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SINGAPORE – The National Wage Council has given employers the green light to implement temporary pay cuts if it means saving jobs.
They should seek the support of employees before doing so and only make the necessary reductions to minimize layoffs, the tripartite group said on Friday (October 16) in updated guidelines that will apply from November 1 to June 30 next year. .
The council did not set an amount for pay cuts due to the uneven impact of the Covid-19 crisis across sectors and companies, but any reduction should depend on the performance and prospects of the sector and the company.
Employees must be informed how wages will eventually be restored.
The guidelines, which are not mandatory but have been accepted by the government, emerge after the council was convened for the second time this year. They set out six key principles for implementing pay cuts, including employers using the annual and monthly variable components to adjust wages and cutting only the base pay if really necessary to avoid layoffs. Management should make earlier and deeper cuts in their wages.
The council recommended freezing wages instead of cutting them for people who earn up to $ 1,400 a month. Cuts for those earning more than that shouldn’t drop the basic monthly salary below $ 1,400.
This is only the fourth time since the council was formed in 1972 that it has convened twice in one year; the last three times were also during economic crises.
Council Chairman Peter Seah said the discussions this time were more intense and took longer than the first round as the issues have been very complex.
“There was a lot of give and take and, more importantly, a lot of trust among the tripartite partners to find solutions that are better not only for companies but also for employees,” he told a press conference on Friday.
The president of the National Congress of Trade Unions, Mary Liew, a member of the council, said the union movement agreed that it was necessary to support “more drastic and immediate measures” due to the need to minimize layoffs after efforts were exhausted. to retain and reassign existing workers.
“It will definitely require sacrifice on the part of workers, but we hope that employers will consider their sacrifices when things improve, whenever possible, recognize their efforts and also reward them,” he said.
The council’s initial annual recommendations in March urged companies to cut non-salary costs first, for example by focusing on training and using the time bank to reduce weekly working hours without adjusting wages.
But Singapore’s economy has since slipped into recession and companies will continue to be under pressure to withdraw, said the council, which is made up of Mr Seah and 21 other members from employer groups, unions and the government.
It considered whether to ask for a reduction in employer contributions to the Central Provident Fund, but chose not to as it would disproportionately affect only local employees, said Manpower Permanent Secretary Aubeck Kam, who is a member of the council.
Cutting employer contributions to the CPF would also be a forceful measure that would not take into account the significant variation in circumstances between sectors and companies, he added.
The council also renewed its call on employers to implement the flexible salary system, which can act as a “buffer” in times of crisis, said board member and president of the National Federation of Singapore Employers Robert Yap.
Mr. Kam said that the system gives employees some certainty when planning their expenses, while Ms. Liew emphasized that the system is not just for pay cuts, but also for companies to reward employees when the company breaks down. performs well.
Last year, only 29.3 percent of employees were in companies that used the flexible salary system, according to which 10 percent of the total salary package can be a monthly variable component and 20 percent can be a annual variable component. The variable components should be higher for middle and upper management.
The system was first introduced in 1986 with only an annual variable component, but in 1999, after the Asian financial crisis, the council recommended including a monthly variable component to allow companies to react more quickly to changing business conditions.
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