Committee of Supply (Speech 3) by Mr Hawazi Daipi, Senior Parliamentary Secretary for Education and Manpower, 05 March 2012, 4pm, Parliament

1. The House has been given an overview of the measures our Ministry will take over the upcoming fiscal year to help Singaporeans achieve retirement adequacy and to build a Singaporean core in our workforce. I will now touch on the measures to help low-income Singaporeans benefit from our economic growth.
   
   A. Government's commitment to help low-wage workers
2. As we have heard from DPM in the recent Budget Statement, our shared mission is to build an inclusive society and a stronger Singapore.
   
   Profile of our low-wage workers
3. Mr Zainudin Nordin asked about the group that might not be able to enjoy this inclusive growth, specifically, the number of Singaporeans who are low-wage or do casual and contract work.
4. Our efforts to help low-wage workers have been focussed on the bottom 20% of Singaporean workers. Based on income data of 2011, this group of workers earn a monthly income of $1,500 or less. Over the past few years, the number of workers in the bottom 20% has increased in tandem with the growth in the size of our overall workforce.
5. Currently, 13% of Singapore employees in the bottom quintile are casual and short-term contract workers. They are those who work on an ad-hoc basis or on contracts of less than one year. This percentage has remained fairly constant over the last 3 years, although the incidence is slightly higher amongst the low-wage group compared to about 12% for Singaporean employees in general¹. Our overall share of contract employment in Singapore is not unusual among developed countries. For example, it is 15% in Germany and France, and 13% in Canada.
6. Helping workers in the bottom 20% is a multi-faceted challenge. Almost half are aged 50 and above, and more than three-quarters have secondary education or lower. They also train less compared to the other income groups, and are more likely to suffer from poor employment standards. I agree with Mr Laurence Lien that we need to understand low-wage workers and their challenges better, and that this calls for more research and analysis. MOM will consider his specific suggestions further.
7. Helping low-wage workers also requires sustained efforts on multiple fronts. It cannot be done just by one agency, the government alone. It has to be a concerted effort by different parties - employers, unions, as well as the government. It is not a sprint, but a middle-distance race. Mr Zainudin asked about the approach that the Government was taking. During the Budget Debate, Mr Ong Teng Koon also asked how we could raise the wages of those at the bottom.
   
   Improving the productivity of low-wage workers
8. Our approach is two-pronged. First, we help the lower-income Singaporeans become more productive so that they can earn higher wages. We do so both at the worker level and the employer level. Through the Workfare Training Support (WTS) and other programmes, we are helping our low-wage workers upgrade their skills, so that they can improve their employability, find better jobs and earn more. And through the Inclusive Growth Programme (IGP), we are helping companies improve processes and redesign jobs, so that they can offer higher-value jobs that can pay more to our low-wage workers.
   
   Encouraging low-wage workers to find regular work
9. Second, we encourage low-wage workers to work, and help create the opportunities for them to do so. Again, we approach this at both the level of the worker and employer. The Workfare Income Supplement Scheme, or WIS, supplements the incomes and retirement savings of low-wage workers, and encourages work. WIS currently benefits about 400,000 workers, with a total annual payout of more than $400m.
10. The Special Employment Credit (SEC) provides employers with an incentive to hire older low-wage workers. With the enhancement of the SEC to up to 8% of wages, there is now an even stronger incentive to tap on the older workforce to meet manpower needs in a tight labour market.
11. During the budget debate, Mr Yeo Guat Kwang offered various suggestions to improve WIS, such as raising the cash component of WIS. We review WIS every 3 years, and will consider these suggestions when we review WIS holistically next year.
12. Mr Zaqy Mohamad had asked whether WIS can be paid more regularly. Other members including Dr Amy Khor, Mr Low Thia Kiang, Ms Irene Ng, Mr Inderjit Singh and Mdm Halimah Yacob have also asked in the past whether WIS can be paid more frequently to low-wage workers, so that they can be used to meet daily expenses.
13. I am pleased to announce that we will do so, by paying employees WIS four times a year, up from twice a year currently.
14. Each quarter, we will now pay WIS to an employee who works for at least two months in the quarter, and who has an average income in the quarter of not more than $1,700. The amount of WIS paid out each quarter will be adjusted proportionately.
15. We will implement this change from January 2012, which means the first quarterly payment, which will be for work done in the first quarter of this year, will be received by 1 June 2012.
16. With these changes, we estimate that about 440,000 older low-wage Singaporeans will receive WIS, or an increase of about 10% from today. Employees with a steady income will receive payments quarterly instead of twice a year. While we are making a move to quarterly payments for employees, I should stress that we will not be raising the payment frequency further, as the intent of WIS is to encourage regular and sustained work.
17. Unlike employees whose WIS eligibility is automatically assessed based on their monthly CPF contributions, self-employed persons (SEPs) are required to declare their net trade income before they are assessed for WIS. While SEPs are given the option of declaring both their mid-year and full-year income, less than 1% of all of them do so. The vast majority of SEPs declare their full year income and contribute to Medisave to receive WIS once a year.
18. The Medisave contribution that needs to be made by an SEP for the mid-year payment is also estimated based on their full-year income, which can result in over or under-contribution to Medisave.
19. Hence from this year on, SEPs will be paid WIS once a year based on the declaration of their full-year income. For SEPs who are required to file an income tax return with IRAS, no further income declaration is necessary.
    
