Government to stay out of contract renegotiations linked to Progressive Wage Model costs: Zaqy
Renald Yeo
THE government does not wish to “get in the way” of commercial contracts between service buyers and service providers whose costs have risen due to the Progressive Wage Model (PWM), said Senior Minister of State for Manpower Zaqy Mohamad in Parliament on Friday (Apr 21).
He was responding to Member of Parliament Yeo Wan Ling, who asked what government “assistance and interventions” were available for companies with difficulties renegotiating multi-year contracts that were signed before the PWM wage rungs were set.
Zaqy noted that PWMs spell out a multi-year schedule of wage increases to provide clarity on future increases. The schedule is also announced in advance so that service providers and buyers can enter into new contracts with sufficient information, or discuss the need to renegotiate existing ones.
“Tripartite partners encourage service buyers to work closely with service providers to renegotiate ongoing contracts where reasonable,” he said.
The government also helps to offset cost pressures with the Progressive Wage Credit Scheme, he added. This co-funds up to 75 per cent of the wage increases for eligible lower-wage employees, including increments given in line with PWM requirements.
Yeo noted, however, that some service providers may be locked into contracts which run for up to 10 years. This may go beyond the length of government support, with the Progressive Wage Credit Scheme slated to run only till 2026.
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Given that some wage increases may be 20 per cent or more, said Yeo, it is critical for service providers “to align this with service buyers to remain sustainable, even without government support”.
She added that even in cases where renegotiation is successful, some service providers report being told that their clients give them a “black mark” for future contracts. She asked if the ministry would investigate such practices and educate service buyers.
To that, Zaqy said it was “disappointing” that some service buyers blacklist service contractors when wage schedules were put out in advance. Buyers should not “put a stranglehold on outsourced providers and force them to accept these kinds of terms”.
However, he added, these are commercial contracts and the government does not want to “get in the way”. Instead, unions can help to mediate between both parties, he said.
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