Legislation

Central Provident Fund (Amendment) Act 2006 (A15/2006)

The Central Provident Fund (Amendment) Act 2006 came into force on 1 July 2006. Among other things, the Central Provident Fund Act is amended for the following purposes:

1    to increase the number of grounds on which a member may withdraw his CPF savings under s 15(2). New grounds include situations where the member is suffering from a medical condition leading to a severely impaired life expectancy, or where he is suffering from a terminal illness or disease;

2    to allow the amount in a deceased member’s medisave account to be used for the payment of expenses for medical treatment received by the member;

3    to clarify the ambit of the prohibitions and protection under s 24 (protection of benefits from assignment, transfer, attachment, sequestration, set-off); and

4    to clarify how the amount payable on the death of a member under s 25(2) (no person nominated) should be disposed of.

Employment (Recommendations for Annual Wage Adjustment) Notification 2006 (S327/2006)

The National Wages Council (the ‘NWC’) recommendations for annual wage adjustment are set out in the Employment (Recommendations for Annual Wage Adjustment) Notification 2006.

The NWC recommendations cover the period from 1 July 2006 to 30 June 2007 (both dates inclusive). These recommendations are applicable to all employees – management, executives and rank-and-file employees, unionised and non-unionised companies and in both the public and private sectors.

The following are highlights of the NWC recommendations.

Ensure wage increases are sustainable

The NWC recommends that built-in wage increases should continue to lag behind productivity growth in order to be sustainable and to maintain our cost competitiveness. Companies should make greater use of variable bonuses to reward their workers, taking into consideration the differing wage and productivity performances across different industry sectors and companies. Companies that are performing well should grant higher variable bonuses.

Accelerate wage flexibility especially in building up the monthly variable component

In 2004, the Tripartite Taskforce on Wage Restructuring made three key recommendations:

1    introduce the Monthly Variable Component (the ‘MVC’) in the wage structure and work towards a wage structure of 70 per cent basic wage, 10 per cent MVC and 20 per cent Annual Variable Component (the ‘AVC’);

2    narrow the maximum-minimum salary ratio for employees to an average of 1.5 or less; and

3    implement variable bonus linked to Key Performance Indicators (‘KPI’s). Data on wage restructuring pertain to private sector establishments each employing at least 25 workers.

The NWC recommends the following:

1    Companies should continue to implement wage restructuring and adopt the three key recommendations, to put in place a more flexible and performance-based wage system.

2    Companies which are granting built-in wage increases should use the increases to build up the MVC. Those which have yet to introduce the MVC are strongly urged to do so immediately. To accelerate the build-up of MVC, companies could use the wage increase and/or set aside a portion of existing basic wages as the MVC. This should be done now, to take advantage of the favourable business climate and labour market.

3    Companies should formulate and apply appropriate KPIs in consultation with unions/workers, to link variable bonus payments closely to corporate performance. There should be regular sharing of information on corporate performance and KPIs with unions/workers. Companies should also develop performance management systems to better assess and reward workers’ individual performance.

Enhance employability of older workers

The NWC urges companies to put in place wage systems and employment arrangements that facilitate the employment of older workers and re-employment of retired workers. In particular, the NWC strongly urges companies to adopt the following measures:

1    accelerate wage restructuring and move away from seniority-based wages.

2    embark on job-based, competency-based and/or performance-based wage systems. Job-based wage system focuses on responsibilities of the job while competency-based wage system focuses on the ability of the individual worker to do the job. A performance-based wage system looks at how well the worker performs on the job.

3    hire mature and older workers and retain them beyond the retirement age of 62. In particular, companies are encouraged to make use of the ADVANTAGE! Scheme* administered by the Singapore Workforce Development Agency (the ‘WDA’) to implement workplace and wage system changes and provide more employment opportunities for older workers.

Step up efforts to help low wage workers

The NWC urges companies that are granting wage increases to give higher increases for low wage workers. This could be done by specifying a higher percentage increase and/or by including a dollar quantum for built-in wage increases. They could also apply the same principle for the payment of variable bonuses.

Step up skills training and upgrading

The NWC urges companies to step up their training and skills upgrading of workers, in particular older workers, low wage workers and contract workers.

Elizabeth Wong

Allen & Gledhill