fact, only genuine fixed term contracts will be exempted. Employers who intend to circumvent the law by putting their permanent employees on a renewable fixed term contract without sufficient justification will eventually have to face the consequence for violating the law.

Mr Goh asked whether the Ministry will consult the union before it decides on the employers' application for exemption for certain categories of workers from the minimum retirement age requirement. Let me assure Mr Goh that the Government's objective is to encourage all Singaporeans to continue working for as long as possible. It is the Government's objective to do so. Hence, exemption from the retirement age law will not be granted liberally. It is meant to provide flexibility for a certain kind of work which may not be suitable for older workers, or for a certain kind of jobs which are linked to a specific project. In deciding on the merit of each case, the Ministry will consult the unions concerned as and when the need arises, and where the exemption could affect the collective agreement between the union and the employers.

Mr Goh also asked whether seamen as a group ought to be completely exempted from the provision of the law. Some seamen are on permanent employment, others are on short-term voyage-based contracts with particular employers. In the case of those who are on permanent employment, it is not the Ministry's intention to exempt them. In other words, seamen who have permanent employment with the employers will be covered under the minimum retirement age law. However, those who are on a short-term employment, where they are employed for a particular voyage of certain vessels, they will be exempted. They will be treated like those who are on term contracts.

Mr Goh also asked whether reinstatement is workable because it is provided in the Bill that the Minister may order reinstatement of an employee who has been considered to have been dismissed on account of age. In considering the type of compensation which could include just payment to the employee who has been dismissed, the Minister will have to consider whether reinstatement is in fact viable. If the relationship between the employee and employer has not deteriorated to the level where they can no longer work together, then reinstatement will be considered. But in cases where the relationship has completely broken down, you cannot compel unwilling parties to continue to work together. Under such circumstances, it is more likely that the Minister will order a cash compensation to the dismissed employee.

Mr Goh asked whether the Minister will confirm that the CPF withdrawal age will remain at 55. Let me assure him that it is the intention to retain the present CPF withdrawal age at 55. All workers who attain the age of 55 will be allowed to withdraw their accumulated CPF savings. I believe the Member for Hougang, Mr Low Thia Khiang, also raised the same point. So let me assure him that those who have reached the age of 55 can continue to withdraw their accumulated CPF savings.

I think there could have been a slight misunderstanding earlier on, because some Members have asked where the 5% CPF reduction will come from. I said earlier in my Second Reading speech that the 5% reduction in CPF contribution rate will come from the employers' contribution. In other words, the proposal is for the CPF contribution rate for workers aged 55-60 to be 12 1/2% from the employee and 7 1/2% from the employer, making up a total of 20%.

Mr Othman has spoken up in support of the Bill. He emphasised the importance of training of workers, particularly older workers. I agree entirely with him that older workers need additional support from their employers in order to get some skill upgrading and retraining, so that they can carry on working after the age of 60. That is why in my Second Reading speech I urged employers to treat the 5% CPF saving as additional resources for them to provide training and skill upgrading for their older workers.

He is also concerned whether, with the reduction in CPF, it will in fact affect the older workers adversely. As I said in my Second Reading speech, the projection of CPF balance for workers up to the age of 60, with the 5% reduction in the employers' contribution, shows that there will be no serious adverse impact on workers for their housing, old age retirement income and also their Medisave requirements.

In fact, with five more working years, a worker should be able to put aside a lot more money into his CPF account. And when he retires at age 60, he will be in a much better position than if he were to retire at age 55. So notwithstanding the 5% CPF reduction, he will be better-off.

Dr Toh has supported the Bill. He proposed that the CPF withdrawal age be deferred to 60. He knows the consequences of doing so. I have all along been assuring all the workers that the Government intends to retain the present withdrawal age and there is no intention, in fact, of changing the withdrawal age at this juncture.

Dr Toh Keng Kiat rose ---.

Mr Speaker: Do you want to give way to Dr Toh, Dr Lee?

Dr Lee Boon Yang resumed his seat.

Dr Toh Keng Kiat: Mr Speaker, Sir, may I just make a point of clarification? I said that I am not suggesting that the withdrawal age for CPF be increased to 60 years because it will be a political decision of dire consequences. In fact, I want it to be retained at 55.

