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Retirement Age (Amendment) Bill 2011 2nd Reading Speech by Mr Gan Kim Yong, Minister for Manpower, 11 January 2011, 3.00pm, Parliament

Employment practices
  1. 1. Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."
  2. Sir, the average life expectancy of Singapore residents has risen steadily, from 68 years in 1970 to 76 years when the Retirement Age Act was enacted in 1993. The average life expectancy has increased further to 81 years in 20091. Sir, it is a good thing that we are living longer. As we live longer, many Singaporeans want to work for longer. Working not only enhances their financial security in old age, but also provides an added sense of purpose in life. They can remain active while making valuable contributions to their organisations.
  3. Employers can also tap on the increasing pool of experienced and skilled older workers to supplement their workforce. Older workers are a critical source of manpower, experience and skills to sustain our economic vitality.
  4. For these reasons, we need to create opportunities for our workers to work longer, beyond the current retirement age of 62. We have studied what other developed countries have done to enable their workers to work longer. Their experiences have shown that merely raising retirement age may not be the most effective approach. Japan, for example, a country with an aging workforce and yet enjoys one of the highest employment rates for older workers, was the first to legislate re-employment in 2006. Re-employment provides both employers and employees the flexibility to make necessary adjustments to employment terms and conditions to meet their respective needs. This flexibility will help to allow older workers to work longer without imposing undue burden on employers. Therefore, we have decided to take a similar approach by introducing re-employment. Let me elaborate.
  5. First, the statutory minimum retirement age will remain at 62 years. This means that employers have the flexibility to stipulate a mandatory retirement age as long as it is 62 or any higher age. Second, employers will be required to re-employ those who have reached retirement age but are willing and able to continue to work, up to age 65 as a first step, and later, to 67 as provided for in the Act. Re-employment need not be for the same job or on the same terms. The employer and the worker have the flexibility to make changes to the existing job arrangements to suit their needs.
  6. For example, employers may have to consider their organisational needs, such as leadership renewal, and may have to redeploy older employees. On the other hand, older employees may wish to take up a different role, or a lighter one perhaps, so as to spend more time with their family. Re-employment allows both parties to consult each other and work out mutually agreeable arrangements.
  7. Sir, the tripartite partners have been preparing the ground since 2007 when the Government first announced our intention to introduce re-employment. We released a set of Tripartite Guidelines on Re-employment of Older Employees in March 2010 to help employers put in place re-employment practices. In addition to regular industry briefings and seminars, the tripartite partners have put in place a variety of resources and programmes such as the re-employment website portal, the ADVANTAGE! incentive scheme, training programmes and guidebooks to provide employers and workers with the support they need to prepare themselves for re-employment.
  8. We have made good progress since 2006. According to a survey2 done by my Ministry in 2009, nearly two-thirds (64%) of companies surveyed already allowed their employees to work past age 62, either on existing employment contracts or through offering re-employment. Of those which had employees reaching the age of 62, a vast majority (92%) of their employees were allowed to work beyond 62. The Public Service has also taken the lead to implement re-employment early. In November 2010, the Public Service Division released a set of guidelines to implement re-employment for eligible public service officers who turn 62 on or after 1 July 2011.
  9. Sir, we are now ready to introduce re-employment legislation.

    Retirement (Amendment) Bill
  10. This Bill amends the existing Retirement Age Act (RAA) to introduce re-employment. The Bill seeks to achieve two objectives. First, it will provide opportunities for workers who are willing and able to continue working to do so beyond retirement. Second, it will provide flexibility to facilitate employers to retain their older workers beyond retirement.
  11. The RAA will be renamed the "Retirement and Re-employment Act (RRA)". The Bill introduces a new Part III which contains the provisions on re-employment and a new Part IV which provides avenues for employees to seek recourse for re-employment disputes. We also took the opportunity to make technical amendments to update some of the existing provisions in the RAA.
  12. Sir, I will now elaborate on the key provisions in the Bill.

