The biggest elephant in the room is one-sided contracts. And many contracts are based on headcount, rather than on productivity or performance.
By Radha Basu, The Straits Times, 31 Mar 2012
1 A customer has the right to extend a three-year cleaning contract by two years or more at the same prices. The cleaning company has no choice but to oblige.
2 The same customer can terminate the contract without 'giving any reason whatsoever'. Once more, the cleaning company has no say.
3 If a cleaner is absent and the cleaning company does not provide a substitute worker, it gets fined $100. This despite the fact that the cleaner earns only $40 a day - and one of his colleagues does double shift, so the work gets done.
CLEANING companies in Singapore are often subjected to one-sided contracts in favour of service buyers - such as building owners and town councils - checks with a dozen companies, the industry association and the cleaners' union have revealed.
According to the Accounting and Corporate Regulatory Authority of Singapore, there are more than 2,000 firms that provide building-cleaning and janitorial services. Close to 300 were set up last year alone.
With so many companies vying for contracts, snagging deals by tendering cheap seems the only way to survive.
Barriers to entry in this industry are extremely low.
Anyone who can recruit a few bodies, buy detergent and cleaning tools can register a cleaning company, says Mr Milton Ng, president of the Environmental Management Association of Singapore (EMAS), the industry body championing professionalisation and best practices in cleaning.
Cleaners grabbed centrestage in Parliament earlier this month, with Deputy Prime Minister Tharman Shanmugaratnam acknowledging the need to do more to help shore up their wages. Three in four cleaners are older Singaporeans with only primary school education.
The next day, Minister of State for Finance Josephine Teo announced that it will soon be mandatory for all government agencies to award contracts only to accredited cleaning companies which tend to have better pay structures and worker welfare.
Currently only about 60 of Singapore's cleaning companies are accredited, though they hire around 25,000 of the 70,000 local cleaners here.
Accredited companies are required to send cleaners for training and provide them with proper tools.
Moves are also afoot to ensure that all accredited companies have a basic wage requirement for cleaners.
However, industry representatives The Straits Times spoke to say that while these 'best sourcing' initiatives are good, the biggest elephant in the room - one-sided contracts - needs fixing urgently.
It is the industry's dirty secret that has been suffered in silence for a long time.
Unless there is a 'basic level of standardisation' in contract clauses, the problem of low wages cannot be fixed, says Mr Ng.
'Even domestic workers have the right to get out of a contract by giving notice. We don't see why cleaning companies should be any different?'
One-way street
THE fact that contracts can run up to six years at a time makes matters worse, says Mr Ng, who is director of Ramky Cleantech Services, which employs 1,500 cleaners.
'We have seen many 3+2 contracts where the service buyer has the right to extend a three-year contract by another two years with the same pay and work conditions. This means that a cleaner's wages can remain the same for up to five years.'
Ironically, while there are cleaning companies aplenty, the industry is facing a shortage of cleaners because of two recent developments: Singapore is witnessing its lowest local unemployment rates in 14 years, and increases in foreign-worker levies have tightened the tap on migrant workers eager for cleaning jobs.
Levies for unskilled foreign cleaners on work permits are being increased every six months, from $270 per worker per month in February last year to $400 in July next year.
Currently, any company getting an unskilled cleaner in pays $310 per worker per month.
That many contracts are based on headcount, rather than on productivity or performance, has made the situation worse, says Mr Woon Chiap Chan, country managing director of ISS Facilities Services.
With more than 6,000 cleaners, it is one of the largest such providers in Singapore.
ISS has more than 200 customers with monthly contract values of $5,000 or more. At least 70 per cent of them have drawn up headcount-based contracts, he says. These are audited largely by checking how many cleaners turn up for work each day.
Such an approach 'misses the forest for the trees', he says. The danger is that cleaning companies become mere 'body shops', with no incentive to increase innovation or productivity.
Heavy penalties
THERE is also an intricate system of fines, or 'liquidated damages' - usually of $100 per worker per shift - if a worker is absent and the provider falls short of the specified head count. In some cases, the fine has to be paid even if a worker is on medical leave and an existing worker covers for the absentee's duties.
'Even CEOs can take medical leave and the work at their company goes on. I just don't see why cleaners can't,' says Mr Woon. Some service buyers even penalise companies $10 to $30 if the worker shows up 10 minutes late.