Dr Lee Boon Yang: Mr Speaker, I may have misunderstood Dr Toh. On the other hand, he proposed that we do away with employees' contribution altogether, am I right?

Dr Toh Keng Kiat: Yes.

Dr Lee Boon Yang: That would not be a viable alternative to what we are proposing now, which is a 5% cut on the part of the employers' contribution rate. The reason is that doing away with the employees' contribution does nothing to minimise cost. It does nothing to help employers shoulder the burden of an increasingly aged working population. While it will of course increase the workers' take-home pay, it does not make retaining older workers more attractive. So I am not in favour of reducing the employees' CPF contribution rate.

Dr Toh also suggested that the PAP signals its support for older workers by fielding more older election candidates. I do not know how that has been linked with retirement age. But let me reassure Dr Toh that it is not true that the PAP only fields young candidates. He himself mentioned Dr Richard Hu. He stood as a candidate in the 1984 general elections, and has gone on to become one of the most notable Finance Ministers. He was way over, I think, 55 when he stood for election.

PAP fields candidates for election based on their ability to contribute to the political process. It cannot be that the candidates are fielded just because they belong to a certain age group. I think that would not do our political system much good. But where we come across or where we can persuade people who are in the older age group, and who are able to contribute to the political process and offer leadership capability, then I am sure that the PAP will consider such candidates.

Dr Toh and, I believe, a few other Members have also asked whether the provision under clause 10 for the Minister to exempt certain classes of workers will be made known. Yes, the intention is to gazette an exemption list when the Retirement Age Bill comes into force. I think the categories of workers that we have considered for exemption could include some of these employees who are in positions or employment approved by the Minister or such other persons appointed by him where being of a particular age or in a particular age group is a job requirement, for the reason of safety or for any other reason. So employers will have to apply to the Minister for such exemption.

Other categories of workers to be exempted are those employees who have entered into a fixed term contract of service. As I have mentioned earlier on, we intend to exempt this group of employees to ensure that the labour market remains flexible and adaptable. We will also be exempting persons whose employment is of a casual nature, as I mentioned earlier on. We will also exempt all foreign workers in Singapore who are here on either work permit or employment pass. They will be exempted. Because it is not the intention of the Government to ensure that all foreign workers get a job in Singapore up to the ripe old age of 60. They are here for a short term. When they have finished their short employment in Singapore, be it two years, four years or six years, they must go back.

These are some examples. Other examples of exemptions are students working on a part-time basis. As you know, during vacation, many students take on part-time employment. It is not the intention of the law to include such student workers under the provision for minimum retirement age.

Dr Toh questioned the need for clause 5 which invalidates any term of contract of service which is less favourable than that prescribed under the Retirement Age Bill, and whether or not it is back-dating the provisions of the Retirement Age Bill. Let me assure him that this is necessary in order to protect existing workers who may well have entered into contracts previously where the retirement age norm is 55. It is also not a new principle in law to have such provisions to nullify contracts made previously. If the Member looks at section 8 of the Employment Act, he will find a provision which is very much similar to what is provided for under this Retirement Age Bill. Otherwise, a large number of workers who are presently working will not be able to enjoy the benefit of working to age 60, because they all have entered into contracts of service, whether written or verbal, where the retirement age norm is 55. So it would then take a very, very long time for the retirement age of 60 to become a norm, a practice, if we do not make all previous contracts void.

Dr Toh also asked how much it will cost the Government to implement the Bill. It will cost the Government some money in order to set up the infrastructure that is necessary to investigate and to conciliate whenever complaints of retirement or unfair dismissal on account of age is brought to the Ministry's attention. But, as of this moment, I am not able to tell him exactly how much that would cost.

Mr Umar, who also spoke up in support of the Bill, sought reassurance that workers will be able to withdraw their CPF savings at the age of 55. I have already given that assurance earlier on.

Dr Soin, together with several other Members, including Mr Shanmugam and Assoc. Prof. Walter Woon, questioned the feasibility of implementing this law in view of the fact that employers today can terminate a worker's service, whether it is on a fixed term contract, or they can terminate the service by giving due notice, and, in some cases, even without giving due notice. While it may appear a little difficult, my Ministry has, in fact, been regularly handling such complaints about termination of services. We will be able to treat such complaints of termination on account of age, as we have been treating various complaints brought to our attention for wrongful dismissal. Under section 14, subsection 2(a) of the Employment Act, employees, who make complaints that they have been wrongfully dismissed or unjustly dismissed by their employers, will give their reasons for thinking that it is unjust. My Ministry, on receipt of such a complaint, will call up the employer and seek explanation from the employer. And it is really up to the employers then to explain why the termination of service under the Employment Act is justified and it is within their right to give notice or even terminate the service of a particular employee without notice.

