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Committee of Supply (Speech 2) by Mr Gan Kim Yong, Minister for Manpower, 09 March 2011, 4.45PM, Parliament

Employment practices

1. FOSTERING INCLUSIVE GROWTH

(I) SHARING OUR GROWTH, IMPROVING EMPLOYABILITY

  1. Sir, while we strive for increased productivity and sustainable economic growth, it is paramount that this growth is inclusive. All Singaporeans should share in this growth.
  2. In January, we had a full debate in this house on a motion on inclusive growth. Many members shared their views on the subject and there was general consensus that Workfare was the right approach to helping low wage workers. Ms Irene Ng suggested tying Government incentives and subsides to the outcome of wage improvement of low-wage workers and improving the work conditions of low-wage workers. We need to be very mindful that each government scheme or subsidy has specific objectives and we should not undermine such objectives by tying to additional conditions to help low-wage workers. It is better for us to continue to focus on enhancing our Workfare scheme and also to work on the Inclusive Growth Programme administered by NTUC to help low-wage workers. Many members offered suggestions on how to strengthen Workfare during the debate as well as during COS. We will consider the suggestions carefully when we next review Workfare.

    a) Workfare and Workfare Special Bonus (WSB)

    (Please refer to Annex A for Minister's speech in Mandarin)
  3. Meanwhile, Minister for Finance has announced a Workfare Special Bonus (WSB) which has been welcomed by many members. We can afford the WSB because our economy performed exceptionally well last year, allowing us to share our economic surplus with low-wage workers in a targeted and meaningful way. Sir, allow me to talk about Workfare and the Workfare Special Bonus in Mandarin.
  4. WSB totalling up to $2,800 will be paid out to WIS recipients for work done in 2010, 2011 and 2012. During the debate in January, several members like Ms Josephine Teo have suggested raising the cash component of Workfare. Employees will receive WSB fully in cash. Self-employed persons too will now also receive half their WSB in cash, with the other half paid into their Medisave to build up their healthcare savings.
  5. WSB payments will be timed to be paid in between the half-yearly WIS payments in September and March, to give recipients more frequent payouts.
  6. While WIS and WSB are helpful, low-wage workers must also train and upgrade their skills so that they can take on better jobs and earn more. The Government introduced the Workfare Training Support (WTS) scheme last year to help low-wage and low-skilled workers achieve this. We now introduce CET Qualification Award to encourage rank and file workers to attain CET qualifications. We will also do more to promote WTS.
  7. Sir, I would now explain what all our schemes mean to low wage workers in English.
  8. Let's take for example a 55-year old worker living in a 3-room HDB flat called Mr Tan. He earns $1,000 a month.
  9. First, Mr Tan will receive $2,100 in WIS. He will receive a further $1,050 WSB for work done in 2010. This is a total of $3,150 for working and staying employed. As Mr Tan is a keen learner, he tapped on WTS to complete WSQ literacy and generic skills training, and even moved on to attain a WSQ Certificate. In the course of his training, Mr Tan would have received an additional $300 in Training Allowance under the Workfare Skill Up programme. Further, he would have received a total of $800 from various awards for completing skills upgrading. In total, he will receive a total benefit of $4,250 this year, and this does not include the generous 95% funding support in course fee subsidy and absentee payroll which enabled his employer to send him for training.

