1. Flexible Wages A Competitive Advantage in a Global Economy 30 January 2004 Ms Yong Ying-I, Permanent Secretary(Manpower)

2. Where am I today? Should I take part? Where is Singapore going? How do I get there? What do I do next? X Key Questions

3. What I will cover Introducing the Tripartite Taskforce Explaining the national wage restructuring agenda Where does this conference fit in? Taskforce recommendations

4. Yong Ying-I Leo Yip Ng Wai Choong Ong Yen Her Stephen Lee Alexander C Melchers Christopher James Koh Juan Kiat John De Payva Teo Yock Ngee Lim Chin Siew The Tripartite Taskforce ALSO: Sector Working Groups HR Resource Persons

5. Part I of the Taskforce’s Work Unclear cost- benefit It’s hard work & needs CEO’s close involvement Not sure about the gains It’s sensitive; might upset employees & unions It’s hard to do a.k.a. don’t know how to do Understanding reasons for slow progress by employers It’s easier to retrench or cut basic wages when crisis hits employees will understand

6. Part I of the Taskforce’s Work How does this impact me? Is it a pay cut? How will my wages be affected over time? What must I do to get paid more? Is my job safe? Can I trust the company? Is my boss sincere, or will he use the opportunity to “just cut”? Understanding employees’ concerns

7. Taskforce Report – a “how to” guide What does a flexible wage structure look like? - i.e. how to structure the components ? How to actually adjust wages up and down as business conditions change? - i.e. when and how to make changes Wage model “The devil is in the details”

8. Reducing “cost” of implementation Changing the cost-benefit calculation Reducing “sensitivity” of topic: –Legitimize discussion; openly address implementation fears Help HR Dirs design details Bring parties together to discuss

9. Building consensus Building trust Platforms to share, and to listen to query, and to understand to co-create & move forward together

10. Wage Restructuring - national programme Jun-NovDeveloping 03(a) main wage model (b) sectoral models for 4 industries Building consensus Oct thruDiscussion with many Jan 04groups of companies (CEOs & HR Dirs) 30 Jan 04National Tripartite Conference on Wage Restructuring Issue Taskforce report

11. National Programme - what happens next? Implementation - 2004 Publicize – nationally & at industry level platforms Facilitate 1 Tripartite “SWAT team” facilitators to help interested companies clarify concerns 2 Train HR managers how to implement flexible wages 3 Form more sectoral work groups to drive implementation Track outcomes; publicise

12. Increasing Flexibility Increasing Competitiveness Variable wage structure –70 fixed: 30 variable –Restructuring allowances –Building in other structures for flexibility How to adjust? –According to corporate & individual performance 1: 1.5 min-max –How to get there –How to move up from min to max –Annual Review; avoid lengthy lock- in periods in Collective Agreements Key Recommendations

13. 20406080100120 50 6040702010 Senior Mgt Mid Mgt & Execs Rank & File BasicVariable AVCMVC AVC + MVC Proposed Wage Structures AnnualMonthly

14. Reducing rigidities by clarifying and collapsing allowances Proposed Wage Structures PresentRecommended 1.Sectoral workgroup reports give specific examples of how to proceed 2.Allowances should have current-day relevance & motivate performance

15. 13 th month “deferred payment” Source of great “confusion”: –legally variable but “culturally fixed” Wide range of practices –Companies paying more than 1 month fixed, should reduce fixed payment to 1 month in contracts, and build rest into AVC “Call a spade a spade” –If you regard it as fixed, it is fixed –If you regard it as variable, treat it as component of AVC Annual Wage Supplement

16. How to trigger wage changes Key performance indicators Corporate performance Individual performance Rewards 1.Define corporate & individual key performance indicators 2.System to link change in variable component to change in KPIs Critical to provide upside to motivate employees 3.Discuss with union; communicate clearly to employees MVC AVC

17. Single biggest issue of controversy –Is it needed? –Is it realistically doable? You decide if you need it – if yes, do it –Some industries do need it critically; others prefer quarterly variable component etc Report has detailed guide on how to trigger MVC changes, both cut & restoration –Tie to corporate KPIs Monthly Variable Component

18. Additional Flexibility Options No-pay Leave Flexible work schedule Shorter workweek Temporary lay-offs

19. $$ Market Pressure Implementing Competitiveness

20. Experience + Productivity $$ Ratio = 1.5 How to reduce ratio to target Implementing Competitiveness Seniority-based wages How to raise from min to max

21. So what’s new? 1.There is tripartite consensus: What should be the wage structure, in detail How to implement 2.National Wages Council will adopt model 3.There is a template to follow, & tripartite facilitation to support implementation

22. Key Recommendations Increasing Flexibility Increasing Competitiveness Recap Foundation: good HR; leadership & employee communications Variable wage structure –70 fixed: 30 variable –Restructuring allowances –Deciding on MVC How to adjust? –According to corporate & individual performance 1: 1.5 min-max –How to get there –How to move up from min to max –Avoid long lock-in periods; annual reviews

23. Thank You 30 Jan 2004