Smaller firms are among the hardest hit.
Cleaning company boss Michael Koh, who heads a firm with 70 cleaners, claims that he paid out $200,000 in punitive fines last year alone. He had lost at least 20 staff - whom he paid around $900 a month - to competitors paying more.
Most of his contracts were tendered before the increase in levies last year and the fall in local employment rates. 'Most of the smaller companies like us just have to accept it and pay the penalties if we want to do business in this industry,' he says. 'We have no other choice.'
These days, cleaning companies have to pay $1,200 or more to woo local new entrants.
Because of rising labour and levy costs, Mr Woon badly wants to get out of a contract he tendered more than two years ago because he is losing $10,000 every month - but he can't.
The penalty of early termination will cost him more: at least $300,000.
Cleaning companies like his generally don't have the right to terminate the contract or change headcount requirements even if there are major policy changes.
But clients can. Any time.
Cleaning Express customer service manager Matthew Houston says that recently he had five clients asking for fewer staff as they were 'cutting costs'.
Fortunately, because of the labour shortage, Mr Houston was able to deploy all affected workers elsewhere. 'But some had to be trained for a new job scope as they moved to a different type of building. Yet others asked for additional transport costs, which we had to absorb,' he says.
There are some contracts that do provide cleaning companies with the option to pull out with one to three months' notice.
But the penalty for doing so is so heavy that it is just not worth it, says Mr John Selvan, managing director of Shiners Facilities Management.
'We get clients very much through word-of-mouth marketing. So pulling out will always be the last option,' he says.
Instead, companies like his, which are accredited and have begun paying cleaners $1,200, look to bagging contracts with fair buyers, usually foreign multinationals and private condominiums, who believe it is in the worker's interest to pay more.
There were at least 10 cases last year where Mr Selvan lost a contract to a cheaper bidder and had the client return to offer him the job when the cheaper competitor could not cope with the job.
'A company that pays a cleaner $750, will obviously have issues with quality and worker retention and might not end up being able to fulfil the contract,' he says. 'But not many buyers see that at the beginning.'
Sometimes, there are also no specific provisions for out-of-pocket expenses.
Operations manager Lawrence Toh of Chang Seng Services, for instance, rues the clause in a contract which makes the cleaning company responsible for building maintenance.
Every time a loan shark sprays paint on someone's door or someone complains of a ceiling blackened by soot in a block, Mr Toh's company is responsible for cleaning it up.
'We don't mind providing the manpower, but the service buyer should at least provide the material or pay for it,' he says, adding that during the tendering stage it will be impossible to estimate how many times a wall gets vandalised and factor in costs accordingly.
Net effect
WITH wage costs comprising up to 80 per cent of the tender costs - and usually fixed before the deal is closed - it's no surprise then that gross median pay for cleaning has seen a drop overall over the past decade.
In 2000, the median gross wage for cleaners and labourers was $1,277. By 2010, it fell to $960.
For cleaners of industrial buildings, the median gross wage was even lower, at around $600 in 2010.
Even as companies rush to woo new cleaners with high salaries, existing ones are not being paid more - like Mr Ng Peng Sian, 63, who has not had a pay rise since he began cleaning two HDB blocks near where he lives in 2007. He earns $600 every month for his six-hour-a-day job. He gets two days off a month.
Madam Norshiah Ibrahim, 60, has seen her pay shrink from $1,200 a month when she first began work in 1999 to $850 today.
The widow with four grown-up children cleans three HDB blocks in central Singapore between 7am and noon every day. 'I have not had to seek help from the Government so far, but with costs so high, it's quite difficult,' she says.
When the town council changed contractors, Madam Norshiah became an employee of the new contractor with the winning low bid.
'My bosses have always been good,' she says. 'But they say the price of the total contract has fallen so they cannot pay me more.'
She says that her boss has promised her that in three months, she may see her first raise in 13 years.
'I hope I get it,' she says, adding that she never thought of looking for another job since the current one is near her home.
Neither Mr Ng Peng Sian nor Madam Norshiah - who work in different districts - have written employment contracts or even pay slips, which are supposed to be mandatory.