    B. Raising awareness & stepping up enforcement efforts
    
    Non-compliance with the CPF Act
20. WIS has become an important pillar of our social security system. Regrettably, not every low-wage worker receives it. This is because some fall outside the CPF system, which is used to administer WIS. Under the law, not paying CPF is a serious offence that can attract a fine of as much as $10,000 per charge, in other words, $10,000 per worker per month.
21. To compound the problem, some workers also prefer that their employer does not contribute CPF, so that they too can avoid contributing their employee CPF and have higher take-home pay. This may give them a better take home pay, but certainly this is short-sighted.
22. As Mr Zainudin and Mr Zaqy pointed out, workers lose out in the end when they do not receive CPF. This is because the Government channels a significant part of its assistance such as WIS, as well as any other occasional top-ups, to the low-income via the CPF. Furthermore, they also compromise their retirement adequacy.
23. To illustrate this, a Singaporean worker aged 55 earning $1,000 per month who is not in the CPF net over the past 5 years would have foregone more than $9,000 in cash and CPF from the Government through the WIS, Workfare Special Payment, Workfare Special Bonus as well as top-ups to the CPF Medisave account. If we were to include the employer CPF contributions due to him, he would have lost out an additional $11,000. In total, this worker would have lost out more than $20,000 over a 5-year period, which works out to be about a third of his overall pay. And we have not counted the interest he would have earned in the CPF. So the worker, who is not receiving CPF, whether because of his own will, or because the employer does not want to pay him CPF contributions, will lose out a lot.
24. So I would like to urge all Singaporeans who are aware of any relative, neighbour or friend who are forgoing their CPF to remind them that they are losing out and urge them to make sure they ask their employers pay them CPF.
    
    Non-compliance with the Employment Act (EA)
25. An associated problem that Mr Zainudin raised is non-compliance with the Employment Act (EA). The EA sets out basic employment terms that employers must offer their workers. For example, workers cannot work for more than 12 hours a day. Workers must also be given 14 days of paid outpatient medical leave per year. However, some employers are unaware of the obligations they have to their employees, while some others deliberately circumvent it.
26. As DPM Tharman mentioned in his speech earlier, MOM will step up our efforts to bring about compliance with the CPF Act as well as the Employment Act.
27. We will do so in two ways. First, we will step up education of both employers and employees on their obligations and rights. There are misperceptions to correct. For example, one false impression is that CPF contributions are not mandatory for part-timers and casual workers, such as restaurant workers who only work on weekends or are only called up to help out at large events. This is incorrect. CPF is payable for such employees.
28. To raise awareness, the CPF Board and MOM will launch a media campaign, as well as intensify our outreach in collaboration with NTUC, SNEF and other partners.
29. Second, MOM and CPFB will ramp up enforcement efforts. We have increased the number of inspections since the start of this year, and we will step this up sharply over the next 5 years. We will focus on sectors where non-compliance is known to be higher, such F&B, retail, cleaning, security, as well as others.
30. In some sectors, employers attempt to reduce the CPF they pay by claiming that certain payments made to the workers are reimbursements. This may form a large portion of what workers receive as take-home pay. Valid reimbursements do not attract CPF. However, many of the expenses may not be valid reimbursements. So this is how some employers circumvent their obligations to pay CPF.
31. For example, cleaners and security officers receive large and regular payments as laundry reimbursements. But they typically wash their uniforms at home, rather than incur laundry expenses. We recently encountered a case where the security guard earned a basic pay of $745 but received a monthly laundry reimbursement of $182. The laundry reimbursement was close to a quarter of the security guard's basic pay, but the worker did not receive any CPF on it.
32. There are other examples. We will therefore tighten up on enforcement to reduce instances of employers trying to circumvent their obligations under the CPF Act with such malpractices.
33. Workers play an important role in our enforcement efforts. We encourage workers to come forward if their employer did not pay CPF or accorded them what is due under the CPF Act and EA.
34. Mr Zainudin and Mr Zainal have asked whether we will be reviewing existing legislation to protect the rights of low-wage workers, such as holding buyers accountable for the employment conditions of their outsourced workers. We will need to consider any introduction of legislation carefully in consultation with the tripartite partners, given its potentially wide-ranging impact. But we are not closed to reviewing our legislation where warranted, and will look into these suggestions further in close consultation with our tripartite partners.
    
