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National Wages Council calls for 5.5%-7.5% pay rise for lower-wage workers amid shaky economic recovery

SINGAPORE — The National Wages Council (NWC) has urged struggling firms to raise the monthly pay of lower-wage workers by at least 5.5 per cent while calling on businesses that are faring better to give larger pay rises. This is a bigger pay rise than it recommended last year.

National Wages Council calls for 5.5%-7.5% pay rise for lower-wage workers amid shaky economic recovery

Singapore

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  • The National Wages Council called on employers to raise salaries of lower-wage workers by a larger amount than it recommended last year
  • Different wage increments were recommended for businesses based on their business outlook
  • The council also reverted to its pre-Covid guidelines for other workers, recommending employers that have done well to raise workers' salaries 

SINGAPORE — The National Wages Council (NWC) has urged struggling firms to raise the monthly pay of lower-wage workers by at least 5.5 per cent while calling on businesses that are faring better to give larger pay rises. This is a bigger pay rise than it recommended last year.

In its annual guidelines issued on Monday (Nov 14), the council said it came to its recommendations after taking into account Singapore’s economic recovery from the Covid-19 pandemic and the uncertain global economic outlook.

It also noted that inflation this year is markedly higher than last year.

The NWC recommended that:

  • Employers that have done well and have good business prospects should provide lower-wage workers a built-in pay increase at the upper bound of 5.5 to 7.5 per cent of gross monthly wage, or at least S$80 to S$100, whichever is higher.
  • Employers that have done well but face uncertain prospects should provide built-in wage increases at the lower to middle bound of the same range.
  • For employers that have not done well, they should still give lower-wage workers a built-in pay increase at the lower bound of the percentage range. If business prospects improve, they should consider further wage increases.

These guidelines for lower-wage workers apply to employees earning a gross monthly wage of up to S$2,200, which corresponds to the 20th percentile wage level of the workforce, up from S$2,000 last year.

The split recommendations come amid an uneven recovery for business in different sectors. The Singapore economy grew by 4.3 per cent year-on-year in the first three quarters of the year, with most sectors having recovered beyond their pre-pandemic levels.

But some industries continue to lag. They include the construction, retail trade, transportation and storage, accommodation, food and beverage services, as well as the administration and support services sectors. 

The recommendations also come at a time of high inflation, leading to worries of a wage-price spiral, where higher wages feed directly into higher prices.

The Government has accepted the recommendations, which are for the period from Dec 1 this year to Nov 30 next year.

COVID WAGE CUTS MOSTLY RESTORED

Besides lower-wage workers, the NWC on Monday also gave wage guidelines for other employees.

It shifted its focus from urging employers to restore Covid-related wage cuts and reverted to its pre-Covid guidelines recommending employers that have done well to raise their workers’ salaries. It also called on employers to reward the contributions of employees who suffered Covid-related cost-cutting measures.

For unionised companies, the vast majority have given pay raises that have gone beyond just restoring wage cuts, said Mr Desmond Choo, assistant secretary-general of the National Trades Union Congress (NTUC) and a Member of Parliament.

“Some of them, in the hospitality and tourism sectors, they really haven’t been back to pre-Covid levels,” he said at a news conference on Monday.

NTUC in a statement said it "strongly encourages" employers to follow NWC's guidelines to reward employees with fair wage increases and variable payments for all workers, including the middle-income group of workers.

"Employers should also recognise employees’ contributions over the last two years, particularly workers in the hardest hit sectors, who may have taken wage cuts during the Covid-19 pandemic. And to factor in the cost of living pressures, to ensure real income growth," NTUC said.

"In this year’s negotiations, there were several notable wins for our workers in the form of higher wage threshold and increment for lower-wage workers — from S$2,000 to S$2,200."

The NWC, made up of representatives of employers, the trade unions and the Government, also noted that inflationary pressures may cause a wage-price spiral, a concern Deputy Prime Minister Lawrence Wong had earlier flagged.

