Retirement and Re-employment (Amendment) Bill 2016 Round-up Speech at Parliament

Mr Lim Swee Say, Minister for Manpower, Parliament

1. Mr Deputy Speaker, Sir, first of all, I would like to thank the 17 Members who have spoken and for their support of the Bill. Let me try to address the key issues brought up by the Members.
2. First of all, I am happy to see that all of us in this House share a common objective which is to help as many Singaporeans as possible to work for as long as possible. Given the longer life expectancy, I think there is no disagreement that helping our seniors to live what I call "H2P2" – a Happy and Healthy, Productive and Purposeful life. I think we are on the same wavelength.
3. The issue is: what is the best way to go about achieving this. First, why re-employment and not retirement? Why do we not raise the retirement age? The Member Assoc Prof Daniel Goh asked that question: why leave the retirement age at 62; why not raise it to 65 or even higher? Why raise only re-employment age?
4. Mr Deputy Speaker, Sir, we started off raising the retirement age as the key mechanism to enhance the employment rate for older workers. We used to have a de facto retirement age of 55. Later on, we formalised it at 60 – it was alright. Later on, the tripartite partners worked very hard together to raise it to 62. We managed to make it happen. But after that, we hit a wall. When the tripartite partners sat down to talk about raising the retirement age from 62 to 65 and beyond, all three parties objected.
5. First, the employers objected for the very obvious reason because they are concerned about the impact on businesses. On the part of the workers, Members may not be aware, our younger workers objected too. In fact, at a grassroots dialogue chaired by Prime Minister Lee Hsien Loong, a young worker asked him a very direct question. He said, "I am now in my 40s. I have been waiting for many years to take over the position of my boss. My boss is going to retire very soon, because he is reaching 62 soon. Now, if you were to raise the retirement age to 65 and beyond, it means I have to wait a few more years." He asked, "How is the Government going to take care of the aspirations of the young?" The young employees objected.
6. The older employees also expressed their concerns. They talked to NTUC. Every time we raise the retirement age, employers will demand a wage cut because of various considerations, and the older employees would object to the wage cut. So, we could not move. Employers did not want to move, young workers did not want us to move, and unions were pressured by senior employees not to give in to demands for wage cuts. So, we were stuck. How to find a solution? But we believe that instead of having all three parties looking at this as a problem, why not all of us work on a solution? A solution that can produce an all-win outcome.
7. We went to Japan. We studied their model. Every country talks about raising their retirement age, but in Japan, they pursued the direction of re-employment age. The core difference between retirement and re-employment age is that when you raise the retirement age, the expectation is for same job, same pay. As a result, we may deprive the younger ones from career progression. Whereas when Japan introduced the idea of re-employment age, the concept is, not necessarily the same job, not necessarily the same pay.
8. They told us, when we visited them in 2005, 2006, that in Japan, under the Re-employment Act, no manager is allowed to be re-employed as a manager so that the position will be made available to a younger successor, and that person who is re-employed will provide value add, maybe as a consultant, an advisor, or a staff officer to guide and help the younger ones to succeed. In some cases, if the corporation does not have a position opening for them, they allow them to be deployed to the subsidiaries. Why? Because they can actually help to bring their expertise and experience to the subsidiaries.
9. We learnt from them. We thought it made a lot of sense. We invited the Japanese experts to come to Singapore to conduct workshops. And finally, we came to the conclusion that that is the best bet, and the way to go ahead. As a result of that, we moved away from raising the retirement age, towards the introduction of the re-employment age. I would say that over the last five years, since 2012, it has been proven that what we did was correct.
10. The second point: are we moving too slowly? Have we wasted 23 years? Deputy Speaker, Sir, we learnt from Japan the concept of re-employment. Come 1 July 2017, we will be ahead of Japan in the adoption of re-employment age. The re-employment age in Japan today is still at 65. We learnt from them five years ago and adopted the re-employment age of 65. Come July, our re-employment age will be 67, but in Japan, it is still 65. Our re-employment age at 67, compared to many other countries, is already among the higher ones. Of course, some many argue: why not do away with retirement age completely? Why not do away with re-employment age completely?
11. We did a quick comparison. There are countries that have no retirement age, for example, UK, Australia, US, Denmark, New Zealand and Germany. They have no retirement age, but yet at the same time, there are other countries – I am talking about the developed economies – they have retirement age. For example, in Korea, it is 60; in Switzerland, 65 for males, 64 for females; Sweden, 67; Finland, 68; Luxembourg, 68. Some of them are about the same as us, some are lower, and some are higher than us.
