NATIONAL WAGES COUNCIL (NWC) Presented by Anna Koh Industrial Relations Officer

Development : Pre NWC In the 50s Communist activities prevalentCommunist activities prevalent Many strikes  Manhour lossMany strikes  Manhour loss Low productivityLow productivity In 1959 PAP came into powerIn 1959 PAP came into power In the 60s In 1961, NTUC was formed. In 1965, S’pore gained independence. Political isolation & economic uncertaintyIn 1961, NTUC was formed. In 1965, S’pore gained independence. Political isolation & economic uncertainty IR Act, Employment Act established in 1968 to attract investment & manage labour costIR Act, Employment Act established in 1968 to attract investment & manage labour cost There were wage restraint due to labour surplusThere were wage restraint due to labour surplus In the 70s Industrialisation PeriodIndustrialisation Period Full employment, tight labour marketFull employment, tight labour market Union-led wage negotiation  Wage disputes & industrial unrestUnion-led wage negotiation  Wage disputes & industrial unrest Feb 1972, NWC was formed Advisory body on wages adjustmentsFeb 1972, NWC was formed Advisory body on wages adjustments

Development : Post NWC In the 80s Economic restructuring, hi value chain industry emergedEconomic restructuring, hi value chain industry emerged Up to 85, NWC encouraged rewards tied to performance. Wage standstill in the 85 recession. Post 85, qualitative wage guidelineUp to 85, NWC encouraged rewards tied to performance. Wage standstill in the 85 recession. Post 85, qualitative wage guideline Recommended a flexible wage system. Reward based on performance, profit & productivity. Wage  lags productivity growthRecommended a flexible wage system. Reward based on performance, profit & productivity. Wage  lags productivity growth Fm 72 ~ 80 Real GDP growth, inflation rate kept to acceptable level, tight labour marketReal GDP growth, inflation rate kept to acceptable level, tight labour market Substantial wage   industrial harmony, industrial stoppages absentSubstantial wage   industrial harmony, industrial stoppages absent Focus on  ops efficiency, productivity, disacourage job hopping to ensure industrial disciplin eFocus on  ops efficiency, productivity, disacourage job hopping to ensure industrial disciplin e Tied rewards to performance. Wage  in 2 tierTied rewards to performance. Wage  in 2 tier Skills Development Fund created to compel workers’ training & to push for switch to value add investmentSkills Development Fund created to compel workers’ training & to push for switch to value add investment

Why Formed NWC Stabilise Labour Market Ensure Employers & Unions are represented  Time loss in negotiation Set Guidelines on wage  implementation Recommendations based on economic performance, projected trends / outlook Promote Business Growth Enhance Workers’ Morale Bring about national economic growth        

Objectives of NWC Formulate & issue guidelines on wages policy Recommend adjustments in wage structure Advise suitable incentive system

NWC Structure Tripartite, negotiating & advisory national level Has representatives fm employers, unions & govt.Has representatives fm employers, unions & govt. Draws admin assist fm MOM Draws admin assist fm MOM Focus on wages while addressing spectrum of related concerns Has no statutory power or restraintHas no statutory power or restraint No legislation to govern CouncilNo legislation to govern Council    

Role of NWC Gives recommendations on wage policy wage negotiation & guide wage adjustment implementation Gives recommendations on wage policy wage negotiation & guide wage adjustment implementation Formulated guidelines are then submitted to govt for acceptance before announcement in Jun/Jul each yr Formulated guidelines are then submitted to govt for acceptance before announcement in Jun/Jul each yr A consultative platform for orderly wage increases for employees A consultative platform for orderly wage increases for employees

How NWC Draws Out Guidelines International Competitiveness Global / Regional Outlook Economic Prospect / Domestic Market Growth Employment Situation / Labour Market Changes Productivity Growth Labour Productivity Inflation / Consumer Price Index Nominal / Real Wages Sought Public Views

Principles For a Effective NWC Tripartite consultative / cooperative arrangement Consensus & unanimous approach to decision-making Non- interference in specific negotiations & disputes Non- confrontational processes of consultation, conciliation & arbitration Shared responsibility, burden & commitment

