CENTRAL RETRENCHMENT BENEFITS FUND (Setting up)

Mr Low Thia Khiang asked the Minister for Manpower whether the Government will consider (i) setting up a Central Retrenchment Benefits Fund in which individual companies are required to maintain an account with the Fund; and (ii) requiring companies to contribute a certain amount to the Fund yearly from their profits for the purpose of ensuring that workers who are retrenched and are eligible for retrenchment benefits will get the payment.

Dr Lee Boon Yang: Mr Speaker, Sir, the setting up of a Central Retrenchment Benefits Fund is not a sound proposition. By requiring companies to set aside part of their profits every year, we will be tying up their financial resources. This requirement will also affect the cash flow of companies and weaken their ability to seize new business opportunities. To establish such a Fund now when the economy is slowing down, and may even go into recession, could hasten the demise of more companies. So instead of doing good, it may end up causing more workers to lose their jobs.

I am therefore not in favour of the proposal to set up a Central Retrenchment Benefits Fund. This, however, does not mean that workers are not paid retrenchment benefit when they are laid off. In fact, retrenched workers with a minimum of three years' service are eligible for a retrenchment benefit although the quantum of payment varies from company to company and depends on the financial position of each company. For workers with less than three years' service, it is also not uncommon for their employers to grant them an ex-gratia payment to help them tide over their immediate difficulties before they secure an alternative job.

Sir, in view of the current economic difficulties, I urge all companies with excess manpower to consider retrenchment as a last resort. They should seriously explore alternatives to retrenchment, including sending their employees for training and skills upgrading with Government's financial support.

Mr Low Thia Khiang: Sir, nowhere in the Question did I suggest that a Fund should be set up now. Does the Minister agree that workers will get very little or no retrenchment benefit if a company goes under and the proceeds from the sale of the assets are insufficient to meet the claims of its secured creditors? In that case, the workers will get nothing.

My second supplementary question: does the Minister agree that the situation of retrenched workers under the circumstances getting very little or no retrenchment benefit is the result of the Government failing to establish a mechanism to secure such payments in advance, whether by benefit or whatsoever, when times are good? And when times are bad and if a company goes under, the retrenchment benefit goes down the drain as well.

Dr Lee Boon Yang: Sir, I thought the Member asked whether the Government will consider setting up a Central Retrenchment Benefits Fund. So I presume that he is asking whether the Government would consider setting up such a Fund now, is it not? If he raises a Question at this point in time, that means he is asking whether the Government would do so.

To come to his supplementary question, what happens if a company is in liquidation and has no substantial assets to pay retrenchment benefit? Even if we have a law to provide for retrenchment benefit to be paid or the quantum is stated in the law, if a company has no assets, then there is nothing that can be done. The company is bankrupt. It has no assets. So there is no way that we can force the company to cough up retrenchment benefit for workers that are now out of job.

The Member also said that the situation of some workers who are retrenched with little or no retrenchment benefit is the result of the Government not doing anything to protect their interest in advance. I think that is quite wrong, Mr Speaker, Sir. The law has provided for the employees with more than three years' service to be eligible for retrenchment benefit and the trade unions have certainly acted on this provision because they have ensured that in their collective agreements, retrenchment benefit is clearly spelt out and the practice today in the unionised sector is for retrenchment benefit to be calculated anywhere from two weeks to a month for each year of service. Companies that are retrenching workers and are still in a sound financial situation very often comply with the provision for retrenchment benefit within their collective agreements. So it is incorrect to say that the Government has not looked after the needs of workers with regard to retrenchment benefit.

Mr Jeyaretnam: Sir, whilst I appreciate the Minister's answer that it may be wrong to burden companies with more payments at this particular time, has the Ministry considered setting up a retrenchment fund and transferring some of the huge amount of monies that the Government has collected by way of foreign worker levies, and the Ministers also giving up a part of their salaries to put into this retrenchment fund?

Dr Lee Boon Yang: Mr Speaker, Sir, the foreign worker levy is collected for a totally different purpose. It is a means of moderating the demand for foreign workers, in particular, the lower skilled foreign workers. As to Government setting up such a retrenchment fund, whether it is from fees and levies that Government has collected from elsewhere or even from cuts in Ministers' salaries, I think it is appropriate for me to point out to the Member that such retrenchment funds set up elsewhere have very often not delivered the results that they have been set up for.

Let me read to Members the assessment which was made by the Japan Institute of Labour. This was carried by the Japan Labour Bulletin which was published in March this year. This is on their assessment of the national unemployment benefits. In Japan, since the early 80s, they have established an employment insurance scheme with the help of the government. I quote:

`However, since 1994, the scheme has been in the red due to the worsening employment situation in Japan. Given this situation, the Central Employment Security Council has been studying ways to reduce the national treasury's contribution and to revise the employment insurance scheme in order to keep up with changes in the industrial structure and the ageing of the population.' So, what it says here is that a country, with Japan's economic resources and trillions of dollars of reserves, is unable to sustain a national employment insurance scheme in order to pay unemployment benefits to out-of-job workers. Do you think that a country like Singapore, with the limited resources that we have, would be in a position to do better? The real solution is to ensure that we continue to achieve steady economic growth and that new jobs will be created so that retrenched workers have the opportunity to take on these new jobs. And where the retrenched workers are unable to fulfil the skill requirements of the new employers, then the Government will come in to provide the necessary support, including funding, so that these workers' skills can be upgraded or they can be retrained to take on these new jobs. That is the only permanent and real solution to the problem of unemployment and retrenchment.