Government accepts National Wages Council Guidelines for 2020/2021 to mitigate impact of Covid-19: Allen & Gledhill

1 April 2020

On 30 March 2020, the Ministry of Manpower (“MOM”) issued a press release announcing that the Government has accepted the National Wages Council (“NWC”) Guidelines for 2020/2021 issued on the same day (“Guidelines”).

NWC convened in March 2020 to formulate wage guidelines for the period from 1 April 2020 to 30 June 2021. The Guidelines will supersede the 2019/2020 Guidelines with effect from 1 April 2020. In the Guidelines, NWC calls on employers, unions and workers, and the Government to stay united and work together to mitigate the impact of Covid-19 and to position Singapore for eventual recovery.

NWC Guidelines for 2020/2021

NWC notes that the ongoing Covid-19 pandemic presents significant challenges to the global economy. In Singapore, the sharp fall in international travel and tourist arrivals has badly hit the air transport and tourism sectors. The decline in tourist arrivals and the cutback in domestic consumption have also adversely affected other consumer-facing sectors such as food services and retail trade. Outward-oriented sectors such as manufacturing and wholesale trade face a sharp fall in external demand as the outbreak takes a toll on the global economy. Based on advance estimates from the Ministry of Trade and Industry (“MTI”), the economy contracted in the first quarter of 2020 and MTI has further downgraded Singapore’s GDP growth forecast for 2020 from “-0.5% to 1.5%” to “-4.0% to -1.0%”.

To sustain businesses and save jobs, the Guidelines provide that employers should consider the following (in order of priority):

First, reduce non-wage costs, and consider various measures to utilise and manage excess manpower.
Second, tap on Government support to offset business and wage costs, and press on with business and workforce transformation.
Third, trim wage costs.
Fourth, if it is necessary to retrench workers as a last resort, ensure it is done in a responsible manner.

Reducing non-wage costs and managing excess manpower

NWC recommends the following to reduce non-wage costs and manage excess manpower:

Focus on training and upskilling: Please see the next section on business and workforce transformation for NWC’s training recommendations.
Adopt Flexible Work Schedules: Flexible Work Schedules (“FWS”) allow employers to optimise the use of manpower when they go through cyclical troughs and peaks. Under an FWS, employers reduce weekly working hours without adjusting wages by creating a “timebank” of unused working hours. These banked hours can then be used to offset the increase in working hours in subsequent periods.
Support affected local employees seeking second job to supplement income: Employers that implement job-sharing arrangements, shorter work-week, or temporary layoffs should support employees interested to take on part-time or temporary work for another employer.

Pressing on with business and workforce transformation

Further, to encourage employers to make full use of Government support measures to press on with business and workforce transformation, NWC raises the importance of being focused on longer-term industry transformation, with a view to gaining a competitive advantage and being better prepared to grow when the economy recovers.

NWC sets out the following recommendations in the Guidelines:

Bring forward planned training for employees: In last year’s guidelines, NWC recommended that all employers develop a training plan that meets their current and future requirements, drawing reference from the relevant Skills Frameworks. Employers that have done so should now bring forward planned training, putting employees’ downtime to productive use.

Employers that have yet to develop training plans should seek help from the National Centre of Excellence for Workplace Learning (NACE), Singapore National Employers Federation (SNEF), Singapore Business Federation (SBF), other trade associations and chambers, the unions and NTUC LearningHub.

SkillsFuture Singapore (SSG) offers extensive course fee subsidies and absentee payroll support. The Stabilisation and Support Package (“SSP”) will provide further support in the form of enhanced course fee subsidies for sectors that have been particularly impacted by Covid-19.

Bring forward implementation of productivity initiatives: Employers should bring forward implementation of productivity initiatives by:
- re-designing jobs and training their employees for these new jobs. Under the SSP, Workforce Singapore (WSG) has made the Job Redesign and Redeployment programmes more attractive for sectors most affected by Covid-19. Under the Next Bound of SkillsFuture, the Productivity Solutions Grant has also been expanded to include job redesign consultancy services; and
- investing in training all employees in emerging skills, so that they continue to be employable and are not at risk of redundancy. Eligible employers can also tap on the new SkillsFuture Enterprise Credit to defray 90% of out-of-pocket expenses for business transformation, job redesign and skills training.