So, in effect, employers must defend their action to terminate the service of an employee once a complaint has been registered. Otherwise, we will infer that the employee, whose service has been terminated, is right in assuming that he was unjustly or wrongfully dismissed and we will make the appropriate recommendation. Although it may appear a little difficult, my Ministry has been dealing with such cases and we should be able to continue to conciliate and adjudicate when complaints are brought to our attention about wrongful dismissal or dismissal on account of age.

For Members' information, let me give some statistics. Last year, my Ministry received a total of 2,785 complaints concerning claims relating to terms and conditions of services. Out of 2,785, 601 cases were complaints of unfair termination of service by employers. We also received a total of 33 cases from employees who accused their employers of wrongful dismissal. We have, in all of these cases, been able to resolve the disputes either through a process of conciliation or adjudication. So the procedure is quite established. As I have said in my Second Reading speech, it is quite well tested over the years as we have been using such procedure. And I think termination on account of age will be another aspect of the application of this conciliation and adjudication procedure.

Mr Low Thia Khiang also supports the Bill. He wants a reassurance that the CPF withdrawal age will not be changed. I have already given that reassurance.

He asked about civil servants and officers in the SAF who have the option of retiring at an earlier age. The intention is to exempt certain categories of civil servants including officers of the SAF, and Police officers, from the coverage of the Retirement Age Bill. Because for their specialised vocation, it is not feasible to require that they work up to the age of 60. One can well imagine that for Police officers, Army officers or Army specialists, it would be very difficult to carry out some of the duties if they have to work up to the age of 60. So the intention is to exempt certain categories of civil servants and SAF officers.

He also raised the question of the appeal procedure, which I have explained earlier on, and how my Ministry will go about handling complaints from employees who have been dismissed on account of age. Mr Chng Hee Kok has essentially raised the same concern that there will be difficulty. He expects there will be difficulty in handling complaints from employees who have been dismissed on account of age. As I have explained to Members earlier on, the Ministry has a fairly well-tested and established procedure to deal with such complaints concerning terms of employment and service and also wrongful dismissal.

He feels that it might be difficult, with the new legislation, for companies to remove their senior managers, because, in the past, they could just dismiss them. Now, there is this possibility that they might be asked to explain whether it is a dismissal on account of age. I think what is required now would be for all companies to ensure that they have a proper appraisal system for all their staff. And if they do have a proper appraisal system for their staff to assess their performance, then should they need to terminate the service of such senior management staff, it will be easier to put up a case that, in fact, they are terminating a person on account of his lack of performance, rather than on account of age.

Mr Speaker, Sir, Mr Tong Kok Yeo suggested that all employers who want to terminate the services of their employees at age 55 or thereabouts should notify the Ministry. I do not think, at this juncture, it is necessary to call for such notification. it could become a bureaucratic bottleneck to require such notification. But my Ministry will be monitoring the situation once the law comes into force and is implemented, and if, in fact, there is widespread abuse, we may consider alternatives to monitor the situation which could include compulsory notification.

He also suggested that the Ministry consult the unions when we are considering exemption for certain classes of workers. As I have explained in my response to Mr Goh earlier on, we will consult as and when the need arises.

Mr Tong Kok Yeo also felt that with the flexible wage scheme being implemented since 1986, there should not be any need to reduce the CPF contribution rate of the employers on account of their older employees. Unfortunately, the flexible wage scheme has not worked to the extent to remove the additional cost for retaining workers. Even after six years of attempting to implement the flexible wage scheme, as a general rule of thumb, older workers are still being paid two to three times more than younger workers. So it is not as if the flexible wage scheme has already removed this wage gap between young and older workers. Therefore, we recognise that as the proportion of older workers increases in the workforce, employers could well have to bear a higher cost and this could affect their competitiveness. And in order to ensure that we do not unnecessarily dull their competitive edge, we have sought to reduce their CPF for older workers by 5%. Let me assure the Member that, as I said earlier on, the 5% reduction should not affect the older workers by way of their housing needs, retirement income or Medisave. Even with the 5% reduction, they will still be able to set aside eight percentage points for contribution to their Medisave account. In fact, by having another five more years of working life, of course, the worker will put aside much more money, particularly in his Medisave, to meet future medical expenses.

