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NTUC calls on Government to review procurement law for outsourced labour

SINGAPORE — Even with the labour movement’s Progressive Wage Model, which requires some sectors to pay workers higher basic salaries, outsourced workers such as security guards and cleaners are often trapped in a vicious circle where their salaries stagnate during their contractual service, which can last more than two years.

SINGAPORE — Even with the labour movement’s Progressive Wage Model, which requires some sectors to pay workers higher basic salaries, outsourced workers such as security guards and cleaners are often trapped in a vicious circle where their salaries stagnate during their contractual service, which can last more than two years.

And should they get a raise, this would be “reset” again because once the contract ends, in a bid to acquire new deals, service providers tend to lower their bidding prices, which means they have to suppress wages.

To weed out cheap sourcing, a common procurement practice in Singapore, the labour movement yesterday called on the Government to review and enhance a law governing the procurement of outsourced services.

Mr Zainal Sapari, assistant secretary-general of the National Trades Union Congress (NTUC), said that this would also address the issue of “one-sided” contract clauses, which has resulted in a “master-servant relationship” between service buyers and providers.

Outsourced workers are those hired and supplied by a third-party contractor (service provider) to work in a client company (service buyer) under a contract.

One example of one-sided contracts, which tend to benefit service buyers, is requiring service providers to pay liquidated damages if they fail to fulfil contract requirements.

Mr Zainal, who is also a Member of Parliament, mentioned how one company had a contractual term where the service provider would be penalised S$50 each time any cleaning crew member was late for work.

“These practices are prevalent enough for service providers to raise this to me every year without fail,” he added.

The revision of the Government Procurement Act, the NTUC said, should be guided by the “principle of proportionality”, which means the contract’s requirements and conditions must be in reasonable proportion to the procured services.

Among the key practices that the Act should reflect is for contracts to allow for price variations caused, for instance, by unforeseen regulatory changes such as the mandatory adoption of the Progressive Wage Model. Service providers are now not allowed to withdraw their price offers — which also take into account workers’ wages — within six months from the closing date of a tender.

Two other proposals are for contracts to include a termination clause that allows both service buyers and providers to give notice for early termination so that workers are not affected; and for service providers to quote upfront any costs incurred by extra work such as cleaning after important events.

Liquidated damages incurred by service providers should also be proportionate to the service lapse. Mr Zainal said that he was once told of a case where a contractor had to pay liquidated damages of up to S$100,000.

Mr Kevin Goh, 39, general manager of security firm Soverus, which employs about 750 security officers, told TODAY that it is “very prevalent” for government tenders to have liquidated damages stated in the contract, and the value of the damages is not in line with the amount that companies are charging.

“For example, if I am charging an average of about S$120 per shift for an officer, the damages for not supplying enough manpower can reach up to S$500,” Mr Goh said.

“If I fail to provide a security officer, yes, I should not charge you, but I am slapped with a penalty. There is zero room for negotiation.”

He added: “Coupled with a one-sided termination clause — the government agency has the power to terminate the contract any time they like — it makes it very hard for service providers to survive.”

Mr Goh stressed that the “trickle-down effect on workers is bad” because the liquidated damages are so high and companies have to watch their costs and cut corners.

“We either can’t pay the worker or we can’t afford to pay the worker on time,” he said.

Mr Zainal said that revisions to the Act would alleviate service providers’ concerns of bearing unnecessary costs and allow them to focus more on putting out longer-term productivity solutions, which in turn would benefit workers in terms of jobs and pay.

Knowing that many private companies use the Act as a guideline to determine their procurement practices, he added that the changes would allow the Government to take the lead and move the private sector as well.

He hopes the changes would take effect in two years’ time after they are raised in Parliament following this year’s Budget debate.

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