Retirement And Re-Employment Act: What Employers Need To Know About Retaining Older Workers

In Singapore, the Retirement and Re-employment Act (RRA) prescribes the statutory retirement age as 62. From 1 July 2022, this will be increased to 63. 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, re-employment age will be increased 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 are 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.

From 1 January 2022 (which has already been deferred since 1 January 2021 to help employers manage COVID-19 related costs and uncertainties):

Age Of EmployeeBelow 55>55 to 60>60 to 65>65 to 70
Employer’s CPF Contribution (Current)17%13%9%7.5%
Employer’s CPF Contribution (From 1 Jan 2022)17% (no change)14% (increase of 1%)10% (increase of 1%)8% (increase of 0.5%)
Employee’s CPF Contribution (Current)20%13%7.5%5%
Employee’s CPF Contribution (From 1 Jan 2022)20% (no change)14% (increase of 1%)8.5% (increase of 1%)6% (increase of 1%)
CPF Transition Offset Package0.5% (half of the additional Employer’s CPF contribution)0.5% (half of the additional Employer’s CPF contribution)0.25% (half of the additional Employer’s CPF contribution)

Over the next decade, CPF contribution rates for older workers will be further raised progressively. The full rate of 37% is extended to those aged 55 to 60, after which the rate will then taper off and level out after 70. 

Workers aged 60 to 65 (who currently get 16.5% contribution rate) will see CPF contribution rates go up to 26%, while rates for those who are 65 to 70 years old will go up from 12.5% to 16.5%. Workers aged 70 will continue to receive an unchanged CPF contribute rate at 12.5%.

Read Also: Complete Guide To Employer’s CPF Contributions In Singapore

#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 had joined the organisation before 55 years old.

Employees who reach the current statutory retirement age of 62 must be offered re-employment. Employers must also continue to re-employ up until the re-employment age – when employees turn 67. As mentioned, the re-employment age will be gradually increased 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 three years before turning 62
  • Have satisfactory work performance, as assessed by the employer
  • Are medically fit to continue working
  • Are born on or after 1 July 1952

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. 

Read Also: MOM Responsible Retrenchments – Guidelines For Companies To Be Fair And Decent

#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 $5,500 and maximum of $13,000. This payment is meant to help tide employees over for a period of time while they seek alternative employment. 

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 2021 and 2022, employers will get wage offsets of up to 8% of the wages paid to workers aged 55 and above, and earning up to $4,000. The offset amount depends on the workers’ age and wage. More support will be given for the older age bands. 
  • CPF Transition Offset: This scheme, which only takes effect in 2022, will offset half of the increase in employer CPF contribution rates for that year and is applicable to employees’ incomes paid by employers up to the $6,000 CPF salary ceiling. 
  • Senior Worker Early Adopter Grant: This grant, which is already in effect since 1 July 2020, provides funding support of up to $250,000 to employers who increase their own retirement and re-employment ages ahead of the legislated changes.
  • Part-time Re-employment Grant: This grant provides up to $125,000 to employers who commit to providing part-time re-employment opportunities to eligible senior workers who request for it.

Read Also: P-Max: Up To $10,000 Grant For SMEs To Recruit And Retain New Hires

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 3 years.

Even if an employee signs a contract (from 1 July 1993) which provides for a retirement age that is less than 62, that prescribed retirement age will be void to the extent that is less favourable.

Read Also: Minimum Requirements For Key Employment Terms (KETs) On Employees Contracts

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