askST: Relooking pay guidelines amid Covid-19 - 5 things to know about the National Wages Council

The council will reconvene to look at revising its annual wage guidelines as the Covid-19 pandemic roils the labour market.
The council will reconvene to look at revising its annual wage guidelines as the Covid-19 pandemic roils the labour market.PHOTO: ST FILE

SINGAPORE - The National Wages Council (NWC) will convene for a second time this year to look at revising its annual wage guidelines as the Covid-19 pandemic roils the labour market.

It is only the fourth time since its formation in 1972 that it will be convened twice in the same year.

The move was announced on Monday (Aug 3), less than a week after preliminary labour market data showed unemployment and retrenchment surged in the second quarter of the year. More details will be announced later this month, The Straits Times understands.

Here are five things to know about the council.

1. Tripartite membership

Comprising government, employer and union representatives, the council's composition can change from year to year, and is typically revealed along with the announcement of it being convened.

Mr Peter Seah, chairman of DBS Bank and Singapore Airlines, is the current chairman. He took over in 2015 from Professor Lim Pin, a former vice-chancellor of the National University of Singapore, who helmed the council from 2001 to 2014.

There were 21 other members in March this year.

From the employers group, there were Singapore National Employers Federation president Robert Yap, Singapore Business Federation vice-chairman Gan Seow Kee, and five business chamber leaders.

Workers were represented by National Trades Union Congress president Mary Liew and assistant secretary-general Desmond Choo as well as five other union leaders.

The government group included Permanent Secretary for Manpower Aubeck Kam, Permanent Secretary for Trade and Industry Gabriel Lim and five other senior public servants.

2. Tackling wages, employment

The council's recommendations cover wage adjustments as well as other employment issues.

 
 

The latest guidelines in March this year urged companies to first reduce non-wage costs and tap government support before looking to reduce their workers' wages. Retrenchment should be a last resort.

The NWC also said the monthly variable component (MVC) of salaries can be adjusted first if the employer cannot wait until the end of the year to adjust annual variable parts of pay. But employers should set clear guidelines on reversing any reductions to MVC or basic salary when business recovers.

Over the years, the council has emphasised the importance of including an MVC in the basic wage structure so that companies can respond to economic conditions quickly, with a view to restoring the cuts when business improves.

It has also paid special attention to low-wage workers. In 2012, it specified that workers with basic monthly pay of up to $1,000 should get a built-in increase of at least $50. That was the first time in nearly three decades that the council had spelt out a pay rise quantum, a practice it has continued since then, in some years giving a range.

The salary ceiling for the recommendations for low-wage workers has risen. This year, the NWC said that for workers earning up to $1,400 a month, employers should freeze their pay rather than cut it, if there are company-wide wage cuts, while if a wage freeze or increase is planned, employers should consider giving low-wage workers a built-in wage increase of up to $50.

The council has also commented over the years on issues such as raising productivity, ensuring inclusive growth and raising the retirement age.

3. Guidelines not compulsory

NWC guidelines apply to all employees - professionals, managers, executives, technicians and rank-and-file employees, in unionised and non-unionised firms, in both the public and private sectors. They also apply to re-employed employees.

But they are not legally binding.

 
 

The Government has always accepted the recommendations, and the public sector then adheres to them.

Last year, the NWC urged companies to raise the monthly salaries of low-wage workers earning a basic monthly pay of up to $1,400, by between $50 and $70.

A total of 60.1 per cent of private sector establishments with at least 10 employees did so, according to Ministry of Manpower data.

4. Two months of deliberations - usually

The council's work was expedited this year due to the economic uncertainty caused by Covid-19. It was convened on March 17 and released its recommendations on March 30.

Manpower Minister Josephine Teo said in a Facebook post that the council was able to achieve a tripartite consensus within 10 days.

Feedback from the public is usually sought by the council before it meets.

5. Crisis response

The last three times the NWC was convened twice in the same year were also during economic crises. It usually releases its annual guidelines in end-May.

It released revised recommendations in 1998, due to the Asian Financial Crisis, in 2001, after the Sept 11 attacks in the United States, and in 2009 amid the global financial crisis.

In November 1998, it proposed, among other things, that in addition to a 10 percentage point cut to employers' CPF contributions, total wages for the year be cut by 5 per cent to 8 per cent, as compared with 1997.

The employers' contribution rate should be adjusted upwards when the economy recovered, said the council.

In December 2001, the NWC refrained from suggesting specific numbers for wage cuts, and instead called for "severe wage restraint". It said the majority of companies which were badly affected by the severe economic downturn could, in consultation with their unions or workers, freeze or cut wages, with bosses leading by example.

But those that were performing well should still reward workers.

In January 2009, the council updated its guidelines to recommend - among other things - that companies work with unions and workers to manage costs to save jobs.

They should make use of the variable components in the wage structure, such as the annual variable component and MVC, to reduce their wage costs, and the Government should reduce business costs as well, the NWC said.