How Guidelines Are Used 1 Used by unionised & non unionised companies 2 Used by Unions & Employers as basis for wage negotiation 3 Served as reference point to decide amount for wage  Before 1985 Quantitative GuidelinesQuantitative Guidelines After 1985 Qualitative GuidelinesQualitative Guidelines 4

Why Guidelines Are Widely Accepted Seen as neutral, unbiased, fair & credibleSeen as neutral, unbiased, fair & credible 1 Govt willing to make legislative changes to effect the recommendationsGovt willing to make legislative changes to effect the recommendations 2 MOM uses guidelines to settle wage disputes via conciliationMOM uses guidelines to settle wage disputes via conciliation 3 Court of law uses guidelines as basis for judgementCourt of law uses guidelines as basis for judgement 4 Onus of proof is needed for not following the GuidelinesOnus of proof is needed for not following the Guidelines 5

Wage Policy Considerations To  real wages of workers through higher productivity To ensure that real built-in wage  to lag behind productivity  Global economic trends + S’pore economic conditions + company performance  Wage adjustment + maintain competitiveness 1 2 3

What is a Flexible & Performance Based Wage System  A wage system that has a sizeable variable component that enables companies to adjust wage costs quickly in a severe business downturn  It will enable companies to : Reward employees with bigger bonus in good times Reward employees with bigger bonus in good times Adjust and better manage wage costs in bad times Adjust and better manage wage costs in bad times

Senior Mgt Mid Mgt & Execs Rank & File Basic Variable AVCMVC AVC + MVC Increase Flexibility – By Expanding Variable Components Recommendations by Tripartite Taskforce on Wage Restructuring

Recommendations : Linking Bonuses to KPIs  Companies to build up the Annual Variable Component (AVC) & link it to KPIs  This will motivate and encourage employees to achieve set targets  KPIs can be at company-wide level, departmental level & individual level

Recommendations : MVC For Timely Wage Adjustment  Companies to build up the Monthly Variable Component (MVC) from future wage  and/or from basic wages  MVC gives flexibility to enable companies to make timely wage cost adjustment in response to business environment changes  Draw up clear guidelines / KPIs on how to cut, restore MVC, in consultation with Union / employees.

Recommendations : Enhance Competitiveness  To ensure employees are paid for the job value, rewarded based on productivity & their contribution  Move away from seniority-based wage system by closing the gap between the salary max-min ratio to 1.5 or less

How Employees Benefit Reward & recognition for contribution Better job security during downturn Upside for higher rewards in good times Enhance cost competitiveness & employability Benefits of a Flexible & Performance Based Wage System

How Companies Benefit Enhance competitiveness Motivate employees to give their best for the company Flexibility to make timely wage cost adjustment Benefits of a Flexible & Performance Based Wage System

How Economy Benefits More competitivePromotes high productivity Lower unemployment rate during downturn Better prepared to ride on opportunities in upturn Benefits of a Flexible & Performance Based Wage System

NWC Guidelines 2012/ 2013 : Recommendations Raise Real Wages Over Long Term Built-in Wage  for low wage least $50 wage  for employees earning $1000 & less Raising Productivity Inclusive Growth & Reemployment

1.Raising Real Wages over the Long Term  Real wage should increase in line with productivity growth over the long term. 2.Built-in Wage Increase and Variable Component  Grant built-in wage increase and variable component.  Prevailing labour market conditions, business performances and prospects, and workers’ contribution. SummarySummary

3. Higher Built-in Wage Increase for Low Wage Worker  Include dollar quantum and percentage wage increase.  Workers earning basic salary up to $1,000, to receive built-in wage increase of at least $ Coping with inflation  One-off lump sum payment to help low wage workers SummarySummary

SummarySummary 5. Raising Productivity  Management to spearhead productivity drive at the workplace.  Share gains from productivity improvement with workers. 6. Inclusive Growth & Re-employment  Best Sourcing.  WTS Scheme.  Rights and Obligations under CPF Acts.  Fair remuneration for re-employed older workers.