Singapore Wage Council: Companies may consider temporary wage cuts to minimise retrenchments: National Wages Council

Companies that have already exhausted other cost-saving measures should consider implementing temporary wage cuts, but only to the extent needed to minimise retrenchments, said the National Wages Council (NWC). The pay cuts should depend on the performance and outlook for the company as well as the industry it is in, with the burden of wage reductions not falling on any particular group, the council said.

It added that management should lead by example. “Wage cuts accepted in good faith by employees should also be restored when business conditions allow,” NWC said in its guidelines issued on Friday. The updated guidelines, which will apply from November to the end of June next year, are aimed at sustaining businesses and saving jobs under the challenging circumstances posed by the COVID-19 crisis.
The NWC is a tripartite body made up of representatives from businesses, unions and the Government. 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 meaningful given the uneven impact of COVID-19 on businesses, as well as the significant variation in business conditions across and within different industries and companies.

The council set out several key principles for companies implementing wage cuts, which include having employers adopt the Flexible Wage System and utilise the range of flexibility provided for under the variable components of the wage structure. Under the system, variable components should make up 30 per cent of the annual wage package for rank-and-file workers, 40 per cent for middle management and 50 per cent for senior management. Employers can consider using the annual and monthly variable components to adjust wages, said the NWC, recommending that firms only cut basic pay if necessary to avoid retrenchments.

It also urged management to lead by example by taking earlier and deeper wage cuts, and called on companies which pay annual wage supplements – commonly known as the 13th-month bonus – to continue doing so if possible. “In deciding what is a reasonable level of wage cut, employers should carefully take into account their sector’s and company’s performance and outlook, and the level of government support to employers to offset business costs and employees wages, as well as the cumulative effect of prior wage 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 no-pay leave,” the NWC said. Unionised companies should where applicable negotiate and agree on any wage adjustments and implementation of flexible wages with the union, it added.

The council repeated its call for special consideration to be given to low-wage workers, and said that employers who are cutting salaries should implement a wage freeze instead of pay cuts for workers earning a basic monthly wage of S$1,400 or below. It noted that while it had considered calling for a reduction in employers’ Central Provident Fund (CPF) contributions, the consensus was not to do so. It added that such cuts were a “blunt move” which would not take into account the different circumstances of individual companies and employees, and would also have a disproportionate impact on local workers.

The Government has accepted the guidelines set out by the NWC, with Permanent Secretary for Manpower Aubeck Kam stating that the authorities are committed to supporting workers affected by the COVID-19 crisis. Mr Kam noted that even as employers seek to avoid retrenchments, if layoffs are necessary, they should follow the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment. The updated advisory has been endorsed by the NWC and will be announced on Saturday.


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