SINGAPORE — In tandem with the move to raise the re-employment age from 65 to 67 come July 1 next year, a wage cut provision for workers turning 60 will be removed from the law, said Minister of State (Manpower and Prime Minister’s Office) Sam Tan in Parliament on Friday (April 8).

Currently, employers can reduce the wages of workers turning 60 by up to 10 per cent. But this is a holdover from the days where older workers were “less wage-competitive because of rigid seniority-based wages”, said Mr Tan, who announced this during the Manpower Ministry’s (MOM) Committee of Supply debate. 

According to the MOM, over 98 per cent of companies no longer cut wages at 60, rendering the wage cut provision irrelevant. Pay should be reflective of a worker’s job scope and value, rather than age, stressed Mr Tan. 

The move to raise the re-employment age by next year was announced by Prime Minister Lee Hsien Loong in his National Day Rally last year. The announcement came three years after laws were introduced in 2012 requiring employers to offer to re-hire workers when they turn 62, up to age 65.

In comparison, the Government gave employers a five-year headstart for prepare for the enactment of the re-employment laws, and it had first mooted the idea of raising the retirement age to 67 in 1993. 

Ahead of the changes, the Government will continue supporting employers who are already re-employing workers above 65, and will extend the additional wage offset of 3 per cent till July 1 next year for such employers, said Mr Tan.

The MOM has also received feedback from employers who want to help mature workers secure re-employment in a related company, because they are unable to offer such opportunities within their own firm. 

To facilitate this, the law will be amended — also from next July — to allow new employers to hire these workers, subject to the worker’s agreement, and the new employer will need to take on the re-employment obligations.

Noting that there will be situations in which re-employment is “genuinely not possible”, the Employment Assistance Payment (EAP), which employers can currently tap as a last resort, will be increased in quantum and age coverage “accordingly”. Currently, the EAP, a one-off payment, is equivalent to three months’ salary, ranging between S$4,500 to S$10,000.

More details on the tripartite guidelines on the re-employment of older employees will be made public over the next few weeks.

Mr Tan said: “We strongly encourage employers to adopt both the spirit and letter of the new re-employment practices, ahead of the formal change in law. This is especially important given our tight labour market in the coming years.”