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SINGAPORE: Companies that have already exhausted other cost-saving measures should consider implementing temporary pay cuts, but only to the extent necessary to minimize layoffs, the National Wage Council (NWC) said on Friday (Oct. 16).
Pay cuts should depend on the performance and prospects of the company, as well as the industry it is in, and the burden of pay cuts will not fall on any particular group, the council said.
He added that management must lead by example.
“Pay cuts accepted in good faith by employees should also be reinstated when business conditions permit,” NWC said in its guidelines released Friday.
The updated guidelines, which will apply from November to the end of June next year, aim to sustain businesses and save jobs in the difficult circumstances posed by the COVID-19 crisis.
READ: COVID-19: National Wage Council Suggests Management Lead By Example By Cutting Wages
The NWC, a tripartite body made up of representatives from businesses, unions and the government, generally meets once a year and has issued a series of guidelines in March.
But in light of the evolving situation, he met again in August to update the guidelines.
The NWC noted that while it had considered issuing quantitative wage reduction guidelines, it decided not to do so as such recommendations would not be significant given the uneven impact of COVID-19 on businesses, as well as significant variation in business conditions. between and within different industries and companies.
GUIDELINES FOR THE IMPLEMENTATION OF SALARY CUTS
The council established several key principles for companies implementing pay cuts, including that employers adopt the Flexible Wage System and use the range of flexibility provided in the variable components of the pay structure.
Under the system, the variable components should constitute 30 percent of the annual salary package for grassroots workers, 40 percent for middle managers, and 50 percent for senior management.
Employers may consider using the annual and monthly variable components to adjust salaries, the NWC said, recommending that companies only cut the base salary if necessary to avoid layoffs.
READ: National Wage Council to meet again, points to updated guidelines for September
He also urged management to lead by example by adopting earlier and deeper pay cuts, and asked companies that pay annual salary supplements, commonly known as the 13th month bonus, to continue to do so if possible.
“When deciding what is a reasonable level of wage reduction, employers should carefully consider the performance and prospects of their industry and company, and the level of government support for employers to offset business costs and employee wages. employees, as well as the cumulative effect of salary cuts and other cost-saving measures that have already been implemented to date on employees, such as reductions in allowances and commissions, shorter work weeks, temporary layoffs and unpaid leave ”, the NWC said.
Unionized companies should, where appropriate, negotiate and agree on any wage adjustments and the implementation of flexible wages with the union, he added.
WAGES FREEZE INSTEAD OF CUTS FOR LOW-WAGING WORKERS
The council reiterated its call for special consideration for low-wage workers, saying that employers who are cutting wages should implement a wage freeze in lieu of wage cuts for workers earning a monthly base salary of S $ 1,400. or less.
He noted that while he had considered asking for a reduction in employers’ Central Provident Fund (CPF) contributions, the consensus was not to.
He added that such cuts were a “forceful move” that would not take into account the different circumstances of companies and individual employees, and would also have a disproportionate impact on local workers.
The Government has accepted the guidelines established by the NWC, and the Permanent Secretary for Manpower, Aubeck Kam, affirmed that the authorities are committed to supporting workers affected by the COVID-19 crisis.
Mr. Kam pointed out that even when employers try to avoid layoffs, if layoffs are necessary, they should follow the Tripartite Notice on Managing Surplus Manpower and Responsible Reduction. The updated notice has been endorsed by the NWC and will be announced on Saturday.
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