RETIREMENT AGE (AMENDMENT) BILL

Debate resumed.

Mr Jeyaretnam: Mr Speaker, Sir, let me assure you that I am going to be very brief. I just have one question for the Minister. Isn't this talk about raising the retirement age for employees in the private sector academic so long as the Employment Act allows an employer to terminate the services of any employee by just giving him one month's notice? I can see that this makes a profound change perhaps for the civil servants who have security of tenure under the Constitution. But for the private sector, is this not purely academic?

Dr Lee Boon Yang: Mr Speaker, Sir, I thank the Members who have spoken out in support of this amendment Bill to raise the retirement age from 60 to 62. They have raised many valid points for consideration and I will try to address all the concerns that they have raised.

First, Dr Vasoo, in supporting the amendment, raised the concern of potential areas of dispute between employers and employees when they come to the age of 60 and they have to give reasonable notice on reducing the wage of older workers. And his question is: if there is a dispute, who will mediate, who will help the employee to listen to his appeal, to listen to his own concern? I would like to assure the Member that my Ministry has since 1994, when we first enacted the Retirement Age Act, established a unit in the Labour Relations Department which is geared towards looking after the needs of older workers who have any dispute with their employers on account of age. So, if an older worker feels that his employer is making an unreasonable offer or that he is being retired prematurely, or his service is terminated on account of age, he can always come to my Ministry to seek conciliation or to seek support in resolving those problems with their employers. I am pleased to say that, although I do not have the exact numbers with me, since 1994, we have been able to resolve the cases we handled expeditiously and satisfactorily for both parties.

Likewise, Dr Vasoo also raised this possibility of employers taking advantage of the wage reduction to force out older workers. The recourse here is of course for the older workers to appeal to my Ministry to investigate their complaints against their employers for taking such unfair action. Let me assure Members once again that any such complaints will be carefully investigated.

Mr Ang Mong Seng also supported the Bill and he asked that employers should consider the contribution of older employees when they adjust the wages of such employees. I agree with him. I think I said so in my main speech that the Tripartite Committee in fact made specific recommendation that employers should always consider the contribution, the wage level and the performance of the older employees before they proceed to make adjustment to the wages.

Mr Ang also suggested that the wage reduction should not be done haphazardly on a month-to-month basis or as and when the employers feel like doing so. We have a certain understanding between the tripartite partners that such wage reduction should in fact be done for a reasonable period, either a year or two years. The extension of the retirement age is for two years. Ideally, it should be for the full period of two years. It is not good management practice to go and change the wages of the employee on a haphazard basis. So I agree with him that the employer should in fact give the employees reasonable notice and also make such wage adjustment over a reasonable period of time. He, in fact, also said that there is this provision in the Bill for employees to give reasonable notice to their older employees. It is not specified what is a reasonable period of notice and the question is: should it be seven days or two months? Let me assure the Member that through the tripartite practice, and through our practice of managing the employer-employee relationship, there have evolved certain norms on what is a reasonable notice.

The Tripartite Committee on the Extension of Retirement Age has in fact discussed this particular issue quite extensively and both employer and employee representatives agreed that in amending the law, we should not try to fix a rigid period, whether it should be two weeks or a month. This is because there are many situations in actual human resource management practice where you have to give allowance for the size of the company, the set-up within the company and the company's own management practices. They have recommended that we take a more flexible approach instead of specifying the exact period. Reasonable notices to us, would mean, say, at least a month or something like that. If, in fact, an employee feels aggrieved that the period of notice has been too short, he can always appeal to my Ministry and we will try to resolve these differences. As long as it is in tune with what is current practice in Singapore, it would be considered reasonable.

