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HR guide: Singapore's NWC Guidelines 2021/2022

HR guide: Singapore's NWC Guidelines 2021/2022

This edition of the guidelines focuses on buiiding a flexible wage system in tandem with business recover; sustaining wage growth for lower-wage workers, and implementing initiatives for upskilling the workforce.

The National Wages Council (NWC) 2021/2022 Guidelines for the period of 1 December 2021 to 30 November 2022 have been announced, relevant to employers in Singapore. 

These guidelines focus on three key areas:

  • A flexible wage system
  • Sustained wage growth for lower-wage workers
  • Transforming jobs and upskilling the workforce

Wages should move in tandem with the pace of business recovery and be based on a flexible wage system

Employers are called on to ease exceptional wage policies put in place earlier. However, the NWC recognises that recovery is uneven, particularly for employers in the tourism- and aviation-related sectors. The NWC therefore also calls on all employers who have not yet done so to implement the Flexible Wage System (FWS). The NWC sets out the following wage guidelines for all employers: 

For employers that have recovered or are recovering: 

1. Implement these recommendations in tandem with business recovery and in a timely manner, in order of priority: 

  1. Restore any wage cuts implemented earlier. Employers who reduced fixed wages as an exceptional measure to save jobs should restore the fixed wage component first, followed by the variable wage components – i.e. the Monthly Variable Component (MVC) and the Annual Variable Component (AVC).
  2. Roll back wage-related cost-saving measures - i.e shorter work week, temporary lay-offs, and no-pay leave.
  3. Particularly for employers that are doing well, grant built-in wage increases and variable payments, commensurate with business performance, prospects and productivity growth, as well as employees’ contributions.
  4. Roll back discretionary cost-saving measures - i.e cuts in allowances.

2. Implement the FWS to become more resilient. Employers that have not yet adopted the FWS, or who need to build up the variable wage components to recommended levels, should put both restored wages and wage increases into variable wage components, and transfer part of fixed wages to variable wage components as needed.

For employers that continue to be adversely impacted by COVID-19:

  1. Continue to tap on Government support measures to accelerate business and workforce transformation, retain employees through appropriate cost-saving measures, and retrain and redeploy employees in affected business units to new jobs within the company.
  2. Consider non-wage cost-saving measures as far as possible and endeavour to pay the Annual Wage Supplement, in order to mitigate the impact of prolonged wage cuts on employees and help employees, especially lower-wage workers (“LWWs”), cope with their expenses.
  3. Seek unions’ or employees’ support (where applicable) to implement temporary wage cuts to minimise retrenchments if they have exhausted the above measures, but still face significant cost pressures and poor business prospects.This should be done by adopting the FWS, for employers who have not yet done so, and utilising the range of flexibility provided for in the variable components of the wage structure.

Ensuring sustained wage growth for lower-wage workers

The Tripartite Workgroup on Lower-Wage Workers (TWG-LWW), formed in October 2020, aims to evolve the long-term strategy to support LWWs. Through extensive consultations and deliberation, the TWG-LWW has "achieved tripartite consensus to uplift LWWs while maximising their employment outcomes."

In August 2021, the Government accepted the TWG-LWW’s recommendations for the NWC to:

  1. Guide the rate of Progressive Wage growth for LWWs so that LWWs can gain ground on the median wage level. Tripartite Clusters setting the wage rungs for their respective sectoral Progressive Wages this year should take reference from the NWC’s recommended Range of Progressive Wage Growth, while taking into consideration their sectors’ unique circumstances.
  2. Recommend the wage growth of Occupational Progressive Wages (OPW)

The NWC notes that the TWG-LWW has made recommendations on the initial wage rungs under the OPW, and that it will be implemented from March 2023. The NWC will consider recommendations on the OPW next year.

Moving from basic monthly wage to gross monthly wage as new reference - the TWG-LWW recommends that Progressive Wages for LWWs be expressed in terms of gross monthly wage to give employees greater certainty of the expected monthly wage for a set of standard working hours.

While the NWC’s previous wage recommendations encouraged employers to give special consideration to employees earning up to a basic monthly wage threshold, the NWC’s recommendations for LWWs will reference the gross monthly wage and be relevant for employees earning up to S$2,000 in gross monthly wage.

In implementing these wage increases, employers should seek to bring about meaningful improvement to employees’ income stability in the long run, and ensure sustained basic wage growth and fair wages for employees based on their hours worked.

Wages of LWWs should grow faster than median wage level. To ensure this, the NWC recommends that employers provide a built-in wage increase of 4.5% to 7.5% of their gross wages, or S$70 to S$90 (whichever is higher) for their LWWs earning a gross monthly wage of up to S$2,000.