Mr Tong also suggested that we consider incremental reductions of the CPF rate instead of a one-off reduction by five percentage points. We have already waited for four years for this higher retirement age to be implemented widely. But sad to say, it has not come about that way. We now want to make sure that we do not waste any more time and the way to do so would be to give employers sufficient incentives quickly so that they will comply with the principle and the objective of the law to retain all their older workers when they reach the age of 55 years, rather than to adjust the CPF rate incrementally which could well mean that it may take a longer time for this principle of retiring at 60 years to be widely accepted by both the employers and the employees.

I believe that I have addressed the concerns raised by Mr Shanmugam and Assoc. Prof. Woon on the difficulty of implementing the law. While I cannot go into the specifics of how we will adjudicate, or how we will investigate each and every case of a complaint for wrongful dismissal on account of age, let me assure him that I am quite confident that the procedures that have already been practised by the Ministry of Labour are sufficiently effective as to make a distinction between a genuine termination and a termination on account of age but disguised as some other form of termination.

Mr Chia suggested that those categories of workers who are exempted from the coverage of the Retirement Age Bill should be spelt out clearly. I have, earlier on, listed some of those categories of workers who will be exempted. A more comprehensive list will be issued by way of a Gazette Notification. He also asked the Government to indicate its stronger support of older workers by a wide variety of measures, including tax reduction, medical allowance and CPF topping-up scheme for senior citizens. While all this may help to signal support, what is crucial is that we take a decision now to raise the retirement age and, as and when the Government is doing well, topping-up can be considered. As we have discussed during the Committee of Supply stage, CPF topping-up will, in fact, be practised by the Government. But whether we need to make a discrimination between older and younger citizens when we do a topping-up, that is something to be considered separately.

Mr Speaker, Sir, I believe I have addressed most of the concerns raised by Members.

Mr Low Thia Khiang: Mr Speaker, Sir, there is a question I raised in my speech which the Minister has not answered. Can I repeat my question?

Mr Speaker: Yes.

Mr Low Thia Khiang: How will civil servants, for example, teachers, who are presently under the pension scheme, be affected by the Bill? Does it mean that they can only enjoy their pension at the age of 60 years or older rather than at the age of 55 years?

Dr Lee Boon Yang: Mr Speaker, Sir, in fact, I did answer that question just now. I said that the intention is to exempt certain categories of civil servants, including those who have the option to retire at an early stage and to collect certain pension benefits at an earlier age. We intend to exempt this group of civil servants just as we intend to exempt a small number of employees in the private sector who also have such retirement benefits pegged to 55 years.

We are aware that a group of employees, particularly in the oil industry, who have contracts of service with their companies whereby they stand to gain certain benefits when they reach the age of 55 years. It is not the intention to overrule the provision of all these pension benefits. We will exempt these current workers who are benefitting from this scheme but we will require the companies, when they employ new workers, to ensure that the retirement age for their pension benefits will be pegged to 60 years.

Mr Goh Chee Wee: Mr Speaker, Sir, the Minister has not answered my specific proposal on whether he will consider reducing the employers' and employees' CPF contribution rates by 2 1/2% each side instead of a 5% reduction. The long-term CPF contribution rate is 20% from the employer and 20% from the employee. Currently, for those people who are aged 55 years to 60 years, the contribution rate is 12 1/2% on each side. So with the proposal, this should be reduced to 7 1/2%. For workers who are below 55 years, the employers' contribution rate is 20% but the moment they reach 55 years, this would be reduced from 20% to 7 1/2%. To me, this is too drastic a cut. As my colleague, Mr Tong Kok Yeo has said, even right now, in the unionised companies, many employers are actually extending the retirement age to 60 years without the benefit of a further CPF reduction.

I am not objecting to the reduction in CPF for the older workers because their saving needs are less but I question the need to make such a steep cut. In fact, I prefer a gradual approach and, hence, my proposal to reduce 2 1/2% on each side instead of a 5% reduction from employers.