“CUT COSTS TO SAVE JOBS”: SINGAPORE’S EXPERIENCE Mr Lau Weng Hong Deputy Director, Labour...

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“CUT COSTS TO SAVE JOBS”: SINGAPORE’S EXPERIENCE

Mr Lau Weng HongDeputy Director, Labour Relations

Labour Relations and Workplaces DivisionMinistry of Manpower

Singapore

• Impact of Global Economic Crisis on Singapore

• Response and Managing the Downturn

• Upturning the Downturn

• Conclusion

OverviewOverview

• Global stock markets plunged to new “lows”, unprecedented in the last 40 years

• Singapore economy contracted 6.8% in Q3 2008, 4.2% in Q4 2008, 9.4% in Q1 2009 and 3.2% in Q2 2009

• Singapore’s manufacturing sector faced with excess capacity due to sudden cancellation of business contracts / orders, leading to excess manpower

• Confidence shaken in badly hit global financial and banking systems

• Business travel “stagnated”

• Slower traffic of goods and services in the region

Impact of Global Economic Crisis on Singapore Impact of Global Economic Crisis on Singapore (Sep 2008 – Sep 2009) (Sep 2008 – Sep 2009)

Quarter 2008

2008 2009

GDP 2.5 -6.8 -4.2 1.1% -9.4 -3.2 0.6 4.0

Source: Singapore Department of Statistics

GDP Forecast for 2009 Jan 09 : -5% to -2%Apr 09 : -9% to -6%Jul 09 : -6% to -4%Oct 09 : -2.5% to -2%GDP 2009 : - 2 %

Weak economic outlookWeak economic outlook

GDP growth declinedGDP growth declined

Unemployment rate roseUnemployment rate rose

Seasonally-adjusted unemployment rate, Jun 03 – Sep 09

Mar 09 Jun 09 Sep 09Overall: 3.3% Overall: 3.3% Overall: 3.4%Resident: 4.8% Resident: 4.6% Resident: 5.0%

Resident

Overall

Source: Labour Force Survey, MOM

Redundancies spiked in 1Q 09 Redundancies spiked in 1Q 09

Total Redundancies, Q3 05 – Q3 09

Figures may not add up due to rounding.Total redundancies refer to employees made redundant due to retrenchment or early termination of contracts.

Source: Labour Market Survey, MOM

Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309

Total Redundancies 3,240 3,380 3,690 3,430 2,570 3,390 2,100 2,030 2,350 2,110 2,420 1,880 3,180 9,410 12,760 5,980 2,470

Early Release of Contract

Workers430 180 40 170 100 180 140 110 520 150 140 90 830 1,910 1,860 810 350

Retrenchment 2,810 3,200 3,650 3,260 2,470 3,220 1,960 1,920 1,830 1,970 2,270 1,800 2,350 7,500 10,900 5,170 2,110

10,000

12,000

14,000

Early Release of Contract Workers

Retrenchment

Q1 09Total Redundancies: 12,760

Response and Managing the Downturn Response and Managing the Downturn

Tripartite Guidelines on Managing Excess

Manpower

Skills Programme for Upgrading and Resilience (SPUR)

Singapore National Wages Council Guidelines

Singapore Government’s Resilience Package

SGD $20.5 b

(about USD $15 b)

TRUST Teams

• Launched in Nov 08, revised in May 09, by the tripartite partners, i.e. Ministry of Manpower (MOM), National Trades Union Congress (NTUC) and Singapore National Employers Federation (SNEF)

• Guidelines adopt principles of:

– Spirit of equal sacrifice

– Leadership by example

– Close consultations and transparency

• TOP PRIORITY is to cut costs to save jobs

• Only carry out retrenchments as a LAST RESORT

Tripartite Guidelines on Managing Excess ManpowerTripartite Guidelines on Managing Excess Manpower

TRAINING

• Leverage on the Skills Programme for Upgrading and Resilience (SPUR)