Mr Ang and Mr Lim Swee Say brought up this point that with the raising of the retirement age, pensionable employees in the civil service should not be disadvantaged. Although civil servants are exempted from the coverage of the extension of retirement age, when we moved from age 55 to 60, we gave this exemption to the civil service. I understand that the PSD will in fact apply the new retirement age. In other words, civil servants will be able to work up to the age of 62. For pensionable civil servants, if they want to withdraw their pension at age 60, they would have to retire from the service because they cannot withdraw the pension and carry on working continuously. But if they want to carry on working, then their pension right will be preserved up to the age of 62. And any time between 60 and 62, if they choose to retire, they will be entitled to their pension. I think this is reasonable because if you are already working and drawing a salary, albeit about 10% less, there is really no need for you to have your pension upfront. So, you carry on working, you have a regular income and you do not need the pension. The pension will be released when you retire. But it will be frozen at the age of 60.

Mr Charles Chong made several comments in supporting the amendment. I agree with him that older workers right now may have more difficulties fitting into new jobs that are available and I think Mr Lim Swee Say also made a point on the possibility of retrenchment for older workers. Our approach is to try to help the older workers who are retrenched or who are more vulnerable to retrenchment to uplift their skills, so that they would be able to continue to serve or contribute to the company where they are currently working, or if offered an alternative job in another company where they can make a valuable contribution.

This is the main thrust of the Skills Redevelopment Programme and I reported to this House yesterday that, in fact, the Skills Redevelopment Programme is progressing very smoothly and the take-up rate is very encouraging. As of now, we already have more than 10,000 workers, mostly older workers, who have signed up for the programme for retraining. This is the way that we can help to look after the older workers who are in need of skills upgrading to ensure that they remain employable. I have to say that this is in fact the only way that we can help these older workers to equip them with the means to hold on to a job. There is no other way that we can ensure that they remain employable. We cannot legislate or force the employers, on their own, to retain the older workers, because there are economic considerations. We must make sure that older workers are equipped with all the skills that are necessary for them to make a value added to their employer and that is the only way to remain employable.

Mr Chong mentioned that the cut in CPF arising from the recommendation of the Committee on Singapore's Competitiveness could erode the differential between the younger and older workers. I want to correct an impression. The reduction in the employer's CPF contribution for older workers is a separate matter. So, we are going to proceed with that. We will, on 1st January 1999, reduce the CPF contribution rate for older workers from 7.5% to 4% for those aged 60 to 65, and for those aged 65 and above, from 5% to 4%. This is a separate matter. The CSC's recommendation, which has been accepted by the Government, to reduce employer's contribution by 10% point will also kick in. In fact, for older workers, from 1st January 1999, the employer's CPF contribution rate will come down to 2%, not 4%. So the differential would still be maintained. In fact, it will actually be improved, because in the past, we used to have 12.5% differential between the two groups. Now, we have narrowed the differential some more.

Mr Chong and Dr Vasoo also requested that safeguards should be put in place to ensure that older workers who are currently drawing salaries which are at or in fact below the market rate should not be affected by the 10% wage cut. If they were to look at the Bill, they will see that in fact these safeguards are already provided under the new section 4A(5) which stipulates that the wage reduction shall be based on factors such as employee's productivity, performance, duties and responsibilities and the wage system that a company practises or exercises. This provision means that while employers are given the flexibility to reduce the wages of older employees by up to 10%, such cuts cannot be introduced indiscriminately. For employees who are not on the seniority-based wage system, such as those who are paid by hourly rate or fixed rate, regardless of their age - in other words, they are being paid according to their job worth - then the employers would have to take this into consideration in deciding on whether to make a wage cut. If in fact they proceed to make a wage cut and the employees feel unhappy, they can always appeal to my Ministry. We will investigate their complaints and help them to reach a solution with the employers.

Mr Chong also suggested that we should prohibit companies which are not affected by the seniority-based wage system to introduce a wage cut for the older employees. While I understand his concern that he wants to provide for this explicit protection for older workers, we are of the view that the companies in fact should be given some flexibility to adjust the cost of retaining their older workers. Apart from the seniority-based wage system, companies may need to adjust the salaries of older workers based on other considerations which are already spelt out in the section provided earlier on. These other factors are productivity, performance and contribution to the company. So we should allow companies to do so to ensure continued cost competitiveness despite the fact that there are going to be more and more older workers.

