The Retirement and Re-employment Act (RRA) has been amended to prescribe a statutory retirement age of up to 65. This comes as no surprise as PM Lee had already previously announced during the 2019 National Day Rally that Singapore will increase our statutory retirement age to 63 from 1 July 2022. By 2030, the retirement age will be gradually raised to 65.
As the population of Singapore ages, this move will help to ensure that it can accommodate more older workers in the upcoming decades. In a 2017 report by the United Nations, it was projected that the elderly will make up almost half of Singapore’s population by 2050. This means that the workforce demographics will also gradually shift towards older workers and companies here will need to prepare for that.
Raising the retirement age may help to relieve some pressure off an ageing workforce, but re-employing and retaining older workers is also something companies here are required to commit to in order to encourage them to continue working. As a result, the re-employment age has also been updated to up to 70 years. This also comes on the back of a previous announcement to increase our re-employment age from the current age of 67 to 68 in 2022, and eventually to 70 by 2030.
Companies will need to ready themselves for an ageing workforce in the coming decades. Here are some details that employers will need to know about retaining older workers.
#1 CPF Will Be Raised In Tandem With Retirement And Re-Employment Age Increase
Starting from 2022, CPF contribution rate for those above 55 is set to be raised with the whole process of raising contribution rates for other age groups to take around 10 years or so, said Prime Minister Lee Hsien Loong at the 2019 National Day Rally.
The first two increases took effect from 1 January 2022 and 1 January 2023, with the third to take place on 1 January 2024 as shown in the table below.
Along with the rise in CPF payments, the government will be providing a CPF Transition Offset Package that will be worth half of the employer’s additional contributions in 2023.
Over the next decade by 2030, CPF contribution rates for older workers will be further raised progressively. The full rate of 37% will be extended to those aged 55 to 60, 26% for those aged >60 to 65; 16.5% for those aged >65 to 70.
#2 Employers Must Offer Re-Employment
According to the Retirement and Re-employment Act (RRA), employers are not allowed to dismiss employees because of age if they are a Singapore citizen or PR and if they joined the organisation before turning 55 years old.
Employees who reach the current statutory retirement age of 63 must be offered re-employment. Employers must also continue to re-employ up until the re-employment age – when employees turn 68.
As mentioned, the re-employment age will gradually increase to 70 by 2030.
Workers are eligible for re-employment if:
- They are a Singapore citizen or Singapore permanent resident
- Have served the current employer for at least two years before turning 63
- Have satisfactory work performance, as assessed by the employer
- Are medically fit to continue working
- Are born on or after 1 July 1960
If the employer does not wish to re-employ the worker because the employee does not meet the criteria above, the employer must give written notice within a reasonable period before terminating the employment.
An employee who has hit retirement age can also continue to work as per usual after his retirement age and be offered a new re-employment contract at a later date.
#3 Employers And Employees Should Sign A Re-Employment Contract
When an employee is re-employed within the same organisation, a re-employment contract should be issued and signed, which differs from the previous employment contracts. According to Tripartite Guidelines, the re-employment contract should be offered at least three months before retirement to allow sufficient time for the employees to consider the offer.
The new contract should list out certain factors such as job role and responsibilities, wage adjustments and even seniority system if applicable to the employee. Employment terms in the re-employment contract should not be for less than one year, unless the employee happens to hit the age before the contract is signed.
#4 Transferring An Employee If You Are Unable To Offer Re-Employment
If an employee is eligible for re-employment but you are not able to find a suitable position within the organisation, you will have to transfer the re-employment obligation to another employer. However, two conditions have to be met:
- The new employer must agree to take over the prevailing re-employment obligations to the employee from the present employer, AND
- The employee must agree to the re-employment offer by the new employer
Employees are not obliged to accept the transfer offer. If they turn down the transfer, they will then be entitled to an Employment Assistance Payment (EAP).
#5 Offering Employment Assistance Payment (EAP) As A Last Resort
Employers must offer Employment Assistance Payment (EAP) but only after they have exhausted all avenues of re-employment, such as finding a role within the organisation or transferring re-employment to another employer.
The EAP is a one-off payment equivalent to 3.5 months’ salary (based on gross rate of pay), subject to a minimum of $6,250 and maximum of $14,750. This payment is meant to help tide employees over for a period of time while they seek alternative employment.
#6 Financial Support And Grants For Re-Employing Older Workers
To support and encourage employers to re-employ older workers, the Government issues grants that organisations can benefit from. Called the Senior Worker Support Package, schemes and grants include:
- Senior Employment Credit: For wages paid from 1 January 2023 to 31 December 2025, employers will get wage offsets of up to 8% of the wages paid to workers aged 60 and above, and earning up to $4,000 per month. The offset amount depends on the workers’ age and wage. More support will be given for the older age bands.
- CPF Transition Offset: The Government will continue to provide employers with a transitory wage offset equivalent to half of the increase in employer’s CPF contribution rates for 2023. The offset will be calculated based on the employees’ incomes paid up to the current CPF salary ceiling.
- New Part-time Re-employment Grant: This grant provides up to $125,000 to employers who offer part-time re-employment, flexible work arrangements (FWAs) and structured career planning (SCP) to eligible senior workers.
#7 Workers Who Are Exempted From Re-Employment
There are certain types of employees that are exempted from re-employment. They include:
- Public officers in:
- Police Service
- Prisons Service
- Narcotics Service
- Civil Defence Service
- Corrupt Practices Investigation (Junior) Service
- Corrupt Practices Investigation (Senior) Service
- Persons enlisted for regular service in the Singapore Armed Forces (SAF)
- Auxiliary police officers.
- Public officers and statutory board employees eligible for benefits under the Pensions Act
- Cabin crew on board commercial aircrafts.
- Employees working 20 hours per week or less.
- Employees on fixed term contracts for specific projects, where the expectation is that employment will cease when the project ends.
- Employees who were first employed after age 55, and have served the company for less than 2 years.
Even if an employee signs a contract (from 1 July 1993) which provides for a retirement age that is less than 63, that prescribed retirement age will be void to the extent that is less favourable.
This article was first published on 12 January 2021 and has been updated with the latest information.
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