    2. RE-EMPLOYMENT & RETIREMENT ADEQUACY

    (II) RE-EMPLOYMENT – A TRIPARTITE RESPONSIBILITY
  10. Let me now turn to re-employment and retirement adequacy of Singaporeans. Mr Ang Mong Seng, Mr Low Thia Khiang and Ms Sylvia Lim asked about the employment outlook and opportunities for older workers. Re-employment is the best way to create more opportunities for our older workers to work longer and save more for retirement. At the same time, the economy and society stand to benefit from the valuable experience and contributions of our older workforce. This is especially true in the current tight labour market. Tapping on older workers will also help employers reduce their reliance on foreign workforce.
  11. The Retirement & Re-employment Act introduced earlier this year will take effect in January 2012. The RRA spells out the key obligations and conditions for re-employment. To complement the law, the tripartite partners also updated the Tripartite Guidelines on Re-employment of Older Employees to provide more details on how re-employment should be implemented.
  12. In designing jobs and remuneration for older employees, employers should exercise fairness and take into account reasonable factors when making adjustments to terms and conditions of re-employment, such as wages, medical benefits and leave benefits. Similarly, employees are encouraged to exercise flexibility and be ready to accept the necessary adjustments for re-employment. This includes accepting a salary that commensurate with job worth rather than seniority, and going for training to take on new job responsibilities. Employers and employees who encounter re-employment disputes may approach my Ministry for assistance.
  13. Although the law will only come into effect on 1 January 2012, our survey in 2010 shows that the majority of the employers are able and willing to re-employ eligible workers. 77% of companies surveyed already allow their employees to work past age 62, either on existing contracts or through re-employment. This is a significant improvement from 64% in 2009. 94% of employees reaching the age of 62 were also allowed to continue working beyond 62, up from 92% a year ago.
  14. Sir, as you can see, many employers have already adopted the tripartite guidelines and implemented re-employment ahead of legislation. One example is VDL Enabling Technologies Group(S) Pte Ltd, a contract manufacturing partner that supplies high tech equipment to leading OEM manufacturers. This company employs 215 employees, of which 17 are above 55 years of age.
  15. Since last year, VDL has formalised their re-employment policies and have communicated these policies to all their employees. Line supervisors will be informed of their retiring employees 6 months before retirement and are required to initiate discussions on re-employment with their employees. Employees who are re-employed will be deployed according to their skill sets, work performance and the organisational needs. Where there are still seniority-based elements in their wage structure, some wage adjustments will be made. The first beneficiary of the scheme is Mr Tan Eng Kem, who reached age 62 last year. He is now re-employed in the same job as a Senior Associate Engineer in charge of Quality. Now, he supervises a team of Quality Assurance Engineering Specialists as well as performs incoming and final inspection of machinery parts and modules of semiconductor equipment. In line with VDL’s re-employment policy, Mr Tan’s basic wages has been adjusted to reflect the productivity but all other terms and conditions remain the same. VDL is already engaging another employee retiring this year in re-employment discussions. VDL also continues to provide them with training opportunities to upskill and stay relevant in the workforce.
  16. I urge all employers to follow the example of VDL and implement fair re-employment practices. I am confident that with the strong support from our tripartite partners, we will be able to implement re-employment smoothly.
  17. Ms Sylvia Lim asked about the employment rate target for older workers. Our tripartite efforts have produced positive results with the employment rate for residents aged 55-64 rising steadily from 2005 to 2008. This has since risen to a new high of 59% in 2010 after two years of stagnation due to the downturn. The unemployment rate for older residents aged 50 and above is comparable to the rate for all residents.
  18. We need to make up for the momentum lost due to the downturn. We have reassessed our target and will now aim to achieve an employment rate of 65% for older workers aged 55-64 by 2015 instead. This should be achievable with the concerted measures we are taking to improve the employability of older workers, and if the economic and employment climate remains positive.
  19. My Senior Parliamentary Secretary will give you more details on our tripartite efforts to help employers implement re-employment and improve the employment landscape for all older workers in the year ahead.