However, I also would like to point out that it would be unwise for an employer to indiscriminately cut the wages of their productive older employees as this will certainly cause a serious effect on the morale of such employees. In any case, employers who intend to introduce a wage cut are required, under the proposed Bill, to give notice to the employees and come to an agreement between the employer and employee. In fact, in companies where the workers are represented by unions, the unions also would want to be consulted on the degree of reduction that the employers want to carry out.

Next, I come to Mr Cyrille Tan. I thank him also for the support. He has reinforced my argument on why we should move at this juncture, despite the economic downturn, to raise the retirement age. The fact that most older employees are prepared to accept the wage cut of 10%, according to Mr Cyrille Tan, is an indication that our process of tripartite discussion of a sensitive issue is working well. It is through this Tripartite Committee on Extension of Retirement Age that we have arrived at this consensus that would take into consideration the employers' and also the employees' concern. We have arrived at this level of wage adjustment which I think, as Mr Cyrille Tan has mentioned, is acceptable to the workers. That would help to encourage more older Singaporeans to carry on working. If you make too big a cut, then you will demotivate them and they might just decide not to carry on, in which case our Retirement Age Act would not have achieved its objective.

Mr Cyrille Tan also mentioned the need for training of older workers. I touched on it earlier on. I agree with him that we should continue to provide training to older workers, in particular, to help them to adjust to the changed labour market where newer jobs are being created, but requiring higher skills. I think it is of interest for Members to know that the shift towards higher skilled jobs is taking place quite rapidly. In the early 90s, EDB promoted investments and created a lot of jobs. Out of the jobs that were created through EDB's investment promotion effort, about one-third of them required skilled workers. But today the investments brought in by EDB and the jobs that they create require two-thirds of skilled workers. So we have doubled the requirement for skilled workers over a short period of less than a decade. So older workers, in particular, therefore need to make a special effort. Let me assure Members that Government will provide all the opportunities and fundings that are necessary to ensure that older workers who are in need of skills upgrading will receive this training.

Next, I turn to Mr Zulkifli Baharudin. He raised several valid points and concerns which I will try to address. He mentioned the possibility of introducing legislation like that in the US to outlaw discrimination of workers up to the age of 70. In fact, the Retirement Age Act is such a legislation because under the Retirement Age Act the employers are not allowed to retire workers on account of age until they reach a minimum statutory retirement age. So, in effect, it provides the same degree of non-discrimination for older workers. Yes, the provision now is to raise to only 62, but we have already served notice that we intend to raise it to 67. But we cannot do this in a rush. We cannot hurry the process. We have to take time to ensure that the employment market can adjust to this change. In due course, when we move it to 67, we would already be very much closer to the target in the US.

Mr Zulkifli also suggested that we should prepare workers for retirement. I also agree with him on that score that even as we talk about extending the retirement age and working longer, we do need to make preparation for eventual retirement, and to make both financial planning and also in terms of an alternative or even a second career after retirement. Even at age 62 or, in the future, 65, there will be many Singaporeans who are still very physically and mentally very alert and active. They can do a lot of other kinds of work as a form of a second career. It is part of our continuing education and training programme that we are in the process of establishing under the new charter of the Ministry of Manpower, ie, this concept of a lifelong learning. We will incorporate these ideas to train young and old workers so that they can continually upgrade their skills and capabilities and they can continue to serve their employers or in other areas such as social organisations, as mentioned by the Nominated Member.

But there is one point that he raised that I cannot quite agree with him, and that is, the point about trying to reserve certain jobs for older workers. For instance, he mentioned jobs in kindergartens and childcare services. While I agree with him that grandparents are great for looking after young children, we should not be interfering with the job market to the extent that certain jobs such as those in the childcare centres be reserved for older people. That would not help us in the sense that they will introduce rigidities and distortions into our labour market. It may cause unhappiness and resentment among the younger workers who also may want to do such jobs. We cannot generalise to say that younger workers cannot do such jobs.

