WAGE COST REDUCTION MEASURES BY COMPANIES

Mr Ong Ah Heng asked the Minister for Manpower if he will indicate the latest development on wage cost reduction measures undertaken by companies since the announcement of the revised guidelines by the National Wages Council.

Mr Ong Ah Heng asked the Minister for Manpower whether the decision by some companies to return savings on employers' Central Provident Fund contribution to their employees will have any adverse impact on our cost reduction exercise.

Mr Ong Ah Heng asked the Minister for Manpower how many companies' senior officers had taken higher wage reduction, in support of the National Wages Council's call to moderate wage cut for lower income workers.

The Minister for Manpower (Dr Lee Boon Yang): Mr Speaker, Sir, Mr Ong has raised two questions relating to the recent National Wages Council's wage guidelines and another on the CPF reduction. May I have your permission to take all the three questions together.

Mr Speaker: Yes.

Dr Lee Boon Yang: As the revised NWC guidelines were announced only in November last year, it is too early at this juncture to determine how many companies have implemented the guidelines. My Ministry will conduct a survey to gauge the employers' response to the revised NWC guidelines. The findings are expected to be available by April 1999. In the meantime, feedback from employers and settlements of cases referred to my Ministry for conciliation indicates that most employers in both the unionised and non-unionised sectors have implemented the wage reduction guidelines issued by the NWC. The extent of wage cut varies from company to company depending on their performance. If this trend continues, the companies should be able to reduce their wage cost by 5-8% as recommended by the NWC. Together with the 10 percentage point cut in the employers' CPF contribution implemented in January this year, we should be able to achieve the target of 15% reduction in overall wage cost to regain business competitiveness.

MOM's survey will also determine whether senior management personnel had taken a bigger cut in their salary as compared to their junior counterparts. While the detailed findings will only be available in April, information available so far indicates that many companies have implemented a bigger cut in the salary of their executives and senior management personnel. In the case of the civil service, senior civil servants are subjected to higher cuts in their salaries compared to junior officers as announced by DPM Lee in November last year.

With regard to Mr Ong's question on the impact of cost reduction resulting from some companies wanting to return the CPF savings to their employees, I would like to point out that only companies which continue to perform very well would be in the position to do so. The CPF Board has so far received 49 enquiries by companies on the possibility of continuing their contribution at 20%. Another seven companies have indicated that they were considering passing the savings from the CPF cut to their employees in the form of additional bonuses or other benefits. Such efforts by employers to reward workers for good performance under difficult market conditions are consistent with NWC's recommendation and will not have any adverse impact on our overall effort to regain competitiveness.