Oral Answer by Mr Zaqy Mohamad Senior Minister of State for Manpower to PQ on the Progressive Wage Model and companies facing difficulties renegotiating ongoing multi-year contracts

NOTICE PAPER NO. 1793 OF 2023 FOR THE SITTING ON OR AFTER 3 APRIL 2023
QUESTION NO. 4331 FOR ORAL ANSWER

MP: Ms Yeo Wan Ling

To ask the Minister for Manpower for companies implementing the Progressive Wage Model (PWM) and effecting the higher wage rungs, what assistance and interventions from the Ministry are available for such companies facing difficulties renegotiating ongoing multi-year contracts that were signed before the PWM wage rungs were set.

Answer:

1. The Progressive Wage schedules for each PWM sector is negotiated by sectoral tripartite cluster committees, which comprise representatives from the unions, service providers and service buyers in each sector, as well as the Government.

2. The tripartite cluster committees recognise that in sectors where outsourcing is common, such as Cleaning, Landscape Maintenance, Security, and Lift and Escalator, service providers typically enter into multi-year contracts with service buyers. This is why the tripartite cluster committees negotiate a multi-year schedule of wage increases for each PWM sector, to provide both service buyers and service providers with clarity on how Progressive Wages will increase in the years ahead.

3. The wage schedules are also announced in advance, so that service providers and buyers entering into new contracts do so with sufficient information, and those mid-way through existing contracts can discuss whether the contracts need to be renegotiated. The current PWM wage schedules for all sectors where outsourcing is common were announced in 2021 or 2022, ahead of their 6-year implementation from 2023 to 2028.

4. Tripartite partners encourage service buyers to work closely with service providers to renegotiate ongoing contracts where reasonable. The Government is also doing its part to offset increases in labour costs through the Progressive Wage Credit Scheme (PWCS). Under the PWCS, the Government funds up to 75% of wage increases that employers provide to lower-wage workers, for five years from 2022 to 2026. This includes wage increments given due to Progressive Wage requirements.

5. Beyond this, service buyers should consider moving towards outcome-based contracting. This will encourage service providers to invest in productivity solutions and deploy manpower more efficiently, which is a win-win outcome as it supports sustainable wage growth and can also lead to better services for service buyers.