Latest wage guidelines a help, but may be tough for smaller firms

Employers are encouraged to implement temporary pay cuts using the FWS if it helps to avoid retrenchments. PHOTO: ST FILE

While the latest National Wages Council (NWC) guidelines give employers some flexibility to manage wage costs, their implementation may prove tricky, say business associations.

This is especially so for small and medium-sized enterprises (SMEs), which are more likely to lack the resources needed to adhere to the guidelines.

Among other recommendations, from Nov 1 to June 30 next year, employers are encouraged to implement temporary pay cuts using the flexible wage system (FWS) if it helps to avoid retrenchments.

Singapore Business Federation chief executive officer Ho Meng Kit said the guidelines achieve a "good balance" in a difficult and complex situation, and allow employers flexibility in managing wage costs. But the way employers and employees implement the guidelines in the months ahead is crucial.

Mutual trust and an attitude of give-and-take must be adopted by all parties, he added.

Singapore Retailers Association executive director Rose Tong agreed: "The guidelines send a strong signal to the local workforce that all is not well, and that sacrifices are necessary to keep the company going so that they can, in turn, retain their jobs."

However, SMEs that have not implemented the FWS may find it challenging to do so now, especially while trying to keep the business afloat, said Mr Ang Yuit, vice-president of the Association of Small and Medium Enterprises. "In larger companies, they would have a human resources department. In SMEs, it is usually one person handling the payroll, bonuses, calculating leave and so on," he said.

"To implement FWS, that would mean restructuring the salary structure of the company and having the resources to craft out the details."

The NWC has been recommending employers to adopt the FWS since 1986. A Ministry of Manpower survey found that in 2018, about 88 per cent of private sector employees have "some form" of FWS.

Mr Neo Yong Aik, managing director of event management company Neo.TM, said he has avoided retrenching his 23 employees by cutting their wages by 50 per cent since the outbreak of the coronavirus. In turn, his staff work only for two weeks each time, before taking another two weeks off.

He expects the worst is yet to come, as the amount of wage subsidies from the Jobs Support Scheme that his firm gets is down from 75 per cent to 50 per cent for wages paid from September to December this year. "If we don't make our expected revenue by December, we just might have to go there (retrenchments)," said Mr Neo.

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A version of this article appeared in the print edition of The Straits Times on October 17, 2020, with the headline Latest wage guidelines a help, but may be tough for smaller firms. Subscribe