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SINGAPORE – The National Wage Council (NWC) 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 of next year. .
The council said it 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 in August 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 base pay only if it is really necessary to avoid cuts. 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.
[[nid:504137]]Council Chairman Peter Seah said the discussions this time were more intense and took longer than the first round in March 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 Trade Union Congress, Mary Liew, a member of the NWC, said the union movement agreed that it was necessary to support “more drastic and immediate measures” due to the need to minimize layoffs after the deadlines were exhausted. efforts to retain and reassign existing workers.
“It will definitely take a sacrifice on the part of the workers, but we hope that employers will take their sacrifices into account when things improve, recognize where possible their efforts and reward them as well,” he added.
Singapore National Employers Federation (SNEF) president and NWC member Robert Yap said employers can still face significant cost pressure and poor business prospects even with strong government support.
But they recognize that retaining workers preserves the capabilities of companies and allows them to be better prepared when demand for their goods and services recovers.
“As we have managed to flatten the curve of Covid-19, we should now focus on flattening the curve of reductions, which increased to more than 8,000 in the second quarter of 2020,” Yap said.
NWC’s initial annual recommendations in March urged companies to cut non-salary costs first, for example by focusing on training and using time banking to reduce weekly working hours without adjusting wages.
But Singapore’s economy has since slipped into recession and companies are under increased pressure to cut back, said the council, which is made up of Mr. Seah and 21 other members from employer groups, unions and the government.
Seah said it is difficult to make a call about when companies will emerge from the crisis, but the basic principle is that when they recover they should do everything possible to restore the pay cuts.
Management should maintain an ongoing dialogue with workers on the issue, especially in companies that are not unionized, he added.
The council considered whether to ask for a reduction in employers’ contributions to the Central Provident Fund, but decided against doing so 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.
He added that the previously agreed progressive wage model increases, which establish minimum wage levels throughout a career and a scale of skills in certain industries, are well justified and should continue even during this time.
The council also renewed its call for employers to implement the flexible salary system of a fixed base salary along with variable monthly and annual components, which can act as a “buffer” in recessions, said SNEF’s Mr. Yap.
Kam said that the system gives employees some certainty in managing their expenses, as they know how much could potentially be adjusted, while Ms Liew emphasized that the system is not just for pay cuts, but also for companies to reward employees. employees when the company performs well. .
The recommended monthly variable component for base workers is 10 percent, while the annual variable component should be 20 percent, for a total of 30 percent of the salary package. The total variable component should be higher for middle and senior management.
The system was first introduced in 1986, after the 1985 recession, with 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.
Although the council’s guidelines are not legally binding, the fact that they are backed by leaders of employers’ groups, unions and the government says something, Mr. Seah noted.
“We all come together with a common goal, and if we work well together we will not only navigate the crisis well, but as a country we will come out stronger. And if our economy emerges stronger, it is good for everyone,” he said.
This article was first published in The times of the strait.