Mandating best sourcing
AFTER several Members of Parliament raised the issue of low pay of cleaners in the House, it was announced that the Government will soon make it mandatory for all public sector organisations to hire cleaners only from accredited cleaning companies.
While acknowledging these moves as steps in the right direction, labour MP Zainal Sapari would like to see 'bolder moves' to ensure that low-wage workers get fair pay. Mr Zainal is the executive secretary of the Building Construction and Timber Industries Employees' Union, which cleaners and cleaning companies are affiliated to.
While he is glad that the Government is finally making accreditation mandatory, it could be years before the moves are fully implemented, since existing contracts could be in force for up to two to six years.
Besides, there is little pressure on the private sector to change its cheap sourcing ways. 'Left to themselves, very few companies will put workers' welfare over profits,' says Mr Zainal, who heads the unit for contract, casual and low-wage workers at the National Trades Union Congress.
He feels that enacting laws to make service buyers legally responsible for outsourced workers - even when the worker is not a direct employee - could help even more.
'We already have a precedent,' he says. 'When there is a workplace accident at any construction site, the site owner, not just the contractor, is held responsible under a law passed a few years ago.'
The cleaning industry, meanwhile, would like to see more incentives replace some punitive clauses.
'Instead of fining companies every time a worker does not show up, why not reward workers for 100 per cent attendance,' suggests Ms Sharon Kee of Horsburgh Engineering, which has contracts to clean hawker centres here.
EMAS, on its part, is pressing for fairer deals and a set of common clauses to be included in all contracts. Moving away from headcount-based contracts to those that stipulate, for example, frequency of cleaning, could be a big step forward, suggests Mr Woon.
Most of all, both parties should have equal rights to extend, terminate or renegotiate contracts, especially when there are changes in government policy.
'I recently asked a lawyer whether I could get out of a cheap and unfair contract after the recent hike in foreign worker levies,' says Mr Milton Ng.
'He told me that I had signed my own death certificate.'
Common clauses in one-sided contracts
Unilateral right to extend/terminate contract
The right to terminate is often unilateral. In some cases, the client – or service buyer – can sack the service provider if it “fails to carry out work to the satisfaction of the client”. In others, the client has the option to terminate the contracts by giving three months’ notice in writing “without giving any reason whatsoever”.
In other contracts, the client has the option to extend the contract for up to three years at the same price and tender specifications.
Some contracts also state that the tenderer’s – or the cleaning company’s – bid shall remain valid for a period of six months from the closing date of the tender and that the tenderer cannot withdraw its offer during this period, or face paying damages for losses.
Why it’s unfair
Unilateral extension of the contract or even the tender period does not allow cleaning companies to account for the cost of changes in government policies, such as if foreign worker levies are increased, thus increasing manpower costs for the companies. Both parties should be given equal opportunities to extend or terminate contracts.
Liquidated damages or fines
A service buyer often has the right to impose fines or “liquidated damages” (LDs) worth $100 on the cleaning company if a worker misses work, even if another worker doubles up and completes the work. The fines can be avoided only if a substitute worker makes up the total headcount.
Why it’s unfair
This is tough in a tight labour market where companies are always short of workers. LDs should be based on performance, not on attendance or headcount.
For instance, if a worker is late but the service is completed by his teammates, the service operator has fulfilled the work requirements and should not be made liable.
Limits could also be set on the number of LDs a cleaning company could incur in a specific time period. Anything in excess could be a cause for termination. Such a clause would force the cleaning company to improve its services and also ensures that the service buyer imposes LDs reasonably. There is no point keeping an operator that is unable to perform.
Unfair expectations of workers
The cleaning company shall employ only healthy persons of good character, integrity and normal behaviour... and between the ages of 21 and 55. Waiver of age limit will be granted only on conditions of satisfactory health and work performance.
Why it’s unfair
Such a clause smacks of ageism and implies that an older worker is deemed unfit unless he can prove he is not.
This leads to discriminatory hiring practices and should be dropped, given that Singapore is ageing fast and the Government is trying to encourage older workers to remain in the workforce for as long as they can.
No payment for work done
If any of the buildings/facilities need to be cleaned for a VIP event on a Sunday or on a Monday following a public holiday or after office hours, there shall be no claims for the work done.