Set up a Company Training Committee with the labour movement: Companies should set up Company Training Committees (CTCs) to help them build up their in-house workplace learning capabilities, conduct Ops-Tech Roadmapping, and re-strategise their business.
Share productivity gains with employees: Employers that share productivity gains with employees will benefit from the enhanced Wage Credit Scheme, which subsidises qualifying wage increases for Singaporeans.

Wage recommendations for all workers

In the event employers still find it necessary to trim wage bills in order to save jobs, NWC makes the following general wage recommendations:

Lead by example with wage reduction of management: Employers that are adversely impacted by Covid-19 and face uncertain prospects may exercise wage reduction, with management leading by example. Depending on their financial position and prospects, these employers may consider reducing variable payments, in accordance with the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchments that was updated in March 2020 (“Tripartite Advisory”). As wage reduction measures affect the livelihood of employees, especially over an extended period of time, employers should seek the consent of unions and engage employees before implementing such measures.
Take into account overall wages already impacted: NWC notes that given the adverse impact from Covid-19, fewer employees are working overtime and receiving overtime pay. Employees with commission-based variable payments or who have been asked to go on no-pay leave would also already have had their overall wages impacted. For these employees, employers should take such factors into account if they are considering a reduction in other wage components.
Adjust monthly variable wage components: If monthly wage levels are unsustainable given the fall in demand, employers can consider adjusting monthly variable wage components.
- Under the flexible wage system, the Monthly Variable Component (“MVC”), which is part of the basic wage, allows employers to adjust wages quickly in response to changes in the business environment without having to wait until the end of the year to adjust variable bonus payments and other annual variable components. Employers can consider adjusting the MVC downwards. The extent of the adjustment would depend on the employer’s situation and any key performance indicators or guidelines for triggering an MVC cut as agreed with the union (if company is unionised) or employees.
- For employers that have not implemented the MVC but need to adjust monthly wages downwards, they could consider treating any cut in basic wages of up to 10% as an MVC cut. In the case of management, depending on the circumstances and requirements of the company, the MVC set aside could be more than 10% of basic wages, in line with the principle of leadership by example.
- Employers should set clear guidelines to restore MVC or basic wage cuts through future wage increases or adjustments when business recovers.
Endeavour to pay Annual Wage Supplement: As far as possible, employers should endeavour to pay their employees the Annual Wage Supplement. Recognising employees fairly will enable these employers to retain and inspire loyalty in their workforce and be well positioned for the recovery.
Apply wage reduction measures fairly: Any reduction of wages should be applied to local and foreign employees fairly.

Responsible retrenchment

If retrenchment is necessary despite all of the above measures and wage adjustments, employers are encouraged to conduct retrenchment exercises in a responsible manner, as set out in the Tripartite Advisory. The Guidelines set out the following measures employers should carry out:

Conduct fair retrenchment exercise: When carrying out a retrenchment exercise, the selection of employees for retrenchment should be conducted fairly, based on objective criteria such as the ability of the employee to contribute to the company’s future business needs and should not discriminate against local employees, for example.
Submit Mandatory Retrenchment Notifications to MOM and consult unions early: Employers should submit Mandatory Retrenchment Notifications to MOM, and consult their relevant unions if they are unionised, as early as possible.
Provide longer notice periods: Employers should provide longer notice periods to the extent practicable for employees who will be retrenched, beyond the minimum requirements covered under the Employment Act.
Provide retrenchment benefits: Employers should provide retrenchment benefits in line with the Tripartite Advisory.

Implementation of recommendations

The Guidelines apply to all employees, including professionals, managers, executives, technicians and rank-and-file employees, in unionised and non-unionised firms, in both the public and private sectors. They also apply to re-employed employees. The Guidelines provide that to facilitate wage negotiation, employers should share relevant information, such as company wage information, business performance and prospects, with unions. Employers should work with employers’ associations and unions to address any difficulties employers may face in implementing the Guidelines.

Reference materials

The following materials are available on the MOM website www.mom.gov.sg:

Further information