    C. Uplifting low-wage workers in commonly out-sourced sectors
    
    Problems of cheap sourcing
35. I will now turn to a different type of challenge faced by some groups of low-wage workers – cheap sourcing.
36. As I have shared with Members at the debate on the President's address last October, a significant number of low-wage workers are currently employed in outsourced sectors such as the security and cleaning services sectors. These sectors are often subject to the problem of cheap sourcing, where service buyers award contracts mainly based on price. As a result, service providers bid aggressively low to win contracts, and cut costs by reducing benefits and depressing wages, as manpower is a major cost for such services. When this takes place, low wage workers bear the brunt in terms of stagnant wages, poor employment conditions and few opportunities to up-skill themselves.
    
    Government's Support for Best Sourcing
37. The Government has been promoting Best Sourcing to tackle this problem. The tripartite partners recently released an updated Tripartite Advisory on Best Sourcing practices that encourages service buyers to outsource responsibly and adopt best practices when doing so.
38. To accompany the Advisory, we also launched an implementation guidebook to provide practical tips for service buyers. It is a detailed guide, providing even sample text that can be replicated in tender documents and contracts. Buyers who have the will to best source, now know where to find the way.
39. Government agencies, as significant buyers of services, play an important role in catalysing best sourcing. Ms Josephine Teo at MOF's recent COS debate, announced specific measures the Government will take through its procurement practices to lead by example.
40. To recap, Government ministries and statutory boards will procure only from accredited cleaning companies, and well-graded security agencies with an "A" or "B" grade. Our restructured hospitals and autonomous universities have also indicated their support for best sourcing.
41. Some companies are of the impression that this requirement does not apply to them if they are sub-contractors to the company that wins a government contract. That is incorrect. This requirement will similarly apply to any cleaning company or security agency that is engaged as a sub-contractor.
42. Mr Zainal called for the government to review existing non-BSI contracts and to provide extra funding to help ministries cope with any increase in cost that can be expected. Sir, the Government will need to allow sufficient time for the cleaning and security companies who intend to participate in our tenders to meet the new requirements. The Government will study the various options available to manage the transition. All these will come at a cost to Government. MOF will ensure that Ministries are adequately funded to implement this initiative.
    
    Cleaning Sector
43. But the Government will not stop there. In conjunction with these efforts, we will also tighten regulatory frameworks for the cleaning and security sectors so that workers in these sectors can enjoy better employment terms. So it's not just the pay, we want to also make sure that workers in these two sectors enjoy better employment terms. Let me elaborate first on cleaning.
44. Cleaners are a group that require special attention. As DPM Tharman explained in the Budget Statement, most Singaporeans, including lower-income Singaporeans, have enjoyed significant real income growth over the past 5 years. However, a few occupations at the bottom of the income ladder, such as cleaners, have not seen this lift in incomes. During the budget debate, Dr Amy Khor, Mr Inderjit Singh and Dr Teo Ho Pin also spoke on the need to help raise the incomes of cleaners.
45. We can help cleaners by strengthening the Clean Mark accreditation scheme, which is a voluntary scheme introduced by NEA in 2010 to evaluate cleaning companies on their ability to deliver good quality cleaning services.
46. NEA has been improving the accreditation scheme so that accredited companies and their workers must meet higher training, standards and productivity requirements. MOM is working with NEA to strengthen the employment-related criteria.
47. Due to cheap sourcing, the market does not work as well to ensure that training and standards translate into improved wages in this sector. In fact, while cleaning practices and workers training have improved over the last 10 years, the wages of cleaners have fallen by about 3%. Fortunately, we introduced the WIS in 2007, which helps to make up for the drop.
48. In strengthening the accreditation scheme, we will introduce a requirement that cleaners employed in accredited companies receive appropriate wages, commensurate with the higher training, standards and productivity required of accredited companies.
49. We have been having very useful tripartite discussions on this. We are also consulting cleaning service providers and buyers. Details will be released once they are finalised later this year. Government is taking the lead in buying from accredited companies. MOM is working with NEA to ensure that we uplift the entire cleaning industry. MEWR will be announcing further measures at their COS debate later this week.
    