    Eligibility criteria for re-employment
  13. The RRA will come into effect on 1 January 2012 and re-employment will apply to eligible employees who attain the specified age on or after 1 January 2012. The specified age is defined in Section 2 of the Act as the minimum statutory retirement age of 62, or contractual retirement age if it is higher. Section 7 in the new Part III of the RRA spells out the two criteria for employees to be eligible for re-employment – one, the employee must have at least satisfactory work performance, and two, the employee is medically fit to continue working.
  14. Employers should put in place appropriate performance appraisal systems to evaluate workers' performance. The law places the onus on employers to show proof that an employee is not eligible for re-employment.
  15. Open and early communication is also important to reduce misunderstanding and ensure smooth implementation of re-employment. Section 7A (8) requires employers to give reasonable prior notice to those who are not eligible. Section 7A (10) similarly requires employees to give reasonable prior notice to their employers if they do not wish to work beyond retirement. While "reasonable prior notice" is not defined in the law, the guidelines I mentioned earlier encourage employers and employees to inform each other of their decision at least 3 months before retirement.

    Exemptions
  16. Sir, certain groups of employees are currently exempted from the minimum retirement age under Section 11 of the Retirement Age Act. This includes foreign employees holding work passes, employees whose job requirements are physically demanding, and employees, who before the enactment of the Act in 1993, are covered under retirement benefit schemes that are linked to a contractual retirement age lower than the statutory minimum retirement age of 62. With the introduction of re-employment, we have been reviewing these exemptions in consultation with the relevant employers and unions to examine whether the exemptions are still required.
  17. Employees who are recruited at the age of 55 or above are also currently exempted from the RAA. To ensure that their employability will not be affected, these employees will continue to be exempted from the minimum retirement age provisions. However, employers will be required to offer re-employment to these employees if they meet the eligibility criteria for re-employment and have at least 3 years of service upon reaching the age of 62.
  18. We will continue to work with the relevant unions and employers and complete the review before the implementation of the re-employment law.

    Re-employment Obligations
  19. Sir, Section 7A of the Act stipulates the re-employment obligations of employers. Re-employment is defined in Section 2 of the Act as the employment of an employee by the same employer. This is because employers should not be allowed to discharge their re-employment obligations simply by transferring their older employees to another employer, who is not obligated to keep the employee until they reach65. If the employee does not wish to be re-employed by his employer and chooses to work for another employer instead, then the previous employer is relieved of all re-employment obligations.
  20. Under Section 7A (4), employers may offer a new re-employment contract upon the employee attaining the specified age. To provide re-employed employees with greater certainty and assurance, subsection 6 of Section 7A requires the re-employment contract to be of a minimal duration of one year at each instance, or up to the point when the employee turns 65.
  21. Some employers, especially the Small and Medium Enterprises (SMEs) may not have formal re-employment contracts but continue to employ their workers on the same job and terms, up to age 65. They will be deemed to have fulfilled their re-employment obligations.

    Wage and benefits adjustments
  22. Sir, a key feature of re-employment is the flexibility that it provides to allow employers and employees to make adjustments to employment terms and conditions. In designing jobs and remuneration for older employees, employers should exercise fairness in making any adjustments to terms and benefits of re-employment, such as wages, medical benefits and leave benefits. Similarly, employees should exercise flexibility and be ready to accept the necessary adjustments for re-employment, including accepting a salary that is commensurate with the job worth and going for training to take up new job responsibilities.
  23. Section 7A (5) requires any adjustments to be based on reasonable factors such as the employee’s productivity, performance, duties and responsibilities, and the wage system such as seniority wage system applicable to the employee. The tripartite guidelines describe the principles on how this could be done. For example, taking into account the extent of seniority-based wage in the company, employers could adjust wages, using the mid-point of the salary range of the job as a reference, while accounting for the experience and competency of the worker.
  24. Under Section 7B, the period of service prior to retirement is disregarded to signify a fresh term of employment for re-employment. However, when an employer enters into multiple re-employment contracts with his employees, the period of service accumulated from employment under the various re-employment contracts will be considered as continuous service. Section 7B (2) also stipulates that employees who are re-employed are not required to fulfill the qualifying period for sick leave and annual leave as they would have been working with their companies for a long time.

