The re-employment age for older workers in Singapore will be extended from 65 to 67 this July, and the new scheme promises no pay cuts for citizens when they turn 60.
With changes to the Retirement and Re-employment Act, elderly Singaporeans and permanent residents aged 60 and above will have the opportunity of being re-hired when they turn 65. This cohort in the labour force has increased from 5.5 per cent in 2006 to 12 per cent in 2015.
“As we live longer, we can expect this proportion to continue to grow,” said Manpower Minister Mr Lim Swee Say.
“The move will benefit the increasing ranks of older workers who want to continue to work.”
Under the new scheme, employees are assured of being re-hired if their health is good and their work performance satisfactory. As long as these workers show that they are able to continue working, employers have no reason not to keep them.
The minister explained that re-employment differs from retirement in that while it allows a worker to keep working, the worker may not be re-hired to do the same work or be receiving the same pay.
Worker can be transferred to work with another employer
The new policy states that in the event that the employer cannot accommodate the worker, he has the option of transferring him to his subsidiary or another employer, with the employee’s consent, or compensating with a one-off payment as a last resort.
Allowing employers to transfer older workers to another employer benefits both workers and employers. Mr Lim added,”The employee will have more opportunities to be re-employed. The second employer will benefit from hiring an employee with experience.”
According to Mr Lim, the joint efforts by unions, employers and the Government have been successful in getting companies to move away from a wage system where they peg salaries to years of service.
The wage-cut provision, introduced in 1999 when the retirement age was raised from 60 to 62, has helped employers to manage their payroll. But by 2011, 98.5 per cent of companies with workers aged 60 and above had ceased practising this.
Safeguards needed to prevent abuse of scheme
While the new law allows flexibility both to employers and employees, many Ministers of Parliament (MPs) have called for better safeguards to prevent abuse of the system.
Labour MP Patrick Tay felt that in the case of transferring workers to another employer,”the terms, conditions, environment and nature of work in the new job may vastly differ from what they had been previously employed in.” He urged the Manpower Ministry (MOM) to monitor employers who may abuse the policy.
Non-Constituency MP (NCMP) Leon Perera said since employers are not legally bound to furnish reasons for employment termination, they may discriminate against older workers and dismiss them easily.
Concerns have also been raised concerning the possible manipulation of re-employment terms by subsidiaries, and Labour MP Zainal Sapari (Pasir Ris-Punggol GRC) suggested the main employer be held accountable for the older workers, even after the transfer.
In view of the re-hiring age being raised from 65 to 67, Mr Zainal and NCMP Daniel Goh favoured doing away with the retirement age of 62 completely.
Responding to these concerns, Mr Lim assured that the MOM will monitor the implementation of the law closely to prevent abuses.
He revealed that the Government is reviewing the wage subsidies for employers who hire elderly workers. Mr Lim said that the incentives will cease this July and a decision will be made “well ahead” of that month.
Meanwhile, the National Trades Union Congress, Singapore National Employers Federation and MOM have released their updated guidelines to help employers prepare for the changes from July.
Similar to what the three parties issued in May last year, it includes a one-off Employment Assistance Payment or golden handshake for workers aged 62 when employers cannot re-hire them which is 3.5 times the monthly gross salary, and between $5,500 and $13,000.