Committee of Supply Speech (Part 3) by Mr Gan Kim Yong, Minister of State for Manpower and Education, 05 March 2008, 12:00 PM, Parliament

Mr Gan Kim Yong, Minister of State for Manpower and Education, Parliament

Helping All Singaporeans Move Forward Together

(I) OLDER WORKERS

During the last COS in 2007, we announced the intention to introduce re-employment legislation by 2012. This will allow our older workers to work longer and save more for retirement. The tripartite partners have been working to encourage and help older workers to stay employed longer and to prepare them for re-employment.

2. More older workers are employed now than ever before. Last year, 56% of residents aged 55 to 64 were working, compared to 54% a year ago. This is equivalent to about 20,000 more people. Many of them were formerly economically inactive. This is a significant improvement.

3. To encourage older workers to take advantage of the employment opportunities brought about by strong economic growth, the TriCom on Employability of Older Workers, which I chair, has adopted two major thrusts.

(A) Re-employment of Older Workers

4. First, we will press on to prepare our companies and workers for re-employment. A tripartite workgroup led by SNEF is preparing a set of Guidelines to help workers and employers implement re-employment. We aim to finalise the guidelines by the end of 2009.

Good Practices

5. Meanwhile, the tripartite workgroup has drawn up a checklist of good re-employment practices. The tripartite partners will consult widely with industry and union leaders over the next 12 to 18 months before finalising it.

6. Companies that need help to implement re-employment can tap on the ADVANTAGE! scheme for support. For example, West Pharmaceutical Services implemented a re-employment policy in November last year, after it joined the ADVANTAGE! scheme. The company has put in place a process to discuss available re-employment options with workers 12 months before their retirement, and makes an offer to them 6 months before their retirement. For workers who are re-deployed to a new job, relevant training will be provided. West Pharma offers re-employment contracts of at least two years' duration, subject to a yearly review. Wages for re-employed workers may be adjusted to take into account the value of the job and the worker's competencies.

7. We will also consider suggestions we have received on enhancing ADVANTAGE! We do support pilots as long as it helps the company prepare for re-employment. We also have ADVANTAGE! for SMEs.

Role of Workers

8. Workers have an equally important role to play to make re-employment work. They must be prepared to accept a different job and undergo training for the new job if necessary. They must also be prepared for adjustments in wages and benefits to better reflect the value of the job and their competencies. This is particularly so if a significant portion of their wages is seniority based.

Preparing the Ground

9. Re-employment is still a new concept and we will have to actively reach out to both employers and employees to help them understand what re-employment means and how it can be a mutually beneficial arrangement.

10. The workgroup will be driving these efforts to do so over the next year. Feedback received and experience gained in the process will help us better address the operational issues that companies and workers may face in implementing re-employment.

11. There was also a proposal to remove the concept of a retirement age. I agree with the objective of helping workers stay employed longer, but I think removing retirement age will not achieve this.

12. Re-employment is a more flexible and effective way to help workers work for as long as they are able to. It allows both the employer and the worker to make changes to the existing job arrangements when the worker reaches retirement age. For instance, the worker may wish to work part-time or to take on less responsibility. The company may, on the other hand, need to re-deploy the worker to another job to facilitate leadership renewal. And, even if the worker is retained in the same job, the company may have to adjust his seniority-based wages. This flexibility will allow the company to remain competitive and keep the worker employable.

(B) Increasing the Employment Rate of Older Women

13. A second key thrust is increasing the employment rate of older women. This chart (Annex A) shows that Singapore is among countries with the highest employment rates for older men (at 74%), but relatively lower employment rates for older women (at 39%).

14. Currently, a significant number of women leave the workforce in their 30s or 40s. Many of them do not re-join the workforce thereafter. We need more examples like 52-year old Mdm Noormalin. After having left the workforce for two years, she found a part-time job as a customer service assistant at the SMRT Taxis contact centre. Having a job near her home allows her to earn an income while caring for her four children.

15. Mdm Noormalin is one of the beneficiaries of a "30 minutes to work" job fair. This was launched by a workgroup under my TriCom, led by Mdm Halimah and the NTUC, and in partnership with South West CDC. This year, the workgroup has set a goal of helping 2,000 women enter the workforce.