Why it’s unfair
This does not account for the overtime pay cleaning companies have to pay workers.
Allowance for late payment
Late payment by the client or service buyer shall not entitle the cleaning company to be compensated for any loss arising from this. Neither shall late payment enable the cleaning company to suspend or delay its obligations under the contract.
Why it’s unfair
A cleaning company’s biggest cost is payroll.
If the client pays late, the company may have to incur higher finance rates that may erode its profit margins.
Service buyers or clients should pay on time and should pay a late payment charge if they are late.
Fines for complaints to the public or press
The cleaning company shall be fined $3,000 if it makes a public or press complaint, which brings “disrepute” to the client.
Why it’s unfair
This clause is unfair as it takes away the right of a cleaning company to suggest improvements in work processes that could ultimately increase productivity levels of the workers.
Uphill task to hire Singaporean cleaners
Offering higher pay not enough; firms say some are picky about job scope and place of work
By Daryl Chin, The Straits Times, 8 May 2012
A WEEK has gone by since Ban Chuan Cleaning Services site manager Mohamed Mustaffa posted an advertisement at the void deck of a block in Kovan that read: 'HDB cleaners needed urgently. Salary - $500 to $1,000.'
Not one person has replied.
Despite a bid to attract them with higher salaries, conservancy contractors still find sourcing local cleaners an uphill task. And they are growing increasingly desperate as labour laws tighten and unemployment figures dip.
'We are trying to get housewives and retirees to join us part-time. But even when they do try it out, some are choosy about what they want to clean, or simply do not show up for work,' said Mr Mustaffa.
Conservancy contractor Colin Toh from Legend Maintenance Singapore said HDB estates are usually the least popular, partly because of the amount of litter that cleaners have to deal with.
'They will almost never do refuse collection or block facade cleaning,' he added.
Mr Mustaffa said many Singaporeans also do not want to work near where they live, for fear of being recognised by their neighbours, and take poorly to criticism compared to foreign cleaners.
For a part-time job that involves sweeping two public housing blocks for four hours a day, six days a week, he and other conservancy contractors The Straits Times spoke to are offering about $650 to Singaporean workers.
Five years ago, it was $360 per month for the same number of hours, said Clean Solutions site manager Thanaraj Retinam.
'Many locals like to do only certain jobs. And if the economy picks up and they get a better salary, they will jump ship,' he said.
Jurong Town Council general manager Ho Thian Poh said that typically, those cleaning HDB estates have it tougher compared to, say, those working at condominiums.
'Condos are enclosed, but for HDB estates, anyone can just walk around and litter, and sometimes it can even be bulky waste,' he said.
Ms Lee Bee Wah, chairman of the Government Parliamentary Committee for National Development, said she is aware of the cleaner shortage in some estates.
She refers job-seekers who approach her during her Meet-the-People sessions to her conservancy contractor. 'Some of them are able to overcome the hard work and make very good cleaners,' she said.
To make companies less reliant on foreign labour, levies for unskilled foreign cleaners on work permits are being increased every six months.
They currently range from $310 to $470 per worker per month, and will increase to $340 to $500 by July next year.
In Parliament earlier this year, Deputy Prime Minister Tharman Shanmugaratnam said more needed to be done to shore up the wages of cleaners.
It was announced shortly afterwards that plans were in the pipeline to make it mandatory for all government agencies to award contracts only to accredited cleaning companies, which tend to have better pay structures and worker welfare.
The median gross wage for cleaners and labourers was $1,227 in 2000, and fell to $960 in 2010.
Labour MP Zainal Sapari, who is also director of the National Trades Union Congress' unit for contract and casual workers, said the shortage of local cleaners stems from the low pay.
Even though cleaning companies are willing to offer more, it is not attractive enough. The firms typically put in low bids in order to win a tender, and the low profit margin eats into workers' salaries, he said.
In their defence, conservancy contractors say they will go out of business if their bids are consistently higher than others.
Madam Nasema Beve, 52, who was retrenched two years ago, has no problem with her part-time job sweeping two blocks in Holland Close as it keeps her active and allows her to spend time with her husband, who works in the same company.
'Right now, I am comfortable with the pay I'm getting, but of course getting a raise is always welcome,' said the mother of two, who currently earns about $600 a month.
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