12. At the end of the day, we look at the employment rates. Yes, you can do away with retirement age or have higher or lower retirement age. The bottom-line is: to what extent are we able to help the older workers to stay employed?
13. We looked at the employment rates of those who are aged 65 to 69, and guess what? What we discovered is that, with Singapore's re-employment age of 65, our employment rate of those aged 65-69 is 40.4%, as of 2015. Of the developed countries, two countries are higher than us: Korea whose rate is 44.8%, and Japan whose rate is 41.5%. We learnt from them about re-employment age but when it came to actual employment rates, they are still higher than us.
14. These two countries are higher than us. And guess what? If we compare to all the other countries with higher retirement age, for example, Luxembourg, their employment rate for those aged 65 to 69, is 7.1%, less than 10%. In the case of Finland, the retirement age is 68, but their employment rate for those aged 65 to 69 is 13.1%. In the case of Sweden, the retirement age is 67 and their employment rate is 21.9%.
15. What about countries with no retirement age? UK has no retirement age, employment rate for those aged 65 to 69 is 21%; Australia, 25%; US, 31%; and Denmark, 15%. All of them, all these countries, even though they do not have retirement age, their employment rates for workers aged 65 to 69 are all significantly lower than Singapore's 40.4%.
16. What about workers aged 70 to 74? Eventually, what we hope is that our people can actually continue working for as long as they are able to, and as long as they want to. Looking at the employment rate for those aged 70 to 74, Singapore is 24%. Is that low? Is that high? Again, we compare it to all these other countries. One country that is much higher than Singapore is Korea, which has 32.3%. I must really visit Korea soon to see how and what we can learn from them. Japan is again higher than us, 25%. But all the other countries are significantly lower. In other words, if we compare the employment rates of older workers aged 65 to 69, and 70 to 74, the tripartite partners in Singapore are very convinced that the way we are doing it, is the right way.
17. The re-employment model is the right model. At the same time, we are not progressing too slowly. In fact, compared to other countries, our re-employment age at 67 is comparable and in fact, higher than many other countries. Either going by re-employment age as in Japan or retirement or pension age in other countries.
18. Therefore, I want to appeal for the support of Members: let us commit ourselves. At the end of the day, here in Singapore, what is our objective? We want to ensure that our economy can continue to grow. We all recognise that for economic growth, we have to support businesses. However, the main objective, the end outcome of economic growth must be translated into employment opportunities for people, young and old, all inclusive.
19. Jobs represent the best welfare; full employment is the best protection. Therefore, we will continue to evolve the re-employment model and at the same time, make sure that our re-employment model in Singapore must be both pro-business and pro-worker. If we do not address the interests and concerns of businesses, we will eventually run out of jobs. But yet at the same time, if we do not take care of the interests of our workers, our people will eventually not be able to continue to pursue and live a "H2P2" life.
20. With that as a backdrop, I will now address some of the points brought up by Members. A related issue is about the CPF Payout Eligibility Age (PEA). Assoc Prof Daniel Goh asked whether we can roll back PEA from 65, to 60. For Member Louis Ng, he asked with the increase in our re-employment age, does it mean that we are going to adjust the PEA to 67 as well?
21. Deputy Speaker, Sir, let me explain the current situation. Up until 2012, the link between retirement age and the CPF PEA, is direct and identical. It is a point-to-point linkage. So, when the retirement age was 60, PEA was 60. When the retirement age went up to 62, PEA was 62. But in 2012, something happened. The two are still related, but they are no longer identical. They are still related because both are related to the expected life span but yet at the same time, I think from 2012, you would notice that even though we raised the re-employment age to 65, the CPF PEA in fact, went up much slower to 63 in 2012 and 64 in 2015, and 65 only in 2018.
22. The increase in our PEA is already something like six years lagging behind the re-employment age. Something happened again last year. I do not know whether Members noticed. At the recommendation of the CPF Advisory Panel, we amended the rules by which members can draw on their CPF payouts
23. Starting from 1 January 2016, CPF members, will start their CPF payouts between ages 64 and 70. Come next year, it will be ages 65 to 70 even though re-employment age is 67. Therefore, the relationship between re-employment age and the age of starting the CPF payouts has already changed. It used to be point-to-point, but now, it is a range. The CPF payout start range is now 64 to 70, and the re-employment age will be 67 by July, within that age band. Next year, the CPF payout start range will be 65 to 70, and again, the re-employment age at 67, still within that band. There is no longer a direct point-to-point linkage.