(II) LOW-WAGE WORKERS

(A) More and Higher-Paying Jobs for Low-Wage Workers

16. Let me now move on to another issue raised by several MPs: help for low-wage workers. With strong economic growth, the number of low-wage residents in full-time employment earning $1,200 or less per month fell by 6.6% between 2006 and 2007. The long-term unemployment rate has also come down from 0.8% in Dec 2006 to 0.4%^P in Dec 2007. This is comparable to levels last seen before the Asian Financial Crisis. Nonetheless, there are still those who are unemployed or in low-paying jobs because they do not have the skills that are in demand.

17. Currently, the CDCs and other Distributed Careerlink Networks (or DCNs) already provide free employment facilitation services to residents who are unemployed or retrenched. The DCNs link job seekers to highly-subsidised WDA training programmes for skills upgrading and re-skilling for new jobs in growth sectors. We will be doing more under the newly-unveiled CET Masterplan, which the Minister has elaborated on yesterday.

18. Job-redesign is also important. Job Recreation Programmes (JRPs) are being implemented in a number of sectors to make the jobs appealing to Singaporeans by enhancing job worth, working conditions, and image of the profession. Overall, JRP efforts re-created over 15,000 jobs last year. We will press on with the JRPs.

(B) Helping Self-Employed and Informal Workers Benefit from CPF and WIS

19. For those in low-wage jobs, the Workfare Income Supplement (or WIS) Scheme is an important tool to help low-wage workers and encourage them to stay employed. The lower CPF contribution rates for low-wage workers improve their employability, while WIS makes up for the lower CPF rates and gives them additional income.

20. The first WIS payment was made in January this year, with 287,000 workers receiving $146 million. The second payment will be made in April and May this year.

Suggestions on WIS

21. There have been many suggestions by MPs on how we can help workers to benefit more, such as by excluding overtime pay in computing WIS.

22. Whether a worker's income is in the form of basic salary or over-time pay, they are both income that will help support the worker and his family. Given that WIS' aim is to help low wage workers by supplementing their income, I think it is fair to consider all income earned by the worker.

23. I was highlighted to the case of workers who had received the provisional WIS payment for the first six months of work, but later received a year-end bonus, which increased their average income to above $1,500 a month, making them ineligible for WIS. Firstly, let me clarify that the first WIS payment is an advance payment paid for work done in the first half of 2007, but WIS is actually intended to be paid based on the average monthly income for the whole of 2007. The intent is to help workers with timely payouts to encourage them to stay employed. If we were to wait for the whole work-year to finish, they would have to wait almost 15 months before they get WIS! It is not, therefore, a disincentive to earn more.

24. It is only fair that we should recover WIS paid to those whose average monthly income exceeds $1,500, as such members are not in the target group. Excess WIS in the form of CPF can be recovered directly from the member's CPF account, but we will be flexible when recovering the cash component. Since the WIS is a long term scheme, excess WIS paid in cash will be recovered against any future WIS that the worker may receive. This will not inconvenience the affected workers.

25. During the Budget Debate, there were many suggestions on the WIS scheme, such as including workers earning up to $1,800 a month, increasing the payment frequency, and adjusting WIS to take into account inflation. As WIS has just been implemented, MOM can consider these suggestions during the review of the scheme in 2010.

Bringing Informal Workers into Formal Employment

26. The difficulties faced by odd job workers in receiving the WIS was also highlighted during the debate. While we have measures to help informal workers on this front, bringing them into formal employment, where they benefit from both WIS and the CPF system, will be a better outcome.

27. To achieve this, the CPF Board has stepped up enforcement against employers who fail to make employer CPF contributions for their workers. CPF Board took 14,000 cases to court last year for failure to pay CPF. One of the cases involved a labour supplier that classified its workers as "independent contractors" when they were in fact employees. The CPF Board recovered $47,500 in CPF contributions for 51 employees. 47 of them subsequently benefited from the WIS as formal employees.

28. In addition, the tripartite partners have been reaching out to educate workers on their employment rights and the benefits of formal employment. Together with the CPF Board's enforcement efforts, this has contributed to some 10,000 informal workers converting into formal employment and benefiting from WIS. We will continue to encourage more workers to join the CPF system to build up their retirement nest eggs and benefit from WIS.