In line with the TWG-LWW’s recommendation to aim for higher wage growth for lower-paid LWWs, the NWC calls on employers to provide higher percentage wage increase for LWWs who are earning comparatively lower wages. The minimum dollar quantum of S$70 to S$90 helps to ensure that the lowest-paid employees receive a proportionally higher increase.

Employers who are doing well even during the COVID-19 period and have experienced healthy revenue growth should aim for the upper bound of the range; while employers who are recovering or have recovered may aim for the lower to middle of the range.

This recommendation takes into consideration various factors, including the expected rate of wage growth in the medium term, the current economic climate, and the tripartite-agreed pace to uplift lower-wage workers so they can gain ground on the median worker.

"The NWC also recognises that there are some sectors or employers still facing economic headwinds whose business have not recovered, and are therefore considering a continuation of wage freeze or further wage reduction as a general policy." Thus, for employees earning a gross monthly wage of up to $2,000, employers who are:

  • Freezing or continuing to freeze wages should consider a built-in wage increase of up to S$50 for these employees instead.
  • Implementing further wage reduction should implement a wage freeze for these employees instead.

The NWC has taken into account the continuing economic uncertainty faced by employers particularly those facing headwinds as a result of the economic impact of COVID-19 when recommending the Progressive Wage growth this year. 

Forge ahead in transforming jobs and upskilling the workforce

The NWC expressed its concerns that the proportion of employers that provided structured training to employees decreased from 79.1% in 2019 to 65.4% in 2020, especially with the accelerated pace of economic transformation spurred by the pandemic - upskilling is now required to keep up.

It was also noted that the proportion of employees receiving structured training also dipped from 55.8% in 2019 to 46.5% in 2020.

The NWC thus calls on the Government, employers, unions and employees to take decisive steps to upskill employees. It recommends that:

1. All employers offer structured training for their employees.

Employers are encouraged to work with the labour movement to establish Company Training Committees (CTCs) to build up their in-house workplace learning capabilities. The CTCs have helped companies in driving business transformation and implementing training plans.

Employers can also seek the assistance of SNEF, the Singapore Business Federation, other trade associations & chambers, the unions, and NTUC LearningHub, or access consultancy services offered by the National Centre of Excellence for Workplace Learning, or join a SkillsFuture Queen Bee network where available to develop their training plans.

2. Employers must innovate and implement productivity initiatives, and work towards better wages and skills. This should be done along with employees, They should:

  1. Redesign jobs and train employees to take on these jobs. Employers can tap on the Support for Job Redesign under Productivity Solutions Grant (PSG-JR) to engage consultants who can assist employers in developing proposals for PSG-JR and implementing the PSG-JR project.
  2. Adopt a proactive approach to reskill and upskill existing employees for new job roles within the company. Particularly, this should be done for employees who are at greater risk of redundancy. This will help employers to retain valuable experience and human capital. Employers can tap on Workforce Singapore (“WSG”)’s Career Conversion Programmes to redeploy at-risk employees to new roles, and send workers for modular Continuing Education and Training (“CET”) courses to help them reskill. 
  3. Tap on the various SkillsFuture Work-Study Programmes to build a robust talent pipeline, provide fresh school leavers with the opportunity to build on their skills and knowledge as they transition into the workforce, and improve retention by fulfilling employees’ upgrading aspirations.
  4. Improve and build human resource capabilities in emerging areas and adopt best practices by working with the Institute for Human Resource Professionals (“IHRP”) to certify and upskill HR professionals, and develop HR strategies to maximise employee potential and support business transformation.

3. Employees should also play a part by supporting employers in workforce and business transformation efforts. For example, employees could proactively point out skills gaps and suggest training needs to employers, and undergo training when available.

When it comes to implementing these recommendations, the NWC clarifies that these guidelines apply to all employees – professionals, managers, executives, technicians (collectively known as PMETs), as well as rank-and-file employees, in unionised and nonunionised firms, in both the public and private sectors. They also apply to reemployed employees.

Employers should share relevant information, such as company wage information, business performance and prospects, with unions to facilitate wage negotiation. The NWC encourages employers that encounter difficulties in implementing the guidelines to work with the employers’ associations and unions to address the issues.

Employers, unions and employees have responded with unity and resilience despite the challenges from COVID-19. As the economy recovers, the NWC urges all employers, unions and employees, and the Government to build on the mutual trust that has been carefully built up over the years, so as to secure our recovery, uplift our LWWs, and build an inclusive society.

The Singapore National Employers Federation (SNEF) "strongly supports" the National Wages Council (NWC) Guidelines 2021/2022 and further encourages employers to:

  1. Enhance their wage flexibility
  2. Transform their business and workforce
  3. Uplift their lower-wage workers

 Lead image / NWC Guidelines taken from Singapore National Employers Federation's website

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