“CUT COSTS TO SAVE JOBS”: SINGAPORE’S EXPERIENCE Mr Lau Weng Hong Deputy Director, Labour Relations Labour Relations and Workplaces Division Ministry of Manpower Singapore

Impact of Global Economic Crisis on Singapore Response and Managing the Downturn Upturning the Downturn Conclusion Overview

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 Q and 3.2% in Q 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 (Sep 2008 – Sep 2009)

Quarter 2008 Q Q Q Q Q Q Q4 GDP % 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 outlook GDP growth declined

Unemployment rate rose Seasonally-adjusted unemployment rate, Jun 03 – Sep 09 Mar 09Jun 09Sep 09 Overall: 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 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 Q1 09 Total Redundancies: 12,760 Q2 09 Total Redundancies: 5,980 Q3 09 Total Redundancies: 2,470

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 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 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)

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 (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/hr Below 40 years old $10/hr $4.00/hr at SPUR providers 4. Industry Upgrading 3. More Skills Upgrading Pathways 1. Higher Course Fee Subsidy for SPUR courses PMET level courses 90% 80% / 90% 90% 70% SDF Funding at all other approved providers SPUR – for Employers

Basic Information Communication 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 Aerospace o WSQ Higher Certificate in Aerospace Maintenance Chemicals / Petrochemicals o WSQ Process - operate furnace Electronics o WSQ Certified Mechatronic System Environment Technology o Diploma in Technology (Water & Environment) Food Manufacturing o Good Manufacturing Practices for Food Manufacturing Generic Manufacturing o WSQ Certified Operations Specialist Pharmaceuticals/ Biologics o Specialist Diploma in Biotechnology Precision Engineering o WSQ Specialist Diploma in Precision Engineering Generic Skills Sector Skills SPUR – Examples of Courses

National Wages Council (NWC) - Overview NWC typically convenes in Apr/May each year Due to economic downturn, NWC reconvened in Jan 09 to review May 08 Guidelines –Recommended companies may implement wage freeze or wage cut commensurate with performance and prospects, to stay competitive and save jobs NWC convened again in May 09 to set new wage guidelines applicable for 2009/2010 Guidelines covers all employees: – Management / executives & rank-and-file workers – Unionised & non-unionised companies – Public & private sectors

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: NWC 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 2009/2010 (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)

Tripartite Upturn Strategy 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

20/17 © 2009 Government of Singapore Upturning the Downturn

21/17 © 2009 Government of Singapore Positive signs of Recovery Quarter2008 Q Q Q Q Q Q Q4 GDP % GDP 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 % to 9%

MOM Survey on Measures to Cope with the Downturn

Unemployment rate fell Seasonally-adjusted unemployment rate, Dec 05 – Dec 09 Source: Labour Market Survey, MOM Resident Overall Jun 09Sep 09Dec 09 Overall: 3.3%Overall: 3.4%Overall: 2.1% Resident: 4.6%Resident: 5.0%Resident: 3.0%

Redundancies Fell from 2Q09 Total Redundancies, Q4 05 – Q4 09 Source: Labour Market Survey, MOM Q2 09 Total Redundancies: 5,980 Q3 09 Total Redundancies: 2,470 Q4 09 Total Redundancies: 2,220

Employment growth amidst downturn Employment change by sector, Q4 05 – Q4 09 Source: Labour Market Survey, MOM Q2 09Q3 09Q4 09 Total: -7,700Total: 14,000Total: 37,500

The Singapore Ministry of Trade and Industry reported exceptionally strong GDP growth at 13.1% in Q 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 Q Singapore continues to manage various manpower challenges: -Augmenting & upgrading our Local Workforce -Inclusive Growth -Ageing Workforce -Boosting Labour Productivity Outcome 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. Conclusion

© 2008 Government of Singapore Thank You