Dr Robert Yap, president of the Singapore National Employers Federation (SNEF), said such a situation has been a big concern for employers. But he added that having the council meeting every year to oversee that productivity does not lag behind wage growth gives employers some assurance.

Other members of the council noted that the NWC provides differentiated guidelines based on their business outlook to promote wage growth that is sustainable. They also reiterated their push for a flexible wage system that allows companies to reward workers when business is good and exercise restraint in bad times.

EMPLOYERS REACT TO RECOMMENDATIONS

In manufacturing, where the significant tightening of global financial conditions is threatening to weaken the sector, Mr James Wong, managing director of OE Manufacturing, said he intends to continue paying workers their annual increment or even more if possible next year. 

OE Manufacturing, a hydraulics parts maker with 26 workers, has been largely spared from the impact of the pandemic compared to the rest of the industry and has continued to pay workers their salary increments without any pay cuts over the past two years.

"I think they deserve a good raise," Mr Wong said of workers who have stayed on through Covid-19, adding that he plans to raise wages to help workers get through the rising cost of living.

Things have not been looking up, however, for cookware retailer ToTTs. Online sales have plummeted and people are spending a lot more on travel rather than shopping — and especially not on kitchenware that does not have to be replaced often, said its director Grace Tan.

Yet, despite the latest NWC recommendations allowing ToTTs to "exercise wage restraint", Ms Tan said that she will likely continue to provide workers with their annual wage increment next year in order to retain staff.

In the retail sector where manpower is scarce and firms aggressively compete to hire, she had over the past two years already been raising wages to remain competitive in the market despite the Covid-related business toll, she said.

As for the three or so lower-wage workers that are on the progressive wage model, she said the company will continue to raise their salaries in line with the model's salary guide. "I really appreciate their work and I already planned to increase their salary... so I don't find it a challenge," she said.

For Xperience Singapore Events and Travel, which plans tours, conferences and events in Singapore, workers had their pay reduced in line with the fewer hours they were working during the pandemic as travel was restricted.

The company reinstated full wages last year when it returned to normal working hours and has offered wage increases for 2023 due to rising costs. 

Yet, even though travel has resumed, the outlook for tourism remains uncertain as higher inflation threatens to dampen consumer sentiment. 

Faced with this exceptional challenge, Mr Gunther Homerlein, a director at the firm, said that simply raising wages is not the solution and the industry will have to attract new blood to rejuvenate tourism in Singapore. 

"Because it is unprecedented, there is also no roadmap for the future," he said. "While we are treading carefully with regard to managing costs and expectations... we are bullish about the industry and the talent it will again attract."

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WHAT MEMBERS SAY

SNEF, in a statement, noted that the higher pay raises recommended for lower-wage workers may result in wage increases that rise more than productivity, but said the move was a deliberate one to lift their wages.

Its president, Dr Yap, said many of these workers are in essential roles that have provided Singaporeans with the daily necessities during the pandemic. “All of us can show our appreciation by doing our part in ensuring that these workers can earn progressive wages,” he said.

He also called on employers not to “waste a crisis” and urged them to adopt the flexible wage system, which the pandemic has shown to be valuable in mitigating the impact of business downturns on employers and workers.

Mr Ng Chee Khern, permanent secretary in the Ministry of Manpower, said: “It is timely for employers to reward employees with wage increases or variable payments that are sustainable.”

For wage increases to be sustainable, they must be accompanied by productivity growth, he said as he urged employers to work with NTUC’s company training committees to redesign jobs and to tap the Government’s productivity solutions grant for job redesign.

Mr Lim Wen Sheng, deputy general secretary of the Food, Drinks and Allied Workers’ Union, said he was heartened by the council’s agreement to recommend higher wages for lower-wage workers.

“We encourage all companies to reward their workers with a fair wage adjustment and variable payments to help workers cope with the rising inflation.”

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wages inflation

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