Low Thia Khiang: Don’t cut pay of workers who reach 60

This was a speech in Parliament on 11 March 2010 by MP for Hougang, Low Thia Khiang, during the Committee of Supply debate, on the budget for the Ministry of Manpower (MOM). Read other Workers’ Party speeches and statements at wp.sg.

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By 2012, the re-employment legislation will require employers to offer re-employment to workers reaching 62 years of age, up to age 65, and eventually to age 67. However, the Re-employment legislation will not replace the Retirement Act of 1999.
The Retirement Act allows an employer to reduce the wages of older employees up to 10% on or at any time after the employee attains 60 years of age.
The 10% pay cut at age 60 was recommended by the Tripartite Committee on the Extension of Retirement and the justification then was to address the problem of the seniority-based-wage system.
With the Government’s call to increase productivity and the progress made in wage restructuring from a seniority-based wage system to a performance-based wage system, I would like to call upon the Government to review the Retirement Act of 1999 by removing the wage reduction option given to employers.
A wage system that moves away from seniority elements and towards job worth and performance is more than adequate to ensure an older worker is paid based on the value of the job and his contribution instead of his seniority. Given that the performance-based wage system will improve the cost competitiveness and employability of older workers, we should remove the wage reduction anomaly from the Retirement Act as older workers would have been paid market rate in the run-up to age 62.
Moreover, the Tripartite Committee’s recommendation that employer’s CPF contribution rate for employees aged 60-65 years be reduced from 7.5% to 4% and from 5% to 4% for employees aged above 65 years is sufficient to make re-employment worthwhile for employers.
Sir, any provision in our labour laws to reduce the wages of older workers upon reaching re-employment age will dampen the zeal of an ageing society to continue working beyond retirement age.

By 2012, the re-employment legislation will require employers to offer re-employment to workers reaching 62 years of age, up to age 65, and eventually to age 67. However, the Re-employment legislation will not replace the Retirement Act of 1999.

The Retirement Act allows an employer to reduce the wages of older employees by up to 10 per cent on or at any time after the employee attains 60 years of age.

The 10 per cent pay cut at age 60 was recommended by the Tripartite Committee on the Extension of Retirement and the justification then was to address the problem of the seniority-based-wage system.

With the Government’s call to increase productivity and the progress made in wage restructuring from a seniority-based wage system to a performance-based wage system, I would like to call upon the Government to review the Retirement Act of 1999 by removing the wage reduction option given to employers.

A wage system that moves away from seniority elements and towards job worth and performance is more than adequate to ensure an older worker is paid based on the value of the job and his contribution instead of his seniority. Given that the performance-based wage system will improve the cost competitiveness and employability of older workers, we should remove the wage reduction anomaly from the Retirement Act as older workers would have been paid market rate in the run-up to age 62.

Moreover, the Tripartite Committee’s recommendation that employer’s CPF contribution rate for employees aged 60-65 years be reduced from 7.5 per cent to 4 per cent, and from 5 per cent to 4 per cent for employees aged above 65 years is sufficient to make re-employment worthwhile for employers.

Sir, any provision in our labour laws to reduce the wages of older workers upon reaching re-employment age will dampen the zeal of an ageing society to continue working beyond retirement age.

Author: Gerald Giam

Gerald Giam is the Member of Parliament for Aljunied GRC. He is a member of the Workers' Party of Singapore. The opinions expressed on this page are his alone.

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