    Employment Assistance Payment (EAP)
  25. While the main objective of the law is to create employment opportunities for older workers, we recognise that some employers may not be able to find suitable jobs for employees eligible for re-employment. As a last resort, Section 7C of the Act requires employers to offer a one-off Employment Assistance Payment (EAP) to eligible employees who wish to work beyond retirement, but are not re-employed because their employers are unable to find a suitable job vacancy for them.
  26. Sir, the purpose of the EAP is to help the workers while they look for alternative employment or undergo re-training. It is not meant as a compensation for loss of income or recognition for past years of service. Due to diversity in employment contracts, we should not hardwire a formula or quantum for EAP in the law. This will create rigidity in implementation. Instead, reference points for EAP amounts can be found in the tripartite guidelines. For example, the tripartite guidelines suggest that the EAP could be 3 months of the gross monthly salary, with a minimum amount of $4,500, and a maximum amount of $10,000. These reference points are carefully calibrated after discussion with the tripartite partners to ensure that it does not cause undue burden on employers or disadvantage low-income workers.

    Remedies
  27. Employers or employees with re-employment disputes may approach the Ministry of Manpower for conciliation and mediation under Section 8A of the Act. If this fails, they may either appeal to the Minister for Manpower on grounds of unfair denial of re-employment or lodge a claim with the Commissioner for Labour (COL) for the purpose of claiming EAP. This is similar to the existing dispute settlement processes under the Employment Act.

    Other technical amendments
  28. Sir, we have also taken the opportunity to make technical amendments to update the existing provisions in the Act. Amendments are made to raise the penalty fine for non-compliance with Minister's order from $5,000 to $10,000 and increase the composition fine for offences from $500 to $1,000 to bring it in line with the Employment Act.

    Conclusion
  29. Mr Speaker, Sir, the introduction of this Bill will provide opportunities for older workers to work.
  30. Sir, as I have mentioned earlier, our statistics show that the majority of the employers are generally able and willing to re-employ eligible workers given the flexibility that re-employment offers. Moreover, our experience during the recent economic downturn showed that employers in general do recognise the value that older employees bring to their organisation. Many retained their older employees who bring with them the knowledge and experience needed by the company. As a result, the employment rate of older workers age 55 to 64 held steady at 57.2% in 2009 and improved to 59% in 2010 as the economy recovered.
  31. While the recession did not have any negative impact on older worker employment, it impeded our progress towards achieving the target of 65% employment rate for residents aged 55 to 64 by 2012. We will need to regain the momentum by pressing on with our efforts to encourage adoption of re-employment and promote employment of older workers.
  32. Sir, we have had extensive consultations with the public and our tripartite partners, the Singapore National Employers' Federation (SNEF), and National Trades Union Congress (NTUC), during the drafting of this Bill, and have taken into account their concerns and feedback. We have also updated the tripartite guidelines and these guidelines will be released today. It contains more details on the implementation of re-employment. The tripartite guidelines will be published in the Gazette as it serves to complement the law and provides a basis for mediation and adjudication of re-employment disputes.
  33. Sir, the Bill balances the objective of providing opportunities for more employees to work beyond retirement, with the need to maintain flexibility in implementation. This will allow employers to continue to tap on the pool of experienced and skilled older workers while remaining competitive. In the long term, the introduction of the Retirement and Re-employment Act will help employees who are able and healthy to continue working and make valuable contributions to their organisation and society. This will also help us better utilise our limited manpower resources and reduce the reliance on foreign workers to ensure sustainable economic growth for Singapore.
  34. On this note, I would like to thank all who have contributed to the process of introducing re-employment, in particular the NTUC and SNEF, and the members of the Tripartite Committee and Tripartite Implementation Workgroup on the Employability of Older Workers. They have provided valuable feedback and suggestions which helped us fine-tune our proposals. I seek the continued support of our tripartite partners to ensure an effective and smooth implementation of the re-employment law.
  35. Sir, I beg to move.

 

1 Prelim figure for 2009 released by DOS
2 This is the Retirement and Re-employment Practices 2009 conducted by MRSD.