Helping Informal Workers Receive WIS

29. For those who remain in informal employment, we encourage them to contribute to CPF by allowing them to qualify for WIS if they contribute at the lower rate as self-employed workers. The tripartite partners have been reaching out to these workers on the benefits of contributing to CPF and on the WIS scheme extensively through the "Be a Winner" campaign. MOM has also worked with various partners to brief hawkers, cleaners and grassroots representatives, and to educate employers through seminars.

30. To date, about 54,000 self-employed and informal workers have received their WIS payout. Another 46,900 have registered with the CPF Board but have not fulfilled their Medisave contributions. This shows that while they are aware of the WIS, they have not made the contribution to their Medisave to qualify for WIS.

31. To encourage informal and self-employed workers to contribute to Medisave and receive WIS, we introduced the Medisave Contribution Draw. The first one will be held in June 2008. We have made it easy for workers to contribute, by allowing payments in instalments and at many locations, including CPF service centres, AXS machines, and the 62 Singapore Post branches.

32. To make WIS more attractive to the self-employed and informal workers, there have been suggestions for a cash component in the WIS payout and waiving of the Medisave contribution requirement altogether.

33. The concern is that that many informal workers and self-employed do not find it worthwhile to contribute cash to their Medisave just to benefit from the WIS. While I understand this concern, I should stress that each person must take responsibility for his own CPF savings. This principle is the foundation of the CPF system and applies to all workers, self-employed or otherwise. The Medisave Account enjoys higher interest, including the bonus interest offered by the CPF Board. It provides for the workers' medical needs and allows them to participate in Medishield.

34. Furthermore, self-employed persons and informal workers already contribute far less to CPF than formal employees earning the same amount – only 8.5% compared to 34.5%. For low-wage self-employed persons, their contribution rate has been further reduced, to as low as 2.5%, for those earning less than $12,000 a year. For example, the amount of Medisave contribution required for a 40-year-old worker earning $1,000 a month is $25 a month, or less than a dollar a day (about the price of a cup of kopi-o). Waiving the Medisave contribution requirement for self-employed or informal workers to qualify for WIS will undermine the principle of individual responsibility, and may inadvertently discourage informal workers from converting to formal employment.

35. Given the increasing importance of the CPF system in providing for workers' medical and retirement needs, we should encourage self-employed and informal workers to put more into their CPF, not ask for their contributions to be reduced or waived. ComfortDelGro will be passing on road tax rebates to its hirers' CPF Accounts to help them build up their Minimum Sums, to improve their retirement adequacy. ComfortDelGro has come up with a creative way of helping their self-employed taxi drivers build up their CPF savings. This is a positive move, and I encourage other principals to consider similar initiatives for their self-employed agents. My Ministry, together with CPF Board, is prepared to engage the principals, associations and other organisations on ways to help the self-employed build up their CPF balances.

(C) Improving Employment Conditions for Low-Wage Contract Workers

36. Besides informal workers, contract workers and concerns about the employment conditions of these workers is another area of focus for MOM.

37. Informal workers are covered by our existing labour laws, such as the Employment Act and CPF Act. Employers are therefore required to provide their contract workers with basic employment benefits, such as CPF contributions, overtime allowance, prompt salary payment, annual leave, and medical leave.

38. We have been taking action against errant contractors and helping vulnerable contract workers understand their employment rights. The support of end-user companies of outsourced services is important. Recognising this, the Tripartite Committee on CPF and Work Related Benefits for Low-wage Workers has formulated a Tripartite Advisory on Responsible Outsourcing Practices, which will be released later today.

39. The Tripartite Advisory will serve as a useful reference for end-user companies when they outsource their functions. For example, end-users are encouraged to require third party-contractors to adopt responsible practices such as providing written employment contracts to their workers, and hiring the workers for at least 6 months so that they can qualify for employment benefits under the Employment Act.

40. The public sector will take the lead to adopt the Tripartite Advisory. The TriCom has also secured commitments from private sector employers, like the NTUC Fairprice Co-operative Limited and the National University Hospital.

CONCLUSION

41. In conclusion, Sir, we have made progress in helping older workers stay employed, but we need to continue to prepare employers and employees for re-employment. The WIS scheme has helped lower income workers, and we will continue to reach out to informal workers and the self-employed. However, these workers must also take on the responsibility to contribute to their Medisave to benefit from WIS. This way, we will be able to achieve a win-win outcome for all. My Senior Parliamentary Secretary will now respond to the remaining cuts.

^P Preliminary