24. I think on this, we are all in agreement. But one point which we are still in strong disagreement is really not about the de-linking, but rather, it is about whether we should reset the PEA back to 60. For this Government, we think it will be the wrong thing to do, given that the life expectancy of our people is getting longer.
25. Also on the point about letting our CPF members withdraw more money so that they can invest on their own. Members, if you have been following all the developments, many of the CPF members who had invested their money on their own through CPF Investment Scheme, or CPFIS in short, have not done better. By putting their money under our CPF LIFE, they can earn interest rate of at least 4% per year. Therefore, I believe that it is to the best interests of our CPF members for them to keep their CPF retirement money in CPF LIFE.
26. Please also do not forget that CPF members can withdraw their savings above the Basic Retirement Sum (BRS) if they already have got a sufficient housing charge or pledge in place. In other words, we are not depriving our CPF members from investing their own retirement sum, if they have anything above the BRS for those who have sufficient housing charge or pledge and above the Full Retirement Sum for those without sufficient housing charge or pledge. Therefore, this amendment Bill is about raising the re-employment age. It has nothing to do with the CPF PEA or payout start range, which as I have said, is already fixed at 64 to 70 this year, and 65 to 70 from next year.
27. On the eligibility for re-employment, some Members have expressed concern on whether the onus of proof is on the workers or the employer. I want to make it very clear that the onus is on the employer to show proof. If the employer says this worker is not eligible for re-employment due to poor performance, it is for the employer to show proof. If the employer says that this worker is not eligible for re-employment due to medical reasons, it is for the employer to show proof.
28. Some Members ask, "What if this company has no performance appraisal system in place?" When that happens, we will tell the employer, "Since you don't have proof, you don't have a performance appraisal system in place, and you don't have proof that this person has not been performing well, year after year. And more than that, along the way, you had not been giving him feedback, suggestions and so on." These cases would be ruled as being unreasonable denial of re-employment. MOM will then come in to either reinstate re-employment or order compensation, based on the situation of the case.
29. In the case of discrimination, I share the concerns of the members. This is something that we are always on the lookout for. For example, can the employer try to find ways to get rid of a worker just before 62? A worker may come to MOM to complain and say, "I have been working for this company for 10, 20, 30 years; everything went very well. But somehow, three years before I turn 62, everything turned negative." If this worker is a union member, we can ask him or her to approach the union. If he is not a union member, he should come to MOM.
30. Let me also emphasise that the Retirement and Re-employment Act covers all local workers. There is no salary cap of $4,500. Re-employment is an entitlement that covers all local workers, regardless of whether they are PMETs, high-wage or low-wage workers, they can all come to the tripartite partners or MOM if they feel that they had been discriminated against under the Retirement and Re-employment Act.
31. Regarding the employees' entitlement on re-employment, again, this is a trade-off between being pro-business and pro-worker. The tripartite partners negotiated and decided to strike a balanced outcome, which is that the core entitlement of workers provided for under the Employment Act should be protected. For example, paid sick leave of 14 days for outpatient consultation and 60 days of hospitalisation are protected. In the case of annual leave, the minimum seven days provided for under the Employment Act, again, is protected.
32. Some other entitlements may no longer be relevant and so, they are removed. For example, maternity leave. It is unlikely that the re-employed workers would need maternity leave. This is removed.
33. The question, really, is what about the contractual benefits: medical benefits and other benefits. Contractual benefits have never been part of the Employment Act. In other words, even the Retirement and Re-employment Act cannot protect your contractual benefits. Contractual benefits are bounded through contracts. It applies to all workers, young and old. Whether you are 40 years old or you are re-employed and aged 62, all your employment contract terms depend on what is contained in there; it is a subject of direct negotiation between the employee and employer, or between the union and the management. This will continue.
34. However, the tripartite partners are still concerned that the older workers, those who are re-employed, may not be in a good position to negotiate for fair terms and conditions. As a result, we have issued a set of tripartite guidelines. The latest revision will be issued later today.
35. In these guidelines, we will highlight what is considered reasonable terms and conditions. These guidelines are very important because in the situation of any dispute, the employee can come to the Tripartite Alliance for Dispute Management (TADM) for mediation and come to MOM for mediation. If the mediation is not successful, the case can go to the Employment Claims Tribunals (ECT). The ECT will make reference to this set of tripartite guidelines. So, if the employer is indeed being unreasonable in terms of the terms and conditions, and after mediation, we could not succeed in a resolution, and the case goes to the ECT, the ECT will make reference to this set of tripartite guidelines and rule whether the terms and conditions offered upon re-employment are reasonable. I want to assure Members of this House that the tripartite partners take this very seriously.
