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Less than 3% of private firms cut older workers' wages

  • The Straits Times (20 May 2010) : Less than 3% of private firms cut older workers' wages
  • The Straits Times (14 May 2010) : Unjust pay cut for older workers hurts

Less than 3% of private firms cut older workers' wage 
- The Straits Times, 20 May 2010

We refer to the commentary by your senior writer Radha Basu (ST, 14 May).

2.   The Retirement Age Act does allow wage reduction of up to 10 per cent.  However, the Act also makes it clear that if there is any reduction, it should be based on "reasonable factors" like the employee’s productivity, performance, duties and responsibilities, and the market value of the job. It is worth noting that age does not qualify as a reasonable factor in the Retirement Age Act.

3.   While we have made progress in moving towards a performance-based wage systems, there are still establishments that continue to adopt a varying degree of seniority-based wage systems.  Hence, the flexibility provided in the law still serves to enhance the employability of older workers.  As cited in the article, NTUC Secretary-General Lim Swee Say noted that some companies which have narrowed the max-min ratio to 1.3 will then have less reason to make wage reductions at 60.

4.   The overall number of establishments that practise wage reductions at age 60 is small.  The latest Ministry of Manpower survey on some 3,600 private sector establishments earlier this year found that only 2.8 per cent of the establishments with employees aged 60 and above still have such a practice.

5.   The tripartite partners agree with the writer that wage reduction at 60 should not be "automatic". We like to emphasise that it should only be based on the reasonable factors as stated clearly in the Retirement Age Act. We urge employers and workers to work together to strive for a win-win outcome, by rewarding workers with wages reflective of their job scope, value of the jobs, productivity, and performance, regardless of their age.

6.   Employers can visit the re-employment portal for more information. Employees who feel that their wages are unfairly adjusted can approach their unions or the Ministry of Manpower for assistance.
Unjust pay cut for older workers hurts
- The Straits Times, 14 May 2010


Implementation of ruling on pay cut at age 60 is still an issue.

Madam L. Tay spent 43 years teaching two generations of Singaporeans to read and count. She turned 60 last year. Days later, her pay was cut by 10 per cent. She was doing the 'same job and more', Madam Tay wrote to me last week, responding to a Saturday Special package on older workers published on Labour Day.

One article mentioned a statement by Manpower Minister Gan Kim Yong that while the Retirement Age Act allows companies to cut a worker's pay at 60, companies should not do so 'automatically'. Madam Tay is riled that the Government - her employer - is doing to its own staff what it is urging others not to do. 'Shouldn't the Government of Singapore practise what it preaches?' she says. 'If it cuts wages of its employees the minute they reach 60, the private sector will definitely follow suit.'

The Public Service Division, which oversees remuneration policies of civil servants, told The Straits Times it does not mandate an automatic 10 per cent wage cut at 60. A 'good majority' do not get such a cut, it said. But individual agencies are free to make 'wage adjustments' taking into account 'an officer's salary relative to his grade' when he turns 60. When even the Government does so, it is no surprise that many companies take advantage of the existing law to cut workers' pay when they hit 60.

This provision - to cut the pay of workers by up to 10 per cent when they turn 60 - was introduced in 1998. A survey five years ago indicated that only 15 per cent of private companies did so. But anecdotal evidence suggests the number now is well above that. The labour movement NTUC, which represents 540,000 workers, estimates that about 80 per cent of unionised companies implement pay cuts when a worker turns 60. Many cut pay by as much as 10 per cent, the maximum permissible limit. Are companies taking advantage of the rule to introduce across-the-board pay cuts to all turning 60?

This was surely not the outcome intended when the law was first introduced 12 years ago. At that time, the aim was to lower the costs of hiring older workers to encourage employers to retain them. This was critical at a time when many companies had a seniority-based wage system, paying older workers a lot more than younger ones doing the same jobs. But as NTUC chief Lim Swee Say pointed out late last year, most companies now pay according to performance rather than age. Where previously the salary of an older worker could be 2.1 times that of a younger worker doing the same job, it is now just 1.3 times, he said. It is true employment rates of those in their early 60s rose from 30 per cent to nearly 48 per cent from 1998 to last year. But employment rates of those in their late 50s also increased steadily over the same period, so it is hard to say the rise is due to the pay cut allowable at 60.

Indeed, there appears to be no evidence that employment rates would not have naturally gone up as society aged - though probably at a slower pace - even if the pay cuts were not put in place. Some reasons for pay cuts at 60 include reducing job scope, hours or level of responsibility. But companies - and government agencies - which cut the pay of a worker at age 60 without justification are just discriminating against older workers.

This kind of mindset cannot be allowed to continue, in view of an impending change to the law in 2012, which will make it compulsory for companies to offer re-employment to eligible workers. Right now, guidelines are being proposed that such 'eligible' workers have to be medically fit and perform 'satisfactorily'. Terms of employment are also left to companies and workers to hammer out on their own, leading the latter to fear that they may be short-changed. On paper, the re-employment law can help workers secure employment after 62.

In practice, however, if there is already a culture of pay cuts at 60 for no good reason, the chances of further unjustified cuts at 62 are high. Indeed, some re-employed workers have already suffered such second cuts. Re-employment contracts may be for just one year - which means that if a worker contracts a serious illness, say, at 63, his contract may not be renewed.

Singapore is already labour-starved, and needs its growing legions of older folk to remain in the workforce. Higher life expectancies and one of the lowest fertility rates in the world also mean workers have to continue working longer for their retirement. Ideally, provisions allowing for automatic age-based pay cuts should be done away with altogether. In practical Singapore, it may be that employers want this option to remain. If so, better policing is needed to ensure that the 'flexibility' given to employers does not become a loophole for them to exploit or to short-change workers as they age.
 
A survey is urgently required to show how many agencies - both government and private - are reflexively cutting pay at 60, and for those who are re-employed once more at 62. Such surveys should be done regularly, after the re-employment act kicks in in 2012. Workers too can do their bit. If they feel their employers cut their pay unjustly, they can go to their unions or the Ministry of Manpower. And if they want to continue commanding high pay and yearly increments, they should improve skills and performance through training, instead of relying on their 'seniority'.

Singapore employers too need to change mindsets and speed up the move away from seniority-based wages. Most of all, they must stop viewing the provision for pay cuts as an automatic cost-saving measure. Those that want to cut pay at age 60 or 62 should agree to a commensurate reduction in hours and responsibility, if the worker so desires. This gradual or phased approach to retirement is already being practised in countries like Finland, Germany, Japan and Britain. If implemented thoughtfully, this could turn out to be the win-win solution both workers and employers are looking for. Older workers, after all, need fair play and fair pay.