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Re-employment age to rise by 2 years to 67 on July 1

Employers can transfer their re-employment obligations but cannot cut salaries when staff turns 60
Tuesday, January 10, 2017 - 05:50

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Amid a sluggish job market and the challenges of an increasingly ageing workforce, lawmakers here voted in favour of a set of amendments to the existing legislation to help more elderly workers stay in a job.

Singapore

THE statistics are telling. Nearly one out of every eight residents in Singapore's labour force - about 12 per cent - was 60 or older in 2015, more than double the 5.5 per cent in 2006.

Amid a sluggish job market and the challenges of an increasingly ageing workforce, lawmakers here voted in favour of a set of amendments to the existing legislation to help more elderly workers stay in a job.

There are three key changes to the Retirement and Re-Employment Act that will take effect on July 1 this year. They are:

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  • raising Singapore's re-employment age by two years to 67;
  • allowing workers to be re-employed by another company; and
  • doing away with the option for employers to cut their workers' salaries when they turn 60.

The current laws state that the minimum retirement age is 62 years, and employers are not allowed to dismiss anyone younger than this due to the person's age.

Instead, they have to offer re-employment to eligible workers who turn 62, up to the age of 65. This will be raised to 67 from July 1, and this new re-employment age applies to those who were born on or after July 1, 1952.

Speaking at the start of a lengthy debate in parliament on Monday that lasted almost three hours, Manpower Minister Lim Swee Say noted that the tripartite partners - the government, employers and the unions - had agreed to the changes after extensive consultations and negotiations.

He added that all local workers with at least a satisfactory job performance and are medically fit should be offered re-employment until 67.

Mr Lim cited a 2015 survey that found that over 98 per cent of private sector local employees who wanted to continue working at the age of 62 were eventually offered re-employment.

Out of all those who accepted re-employment in the same job, 98 per cent did not experience any cut in their basic wages.

Employers that are unable to re-employ an eligible worker must then offer an Employment Assistance Payment (EAP) to help him tide over while he hunts for another job.

The EAP, meant to be given out only as a last resort, is a one-off payment equivalent to three months' salary, subject to a minimum of S$4,500 and capped at S$10,000.

The government already provides a 3 per cent additional wage offset to encourage companies to voluntarily re-employ people beyond the prevailing re-employment age of 65.

This scheme benefits around 120,000 Singaporean employees aged 65 and above every year, and is on top of the Special Employment Credit of up to 8 per cent for hiring Singaporeans aged 55 or older and who earn no more than S$4,000 a month. With this wage offset scheme due to expire on July 1 this year, Mr Lim said that the government was studying the need and manner to extend it to encourage voluntary re-employment after the re-employment age goes up to 67.

He said that the government was aware that older employees and their employers need clarity on the future of the scheme, and a decision would be made well ahead of the expiry date.

The second change will give eligible employees the opportunity to be re-employed by another company, in an effort to increase the options for both companies and workers.

The existing rules state that employers are not allowed to transfer their re-employment obligations to another employer, but they will be given the green light to do so from July 1.

Mr Lim explained that this move would benefit all the parties involved. The original employer will be deemed as having fulfilled his re-employment obligations, while the worker will have more chances to be re-employed and enjoy re-employment protection under his new company.

The second employer, meanwhile, will stand to gain from hiring an employee with experience, said Mr Lim as he outlined several safeguards that will be put in place to protect the employee.

The employee has to first agree to the re-employment terms with the second employer, and the latter has to commit to take over all applicable re-employment obligations for this particular employee.

If either condition is not met, the original employer still has to fulfil its re-employment obligations, and offer EAP if it cannot find a job for the worker in the company.

The third major change will remove the current option to slash a person's wages at age 60. Mr Lim recalled how it was back in 1999 when this was introduced to help companies with seniority-based wage systems to manage their costs when the retirement age was first raised from 60 to 62.

"Since then, with the restructuring and re-shaping of Singapore's economy, tripartite efforts have been successful in moving employers away from seniority-based wage systems," he said.

In his remarks, Mr Lim said that the amendments to the laws were the culmination of tripartite efforts over the last few years to strike the "delicate balance" between enhancing job opportunities for older workers while giving enough flexibility to employers.

"We recognise that there are older employees in all sectors and occupations, with different circumstances and needs, not all of which can be addressed by this Bill," he said.

"We will continue to work closely with tripartite partners to continue to enhance employment opportunities for older workers and to build age-friendly workplaces in Singapore."

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