36. The ECT will come into effect on 1 April, before the re-employment age of 67 comes into effect.
37. On the issue of a new option for a second employer, some Members are concerned about what would happen if the second employer is not able to fulfil the commitments of the first employer. So, they ask if there is a way out for the second employer. First, I want to assure the Members that the consensus of the employee is a mandatory condition. If the worker does not feel comfortable, then he does not have to accept this offer. Once the offer is accepted, the second employer will have to fulfil all the obligations of the first employer.
38. For example, a Member mentioned about what would happen after one year, the worker is subsequently not offered re-employment at 63, after having been offered re-employment at 62. At the point of 63, if the worker is not offered re-employment, the second employer would have to pay the worker EAP. No difference from the first employer. Before the second employer can offer to pay EAP, the tripartite partners will come in to scrutinise whether this is the last resort. Remember that the EAP is a last resort. Mr Patrick Tay highlighted this.
39. We will be monitoring very closely to ensure that there is no abuse of the EAP. I am happy to say that in the five years of the Retirement and Re-employment Act, we have not come across too many cases; just a handful. The large majority does not have this issue of abuse of EAP. As such, we believe the second employer will be as tightly bounded by these criteria and conditions.
40. On the question about whether workers should be told much earlier if they are not eligible for re-employment. Our tripartite guidelines stipulate that whether a person is eligible or not eligible for re-employment, he should be notified at least three months in advance, the longer the better. Mr Zainal Sapari asked if the notice period can be one year. The unionised sector can try. The guidelines dictate at least three months' notice for eligibility, and mutual consultation for at least six months prior to re-employment or extension of re-employment. We think that is sufficient but let us do more.
41. On the payment of EAP, I agree fully with Mr Patrick Tay that we must have a safeguard in place to prevent abuse. As I had mentioned, we watch it very carefully, and so far, so good. We will continue to monitor the situation.
42. In terms of the review of the quantum of the EAP, we just reviewed it this round. Having extended the re-employment period from three to five years, the EAP quantum would be higher now, in the event the employer is not able to offer re-employment. This is already in our guidelines.
43. Business concerns are real. We take business concerns very seriously because we recognise that re-employment can only work if it is a win-win outcome. We have been in very close consultation through the Singapore National Employers Federation (SNEF) to take into account all the feedback. We will continue to provide support, not just through this scheme, but through the overall package that is coming up.
44. Assoc Prof Randolph Tan asked what if a company in financial hardship is not able to pay the EAP. Those cases can go to the ECT and the Tribunal will then rule, after they have seen whether the company is indeed in such great difficulty that it is not able to pay the EAP. There is a mechanism to resolve this.
45. Ms Jessica Tan asked whether we can do something to help and encourage employers to re-employ the older workers, including those not eligible for the re-employment till 67. The answer is yes, we are actively looking into this. The decision on the extension, what form, what coverage of this additional wage offset will be decided soon, well ahead of the 1 July implementation date.
46. Last but not least, I share the views of many Members here that at the end of the day, the true success of re-employment depends a lot on how we value our older workers and how we redesign their jobs. I am very happy to hear the Labour Members repeating the call for "ESS", or making our jobs "Easier, Safer, Smarter". We are 100% aligned on this.
47. Last year, we enhanced WorkPro for job redesign. I am still looking for more ways to encourage greater adoption. Many countries have done something, so there is a lot that we can learn from.
48. Mr Melvin Yong asked about whether the public service can take the lead on re-employment. The answer is yes. Actually, the public service was the first one to adopt the re-employment age of 67, way back in January 2015. It has been about two and a half years ahead of the law. I also agree with Mr Heng Chee How that we should look at different ways to make "progressive workplace practices" more prevalent across the board.
49. Mr Deputy Speaker, Sir, I hope I have addressed most of the issues brought up by Members. I also want to assure the Members that many of their good suggestions will be taken note of by the tripartite partners and will be incorporated in our implementation. At the end of the day, just because we have succeeded in re-employment in the first five years, from 2012 to now, it does not mean that the way forward will be smooth.
50. The tripartite partners are concerned that as we raise the re-employment age, the higher the re-employment age, the more challenging it is going to be. Therefore, we have to find ways on the one hand, to make sure that the workplace becomes more age-friendly so that the older workers will be able to remain productive and help companies to remain competitive; at the same time, we must also take good care of our older workers in terms of employability and welfare.
51. We believe that by working together, we can continue to ensure that employment rates of our people aged 65 to 69, 70 to 74 and above, will always be among the highest in the world. On that note, I beg to move.