    Security Sector
50. I'll now turn to the security sector. Our focus here is working hours. Security officers work very long hours. It is not uncommon for a security officer to work 12-hour shifts, 6 days a week. This translates to a total of 72 hours in a week.
51. Such long working hours are not ideal from a security standpoint, as vigilance may be compromised by fatigue and loss of attention. The long hours also become a barrier for Singaporeans who are willing to work but who are unable to work such long hours, creating difficulties in recruitment and retention. A recent feedback that I received from a member of the public affirms this. He talked about how the 12-hour shifts that security officers have to put in meant less time for their families. He related how security officers’ performance would be improved if the hours were shorter and how more Singaporeans would be willing to join the security industry if working hours were better. I fully agree with him.
52. Shortening working hours can help ease the manpower shortage in the security industry. Recently, the Singapore Police Force and WDA launched a programme to attract mature workers and back-to-work women to work as security officers by offering 6 to 8-hour shifts instead of the usual 12-hour shift. More than 150 job-seekers responded in just one job fair. I think this a significant reaction by workers who want to look for jobs in this sector. And as I said, we can do better.
53. We need to reduce the amount of overtime across the sector. This cannot be done instantly as doing so would cause disruptions to current operations, and may lead to difficulties in staffing committed projects.
54. MHA and MOM are studying how we can do so and cut down overtime over the next few years, particularly whether recruitment and training of additional officers can be stepped-up to fill the gap in hours worked. We are also exploring options to increase the use of technology among buyers within the sector to raise productivity. Basic wages can then be adjusted upwards so as to avoid a negative impact on gross wages when overtime hours are reduced.
55. For a start, we can use SPF's grading framework for security agencies to encourage employers to reduce the overtime hours in the industry. The government, as a buyer of security services, will certainly play its part in working towards this goal.
    
    Impact on Costs
56. These measures to uplift the cleaning and security sectors will raise manpower costs for such services. Parallel efforts to raise productivity in the sectors will mitigate this, but it is inevitable that cleaning and security services will cost more for some buyers, especially those who cheap source currently.
57. However, the costs of cleaning and security services are typically small compared to overall operating costs. One real estate company told us that outsourced cleaning and security functions make up about 6-7% of the operating costs of typical offices and shopping malls. A check with a large supermarket chain revealed that these amount to less than 2% of the total operating costs. A hotel that outsourced public area cleaning and night kitchen cleaning said that together these were less than 1% of its operating costs. The incremental costs arising from these measures we are taking would be even smaller - just a fraction of these cleaning and security costs. Furthermore, we will phase in the changes so that they are even more manageable to businesses.
58. We must be prepared to take some cost increase in our stride, if we want to help our low-wage workers earn more. As Mr Laurence Lien pointed out, we cannot as a society want to do more for low-wage workers, but then begrudge small cost increases which may arise from paying them better wages. Low-wage workers too need to earn a decent living.
    
    Other low-wage sectors
59. Mr Zainal had also asked about our approach for other low-wage sectors such as landscaping, retail and logistics sectors. We have measures for low-wage workers in those sectors as well. Let me give you some examples, beginning with one from landscaping.
60. Nature Landscapes is a company that builds and designs natural landscapes and water features for buildings. It invested in new machinery to mechanise the digging of pits, transportation of soil and plants, and so on. Its workers learnt to operate the new equipment and take on new work processes. They became more productive, and the end result was a significant reduction in the man-hours needed. There were cost savings of about $11,000 per month, and the workers enjoyed significant pay increases. There has been a good improvement in their salary as a result of mechanisation and improvement in productivity.
61. TNT Express is another example, this time from the logistics sector. It offers express delivery services. Its workers have to manually handle a large volume of consignments every day. One notable project TNT has undertaken is the 'Red and Green' system, which deploys a high-tech scanner to verify the hundreds of parcels passing through its facility. Workers no longer need to perform eyeball checks on every single parcel. This has enabled each worker to achieve greater efficiency, attain higher targets and share in the productivity gains.
62. Both projects by Nature Landscapes and TNT Express were funded under IGP, where a sectoral approach is adopted. These projects serve as pathfinders, and the solutions found have wider sectoral applications, meaning it can be applied to other sectors as well. As we learn how to raise productivity in each sector, the wider industry can also upgrade and raise their productivity, so that all workers in the sector can benefit.
    
    Conclusion
63. The uplifting of low-wage workers requires the concerted effort of not just the Government, but also the private sector and the society at large.
64. As DPM Tharman pointed out in his Budget Statement, underlying this commitment is the need for us to develop a deep sense of responsibility,not only ourselves and for our families, but also the people who are amongst us, the less fortunate.
65. Let us work together towards this shared goal of making Singapore a better place for all.

¹ The 12% refers to the proportion of Singaporean employees on term contracts (i.e. those on fixed-term contract of employment that will terminate on the expiry of a specific term unless it is renewed), as well as those on casual/on-call employment. This was the best-available definition that would allow for international comparisons, while recognising that the definitions also vary across OECD countries.

Factsheet on Changes in Payment Frequency of Workfare Income Supplement Scheme