– train & upgrade your employees’ skills

FLEXI-WORK

• Re-deploy your surplus employees to alternative areas of work within your company

• Implement shorter work week, temporary layoff, or other flexible work arrangements

FLEXI-WAGE

• Adjust wage cost using the flexible wage system (FWS)

• Make greater use of variable components – Annual Variable and Monthly Variable components

Key Areas of RecommendationsKey Areas of Recommendations

• In Jul 03, the Tripartite Taskforce on Wage Restructuring was formed

• 3 Key Recommendations:

1. Enlarge the Annual Variable Component (AVC) and identify Key Performance Indicators (KPIs) to link the AVC payment closely to performance

2. Introduce / Build up Monthly Variable Component (MVC) into the Basic Salary

3. Move away from seniority-based wage system by narrowing salary maximum-minimum ratio to 1.5 times or less

Background of Flexible Wage System (FWS)Background of Flexible Wage System (FWS)

When retrenchment is inevitable When retrenchment is inevitable

• Exercise should be implemented responsibly

• Inform MOM via 24/7 hotline, and consult union if unionised, i.e. give early notice

• Inform affected workers before notice of retrenchment is given

• Help affected workers look for alternative jobs

A tripartite programme to help employers and workers manage the economic downturn and build new capabilities to seize opportunities

for the economic recovery

Cut Costs, Save Jobs

Help companies

manage excess manpower and

reduce unemployment

/ under-employment

Reskill & Upskill

Help local workers

upgrade skills and convert to

new jobs

Build Capabilities for Recovery

Strengthen capabilities in labour market

and prepare for upturn

Skills Programme for Upgrading & Resilience Skills Programme for Upgrading & Resilience (SPUR)(SPUR)

2. Higher Absentee Payroll Cap

Absentee payroll of $4.00 and $4.50 / hr at all other approved providers

Aged 40 & above and with ‘A’ level quals and below

$10/hr

$4.50/hrBelow 40 years old

$10/hr

$4.00/hr

at SPUR providers

4.Industry

Upgrading

3. More Skills Upgrading Pathways

1. Higher Course Fee Subsidyfor SPUR courses

PMET level courses

80% / 90%

SDF Funding at all other approved providers

SPURSPUR – for Employers – for Employers

• Basic InformationCommunication Technologies

• Certified Service Professional• Communication & Relationship

Management• Health & Workplace Safety .

• Initiative & Enterprise• Lifelong Learning Global

Mindset• Problem Solving & Decision

Making• Service Excellence• Self-Management Workplace-

Related Life Skills• Workplace Literacy &

Numeracy

• Aerospaceo WSQ Higher Certificate in Aerospace

Maintenance

• Chemicals / Petrochemicalso WSQ Process - operate furnace

• Electronicso WSQ Certified Mechatronic System

• Environment Technologyo Diploma in Technology (Water &

Environment)

• Food Manufacturingo Good Manufacturing Practices for Food

Manufacturing

• Generic Manufacturingo WSQ Certified Operations Specialist

• Pharmaceuticals/ Biologicso Specialist Diploma in Biotechnology

• Precision Engineeringo WSQ Specialist Diploma in Precision

Engineering

Generic SkillsGeneric Skills Sector SkillsSector Skills

SPURSPUR – Examples of Courses – Examples of Courses

Highlights of the Revised NWC Guidelines(16 Jan 2009 – 30 June 2009)

• Freeze / cut wages according to performance, prospects

• Make use of variable components in the wage structure

• Call for employers to adopt Tripartite Guidelines on Managing Excess Manpower and tap on SPUR

• Press On with Long Term Initiatives:– Enhancing employability of older workers and

women– Enhancing efforts to help low wage, contract

and informal workers

Role of the NWC in the downturn:Role of the NWC in the downturn:NWC ReconvenedNWC Reconvened

