NWC extends guidelines on cutting basic wages to save jobs, but urges firms doing well to reward staff

• The National Wages Council (NWC) is extending its guidelines spelling out how employers may cut basic wages to save jobs
• It comes as Covid-19 continues to exact a significant toll on the labour market
• The Government has accepted the council’s recommendations
• The NWC called on employers to give special consideration to low-wage workers

SINGAPORE — In the face of an uneven economic recovery and continued uncertainty during the Covid-19 pandemic, the National Wages Council (NWC) is extending its guidelines that spell out how employers may cut basic wages to save jobs.

The guidelines will be extended for five months until Nov 30.

At the same time, the council urged employers that are doing well to reward workers and bring forward hiring plans.

NWC’s guidelines, last updated in October 2020, urged employers that have already reduced the variable components of their worker’s salaries to consider cutting workers’ basic pay temporarily, if this means saving jobs.

It had recommended that cuts to basic pay should, however, be considered an “exceptional cost-saving measure”, after exhausting other means besides retrenchment.

NWC’s recommendations last October built upon its guidelines from March last year, when it called on employers to consider adjusting the monthly variable components of their workers’ salaries.

The Government has accepted NWC’s latest recommendations to extend its guidelines until Nov 30. They were meant to lapse at the end of June.

After NWC released its recommendations on Friday, the Ministry of Manpower (MOM) said in a statement that the guidelines “remain relevant and provide useful guidance to employers”.

This was because the Government’s focus remains on sustaining businesses, saving jobs and pressing on with business and workforce transformation, as Covid-19 continues to exact a significant toll on the labour market.

“While we are observing a broad improvement in the labour market, conditions are still not fully back to pre-pandemic conditions,” MOM said.
 
“With economic recovery this year expected to be uneven across sectors and subject to uncertainties that persist in the global economy, the labour market is also expected to recover gradually and unevenly across sectors.”

The ministry called on all employers to roll out a flexible wage system — which entails introducing a monthly variable component on top of an annual variable component — if they have not done so.

Employers use the monthly variable component to reduce wage costs in severe business downturns. Variable components may be adjusted based on business performance, for instance.

The recommendation is that variable wages of rank-and-file employees should not exceed 30 per cent of their yearly salaries, with the monthly component taking up 10 per cent and the annual variable component 20 per cent.

The Singapore National Employers Federation said that up until 2019, only 29.3 per cent of employees had both the monthly and annual variable components in their wage structures.

MOM said introducing a flexible wage system would give businesses the flexibility to navigate economic uncertainty, increase job security for employees, and ensure that wages are fairly and more quickly restored in tandem with business recovery.

NWC’S GUIDELINES

NWC is a high-level body comprising the Government, employers and unions that meets every year to update guidelines on wage and employment matters.

Last year, in a rare move, the council reviewed its wage guidelines for a second time as the coronavirus outbreak took a toll on the labour market.

NWC said it would convene again later this year to develop guidelines for December 2021 to November 2022.

For now, all employers should re-evaluate their business situation and how the wage guidelines would apply to them, NWC said.

Here are its recommendations:

For employers with good business prospects:

• Reward employees fairly through variable payments

• Bring forward hiring plans

• Grant built-in basic wage increases
   

For employers experiencing business recovery: 

• Roll back earlier wage cuts or other cost-cutting measures (such as reduced allowances and commissions, shorter work weeks, temporary layoffs and no-pay leave) in step with business recovery and in a timely manner

• First restore basic wages, followed by variable wage components, if basic wages had been cut to save jobs

• Continue to consider the performance of the company and individual when determining the annual variable component
   

For employers that continue to be hit by Covid-19:

• Take maximum advantage of government measures to speed up business and workforce transformation

• Retain employees through appropriate cost-saving measures

• Retrain and redeploy employees in affected business units to new jobs within the company
   

For companies that have exhausted non-wage cost-cutting measures and government support, but still face significant cost pressures and poor business prospects:

• Seek employees’ support to roll out temporary wage cuts to minimise retrenchments, including introducing a flexible wage system immediately

• Negotiate and agree with the union on wage adjustments, other cost-saving measures and the roll-out of a flexible wage system, if the firm is unionised
   

SPECIAL CONSIDERATION FOR LOW-WAGE WORKERS

NWC said that employers should continue granting special consideration to low-wage workers and even lift their wages.

Businesses that have done well or are recovering should consider built-in wage increments for such workers.

Employers that intend to cut wages should freeze wages instead, it said.

NWC added that it was working with the Tripartite Workgroup on Lower-Wage Workers, which is exploring ways to cover more low-wage workers with progressive wages.
 
The workgroup is expected to release its recommendations later this year.

NWC said that it aimed to incorporate the workgroup’s proposals into its next set of guidelines.

At a press conference on Friday, the labour movement’s deputy secretary-general Koh Poh Koon said that, as a matter of principle, “this group of workers should be the last to get any cuts, and the first to get any restoration or increment”.

He said that there was already a significant wage gap between earners in the bottom 20 per cent and the rest of the workforce.

“This is the time for us to actually play catch-up and not have them lag behind even further.”