On balance, it is not advisable for us to move towards trying to take a protectionist approach and say that certain jobs must be reserved for older workers or to interfere with our free labour market practice. Instead of adopting this protectionistic approach, trying to reserve jobs for older workers, which is really not efficient, economically speaking, it will be more viable for us to continue to encourage and promote the employment of older Singaporeans for a wide variety of jobs. I am sure Members are aware of how companies like McDonalds, for instance, have branched out in their search for manpower to the older Singaporeans and they have been very successful in that. They can meet most of their labour requirements by employing older Singaporeans, including retirees. More and more companies should adopt this approach and change their mindset to try to create opportunities for older Singaporeans.

Mr Zulkifli also suggests extending the Skills Development Fund or setting up a special fund to look after the training needs of older people. I have already mentioned that in our concept of developing a lifelong learning system, we will reach out to both young and old workers. At this juncture, I do not think there is a need to specifically identify a fund for older workers. In fact, the SRP, if you want to look at it, indirectly benefits older workers more than younger workers because the SRP is targeted at the lower skilled and less educated workers who, by virtue of the definition, become the older workers. They are the ones who are now benefiting most from the SRP. All Skills Development Fund training subsidies are eligible for young and old workers. We make no distinction on age.

I think I have addressed Mr Lim Swee Say's point about pensionable civil servants. Their pensions will be protected. They can carry on to work beyond 60 to 62. Of course, they would also have to come to an agreement on the amount of wage reduction, just like employees in the private sector.

I would pass on his suggestion that the civil service takes the lead in implementing the base-up wage system. I think this will be considered by the PSD. I agree with Mr Lim that while we can amend the law, there is still no guarantee of employment because this is very much dependent on the job opportunities available. In a situation where there is an overall decline in employment, as we have experienced in the last two quarters as a result of the economic downturn, there is of course a greater difficulty to ensure that older Singaporeans stay in the job. But I would urge all employers, even when they have to downsize, not to inflict a penalty on the older workers. I think Mr Lim has adequately pointed out that older workers, and, in fact, several other Members have mentioned this, can continue to make a valuable contribution to the company's operation.

Finally, I come to Mr Jeyaretnam. He says that the talk of raising the retirement age is academic as long as employers are allowed to terminate the employee's service with one month's notice. This is not a new thing. This right to give notice to terminate an employment contract is already in our Employment Act. We have to look at it in totality. While the employer can give termination notice, there must be a sufficient reason for such termination. If in fact an employee whose service has been terminated but he feels that it is actually a dismissal in the guise of contractual termination, he can always appeal to my Ministry. Each year we do get a certain number of such appeals and we have always been able to resolve the differences between the employer and employee. So it is not a completely one-sided situation where the employer has absolute right and to exercise it indiscriminately. We have a mechanism within the Ministry in implementing the Employment Act to ensure that employees' interests are also looked after. I am pleased to inform Members that in terms of conciliation of resolving such difficulties, the Ministry's Labour Relations Department has been very effective and efficient.

I think the Member also has to look from the point of view of the employer. After all, employees also can leave a job by giving a certain period of notice. So it cuts both ways. An employer has invested money in training an employee and the employee can turn around and say, "Look, I want to quit. I give you a month's notice." So I think in a free labour market, we should allow this flexibility, instead of creating more rigidities, as he seems to be suggesting.

Mr Jeyaretnam: May I just ask the Minister one more question? Does he not agree that there is no provision in the Act for an employee whose services are terminated with the requisite notice of one month to appeal to the Ministry? He is not aware of that.

Dr Lee Boon Yang: Mr Speaker, Sir, I have just said that if any employee feels that his services have been unfairly terminated, he can appeal to my Ministry.

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. - [Dr Lee Boon Yang].

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