Recommendation:Employers, unions and the government press on with concerted actions recommended in NWC’s January 2009 guidelines to cut costs, save jobs and enhance competitiveness, through management leading by example in the following areas:

– Wage freeze or cut; – Implementation of other cost cutting measures and

initiatives to cope with the downturn; – Enhancement of wage flexibility; and– Improvement in productivity

NWC Guidelines 2009/2010NWC Guidelines 2009/2010(1 July 2009 – 30 June 2010)(1 July 2009 – 30 June 2010)

Flexible Wage System

• Jobs Credit – encourage businesses to preserve jobs as much as possible in the downturn– employers receive 12% cash grant on the first $2,500 of

each month’s wages for each employee, for a period of 1 year

– given in four quarterly payments in 2009: Mar, Jun, Sep and Dec

• Workfare Income Supplement (WIS) Special Payment - temporary top-up to help with lower wages

– giving low-income workers an additional 50% of the WIS payments received in the year

– relaxing work eligibility criteria

Jobs Credit & Workfare Income Supplement (WIS)Jobs Credit & Workfare Income Supplement (WIS)

TrTripartite ipartite UUpturn pturn StStrategy Teams rategy Teams (TRUST Teams)(TRUST Teams)

• Formed in end April 09

• Tripartite representation within TRUST Teams

• Engage companies on one-to-one basis to advise and guide companies on implementation of downturn measures under the Tripartite Guidelines on Managing Excess Manpower / SPUR

Upturning the Downturn

Positive signs of RecoveryPositive signs of Recovery

Quarter 2008

GDP 2.5 -6.8 -4.2 -9.4 -3.2 0.6 4.0%

GDP growth positiveGDP growth positive

GDP Forecast for 2009 Jan 09 : -5% to -2%Apr 09 : -9% to -6%Jul 09 : -6% to -4%Oct 09 : -2.5% to -2%

GDP for 2009 : - 2%

GDP Forecast for 2010

7% to 9%

MOM Survey on Measures to Cope with the DownturnMOM Survey on Measures to Cope with the Downturn

Performing well, 46%

Gradually recovering,

Unemployment rate fellUnemployment rate fell

Seasonally-adjusted unemployment rate, Dec 05 – Dec 09

Resident

Overall

Jun 09 Sep 09 Dec 09Overall: 3.3% Overall: 3.4% Overall: 2.1%Resident: 4.6% Resident: 5.0% Resident: 3.0%

Redundancies Fell from 2Q09Redundancies Fell from 2Q09

Total Redundancies, Q4 05 – Q4 09

Employment growth amidst downturnEmployment growth amidst downturnEmployment change by sector, Q4 05 – Q4 09

Q2 09 Q3 09 Q4 09Total: -7,700 Total: 14,000 Total: 37,500

• The Singapore Ministry of Trade and Industry reported exceptionally strong GDP growth at 13.1% in Q1 2010.

• Singapore also saw strong employment growth of 34,000 in Q1 2010, while the unemployment rate dipped to 2.2% in Mar 2010, and redundancies also fell to 2,100 in Q1 2010.

• Singapore continues to manage various manpower challenges:- Augmenting & upgrading our Local Workforce- Inclusive Growth- Ageing Workforce - Boosting Labour Productivity

Outcome of Tripartite EffortsOutcome of Tripartite Efforts

• Tripartite partnership has enabled Singapore to cope with the downturn effectively, as many companies implemented cost-cutting measures instead of cutting jobs.

• The measures have helped companies to cut costs and stay viable. Through the government’s special training programmes, many workers have also been able to undergo training in preparation for the upturn.

• The various cost-cutting measures implemented and the strong triparite partnership have enabled the economy to recover quickly, and benefited businesses, workers and the economy.

• Tripartite partnership is indeed an asset.

ConclusionConclusion

Thank You

“CUT COSTS TO SAVE JOBS”: SINGAPORE’S EXPERIENCE Mr Lau Weng Hong Deputy Director, Labour...

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