Wage Issues and Human Resources in Singapore

Abstract

One of the most important HR issues in Singapore today concerns the transformation of the wage system from the seniority-based wage system to the flexible wage system (FWS) based on annual bonuses in the first instance and then on the monthly variable component (MVC), which is a special case of the FWS. This paper examines the complexities involved in the transformation of the wage system which is intertwined with Singapore's social security scheme, namely the Central Provident Fund (CPF) and the tripartite National Wages Council (NWC). Both macro data and the views of employers and employees at the plant level have been included to examine the success and difficulties in changing the wage system. The main findings are encouraging. The improvement of communication and trust is vital for the success of the FWS. These two factors are crucial and interdependent on each other. Besides a clear understanding of the rationale for the FWS, employees and management must trust one another to work in cooperation with each other to make the move into the flexible wage system a relatively painless and problem-free process. All the necessary steps for the implementation of the FWS have been laid out by the NWC. What is required now is the reorientation of the mindset and attitudes of employees and employers to facilitate full acceptance of the FWS. To achieve this, the tripartite players should continue to hold meetings and seminars to educate employers and employees on the need for the FWS and its benefits to them in the long-run. In addition, tripartite teams that look into industrial relations and employment-related issues can be formed to build trust and enhance communication of such issues. With the support of government leaders, union officials and employers, issues that crop up during the implementation can be quickly resolved through open discussions to arrive at a win-win solution for employees and employers. All employees must be briefed clearly on the principles of the FWS to ensure that their interests are aligned for the smooth implementation of the FWS. The provision of incentives to encourage the unionization of employees will also increase the adoption of the FWS as unionized employees are more willing to accept the FWS. They know that their unions are negotiating for them and that their employers would not make pay cuts without the unions' consent. A study of one industry demonstrates that the flexible wage system has been implemented successfully. This is possible with proper cooperation among the tripartite parties and appropriate efforts made to educate employees. With better employee and employer perception of the FWS and the implementation issues involved, measures can be taken to enhance the adoption rate of the FWS by firms in Singapore. These include strengthening the roles of the tripartite parties, emphasis on improvement in information-sharing and the building of trust and effective communication channels. According to union officials, most of the firms in the industry have shared similar experiences. As Singapore is a small and open economy, there is a need to create an effective way to reduce labor costs so as to stabilize employment. Hence, it is imperative that both its workforce and employers be willing to embrace the principles of the FWS and push toward the goal of full FWS implementation.

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