    (III) ENHANCING RETIREMENT ADEQUACY
  20. Besides re-employment, we also enhance our retirement adequacy through the changes in the CPF.
  21. Madam Ho Geok Choo expressed concerned about the retirement adequacy of CPF members and asked about the Minimum Sum (or MS) attainment rate. For the cohort turning 55 in 2010, over 40% of active CPF members, or about 12,600 members, attained their cohort MS set at $123,000 after lump sum withdrawal. Of these members, more than half have set aside the full cohort MS in cash.
  22. The Minimum Sum represents only part of a member’s retirement savings. Almost half of CPF savings are invested in housing. If we were to add back the amounts withdrawn for housing, the average savings of active members turning 55 in 2010 would be $226,000, with the MS attainment rising to about 60%.
  23. The use of CPF for housing has helped nine in ten Singaporeans own their own homes. The flat is a valuable asset which members can monetise through an array of options if they so choose, such as the Lease Buyback Scheme or subletting part of their flat to earn regular rental income.
  24. Mr Seng Han Thong called for more to be done to help self-employed persons save through the Medisave. He cited the Drive-and-Save scheme as a positive example of efforts to encourage self-employed taxi drivers to make Medisave contributions. Such contributions by taxi companies will now be tax-deductible. Since implementation of the Drive-and-Save Scheme in January 2011, about 12,500 drivers have qualified to receive co-contributions from their taxi companies totalling almost $190,000.
  25. Saving for healthcare needs is a personal responsibility, but the government helps through the WIS and Medisave top-ups. In fact, now that self-employed persons will receive cash through the Workfare Special Bonus, there is even more reason for self-employed persons to contribute to their Medisave.
  26. I agree with Mr Seng that business partners of self-employed persons should also play a role. MOM and CPF Board will work with industry associations, unions and companies to develop similar schemes in other sectors.
  27. Mr Ang Mong Seng recognised older workers may have health conditions that prevent them from working. He was worried that such members will not be able to withdraw their CPF because they have not reached the draw down age. I will like to assure members that they can make early withdraws from their CPF on medical grounds, if they are suffering from any medical condition that has rendered them permanently unfit for any employment. The application for such withdrawals would have to be certified by CPF Board’s panel of doctors and approved by the Board.
  28. Madam Ho suggested that we should educate the public on the importance of retirement planning. I agree. CPF Board actively reaches out to members with retirement planning messages through various channels such as the internet and community events. CPF Board also enlists the help of grassroots leaders to educate members from all the Community Development Councils' districts. In addition, CPF Board participates in the national financial education programme—MoneySENSE—which spreads financial literacy messages through many platforms such as info-advertorials, monthly features in the NTUC Lifestyle magazine and radio programmes. We will continue to do more to help members understand financial planning better.
  29. Mr Chiam asked whether we can peg our CPF returns to sovereign funds like Temasek. Sir, we should recognise that Temasek invests in higher risk assets and businesses and the returns are not guaranteed. Even the principle are not guaranteed. On the other hand, CPF monies were shielded from the short-term market volatility. Most Singaporeans would not wish to expose their hard-earned retirement savings to such volatility and potential losses.
  30. Instead, savings in the Ordinary Account will receive a guaranteed interest rate of 2.5% at the minimum. Savings in the Special, Medisave and Retirement Accounts will receive an interest of 4% this year. This ensures that the balances of CPF members continue to grow, even in today’s low interest rate environment.
  31. To improve the overall returns of CPF monies, the Government also pays an extra 1% interest on the first $60,000 of CPF savings.
  32. Those who wish to invest part of their CPF savings in other instruments with potentially higher returns can already do so through the CPF Investment Scheme.
  33. Besides the CPF interest rate framework, recent initiatives announced in the budget statement such as the 0.5% increase in CPF contribution rates and raising the CPF salary ceiling to $5,000 will also help CPF members build up their savings faster. Taken together, the two changes will help a 45 year old person earning $5000 a month increase his CPF savings by $22,200 (in 2010 dollars) by age 55. We are phasing in the changes gradually to give employers more time to adjust.
  34. From time to time, the Government also tops up CPF savings, such as the Medisave top-up announced in this Budget statement. This year, 1.3 million Singaporeans will receive a total of $500 million top-ups in Medisave. Those aged 45 and above will receive Medisave top ups of between $300 and $800.

    (IV) TRIPARTISM – OUR COMPETITIVE ADVANTAGE
  35. Many of our policies and programmes were implemented effectively because of our strong tripartite partnership which is the "special sauce" that has powered our economic growth and ensured our workers benefit from the growth.
  36. Tripartite efforts played an important part in helping us weather the recession in 2009 and allowed us to recover strongly. The partnership has been instrumental in preparing employers and workers for re-employment. They also contributed to the employment dispute resolution mechanism for PMEs which was launched in February 2011 and the Tripartite Alliance for Fair Employment Practices (TAFEP) in promoting fair and responsible employment practices.
  37. Going forward, our tripartite partnership will continue to be an integral part of our strategy to push for productivity improvement, encourage training for workers and ensure inclusive growth. The Employment and Employability Institute (e2i), which administers the $40m Inclusive Growth Programme, is a key platform of this tripartite effort.

    (V) CONCLUSION
  38. Sir, we must capitalise on our strong economic fundamentals and recovery momentum to create more and better employment opportunities for all Singaporeans, including those who are older or earning lower wages so that they too can have a better future.
  39. Our strong tripartite alliance has enabled us to weather the global economic crisis and to emerge from it even stronger than before. We must build upon the progress we achieved to propel us towards a more productive and more inclusive Singapore in 2011 and beyond.