By now, you’ve probably read about the National Wages Council (NWC) being convened for a second time this year (in August 2020), on the back of its recommendations issued in March 2020. This was due to the extraordinary circumstances brought about by the global COVID-19 pandemic.
To better understand how NWC’s recommendations will affect workers in Singapore, we need to first learn about the council’s purpose, their members, and how their recommendations are formulated.
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Origins And Evolving Work Of The National Wages Council
According to the National Library Board, the National Wages Council (NWC) was formed in 1971, at a time when there was an acute labour shortage. Instead of allowing companies to raise wages to compete for talent – for fear that this will be unsustainable – the government formed the NWC as a tripartite advisory body to keep wage increases in check.
NWC makes its recommendations through consultation, discussion and eventual consensus among tripartite stakeholders. Proposed wage adjustments take into account economic performance today, growth outlook for the future, productivity levels, Singapore’s competitiveness in the global market, local employment rate, and inflation, among other things.
It is important to note that NWC’s recommendations are not legally binding, but they are usually accepted by the civil service, which is the largest single employer in Singapore, and sets the pace for government-linked companies, as well as being a point of reference for unionised and non-unionised companies alike.
Over the years, the size, scope and sophistication of NWC has grown. For example, after the 1985/1986 recession, NWC did away with quantitative guidelines and moved to qualitative guidelines instead to give companies more flexibility in applying NWC’s recommendations. NWC has also taken into account the needs of our diverse workforce today, with recent guidelines specifically covering outsourced workers, seniors, and encouraging flexible work arrangements (FWAs).
Amid the changes, fundamental goal remains to ensure wages in Singapore are in line with actual economic growth and are sustainable in the long-run, thereby protecting and enhancing Singapore’s competitiveness.
Today, the NWC of August 2020/2021 has 22 members (and 14 alternates), chaired by Peter Seah (DBS Chairman) and comprising representatives from the National Trades Union Congress, Singapore National Employers Federation, Singapore Business Federation, chambers of commerce and industry, and the government (MOM, MTI, Workforce Singapore, Economic Development Board, SkillsFuture, Enterprise Singapore).
Key Recommendations Made By NWC In March 2020
The NWC was convened earlier than usual and released its recommendation in March 2020 in response to the COVID-19 crisis. NWC’s recommendations were for companies to focus on four main areas (in order of priority):
Reducing non-wage costs and find ways to utilise excess manpower productively: Companies were encouraged to be flexible in allowing employees to seek a second job to supplement their income and explore Flexible Work Schedules (like reduced hours for pro-rated wages). Other ways to utilise manpower include sending staff for upskilling and training while there is a lull in business activities. This can position companies to be stronger on the uptick.
Tapping on government support measures to manage business costs and undergo workforce upgrading: The enhanced Jobs Support Scheme support companies in retaining their Singaporean core of talent and capabilities, while SkillsFuture funding helps defray upskilling programmes. Companies are encouraged to make full use of these schemes to undergo organisational transformation with an eye on the longer-term, such as bringing forward strategic initiatives, training plans, and productivity improvements.
Reducing wage costs: Concrete suggestions were made in view of the fall of business activity, which could make existing wage levels unsustainable. These include implementing a flexible wage structure that includes a Monthly Variable Component, which allows for rapid adjustments in wages in tandem with improvement in business environment. Companies are advised to pay particular attention to lower-wage workers, who would be more greatly affected by any wage reductions.
Only if absolutely necessary, to perform retrenchment in a responsible manner: If all else fails and a reduction in headcount is necessary, companies are reminded to make the selection of staff to let go using fair, objective criteria, as well as provide the appropriate retrenchment benefits according to tripartite guidelines. They should also observe prevailing regulations around notifying the authorities and notice period under the Employment Act.
NWC’s Impactful Work Continues In Good Times And Bad
As we can see NWC’s practical, broad-ranging guidelines reflect the wide range of stakeholders represented by the council’s members, protecting the interests of employees while ensuring Singapore as a whole remains a viable, vibrant economy for years to come.
So even though, NWC’s guidelines are not legally-binding, these are adopted by a large portion of companies and organisations, affecting hundreds of thousands of employees. NWC takes into account the realities of the changing business environment, and it would be instructive for companies to closely study NWC’s recommendations for implementation in their own firms.
As reported in the news, NWC is reconvening in August to adjust their guidelines for companies in light of the ongoing COVID-19 situation, and weaker labour market in 2Q2020.
Companies, workers, and concerned citizens are invited to share their views with the council on wage and employment issues to aid their work from now till 28 August 2020. The council is expected to release their updated recommendations by September 2020.
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