NTUC calls for twin actions on CPF rates

Up older workers' rates by 1-2 points

Relook contributions for all workers

By Amelia Tan, The Straits Times, 13 Feb 2014

THE labour movement has called on the Government to make two changes to the Central Provident Fund (CPF): Bump up contribution rates for older workers by one to two percentage points and relook rates for all workers.

The former is an immediate goal of the National Trades Union Congress (NTUC), said its deputy secretary-general Heng Chee How yesterday, while the latter is a long-term aim.

The unions, he added, hope to see CPF rates of workers aged above 50 to 55 going up from the current 32.5 per cent when the Government announces its national Budget in Parliament on Feb 21.

Employers should contribute the bulk of the hike, he said at a conference. For workers, their contributions should go to their Ordinary Accounts, which can be used to pay for home mortgages.

The labour movement's recommendation is that bosses pay at least one percentage point of the increase, he added. It follows the spirit of the last hike, he said.

In 2012, when the rates for older workers were last adjusted from 30 per cent to 32.5 per cent, 2 per cent came from employers and 0.5 per cent from workers.

"We feel that it's only fair that the employers should come out with more than whatever is asked of the employees," he said.

This does not apply to the comprehensive CPF review, which should focus on parity between contribution rates by employers and workers, and possibly a review of the current contribution ceiling of $5,000, he said, without offering more details. The last major review was in 2003.

Yesterday's call came after labour chief Lim Swee Say sent a similar message on Monday, urging that older workers' CPF rates be on a par with younger workers' 36 per cent. Mr Lim stressed that the 3.5 percentage-point gap need not be closed "in one go".

The CPF rate for older workers was cut in 2003 during a recession. But it was partly restored to the current level in 2012, with the Government promising to give this group the same CPF contributions as younger workers.

Mr Heng said the labour movement found it "logical" to push for a further closing of the gap since the Government had made a public commitment to do so.

It is also timely, he added, as older workers have more bargaining power in the current tight market conditions. "Do you want to wait for a time when the labour market is very weak and there are workers looking for jobs and you seek an increase in the CPF rate?" said Mr Heng.

The Singapore National Employers Federation said it welcomed the call, as it may attract more older workers to join the workforce. But it asked the Government to consider that economic growth might slow this year and suggested that the schemes to reduce the cost of hiring older people be expanded.

Older workers said higher CPF rates would be helpful for retirement but some were worried. Supermarket sales promoter May Lee, 53, said: "Not many bosses like to hire older workers. They may object even more now that the cost of hiring us will go up."

Businesses dismayed by call for CPF rate hikes
By Xue Jianyue, TODAY, 13 Feb 2014

Already feeling the heat from rising rentals, as well as wage pressures in the tight labour market, businesses reacted with dismay at the labour movement’s call for employers’ Central Provident Fund (CPF) contribution rates for workers aged above 50 to 55 to be raised this year.

While they were resigned to the eventuality of the move — given that the Government had previously signalled its intention to close the gap between contribution rates for this group of workers and that of their younger counterparts — most bosses hoped hikes would not kick in until at least next year, so that they would have time to make adjustments.

Mr Vincent Foo, Director of cleaning company AO ServicePro, said he welcomes more help for older workers, “for the benefit of Singaporeans”. But he noted that firms are locked in to existing contracts and thus have no leeway to raise prices to offset any higher employer CPF contributions.

“Frankly speaking, it is not a good time, because labour cost has increased tremendously,” said Mr Foo. Four-fifths of his 300 workers are above 50 and wages make up 30 per cent of his operating costs.

Pointing to higher foreign worker levies, among other things weighing down on many firms’ margins, Director of cleaning services company SQ 1 Development, Mr Andrew Yeow, added that raising employers’ CPF contribution rates now would eat further into margins. Half of his profits go to paying salaries, said the employer of 400 workers, of which two-fifths are aged 50 to 55. “Employers like us will call it a day,” he added.

The Singapore National Employers Federation (SNEF) also stressed that “the timing for any increase is important”. Pointing out that the International Monetary Fund had warned that the global economy is not out of the woods yet, the Singapore economy “still faces many downside risks”, it added in a statement. “Hence, the Government should take into account the prevailing economic conditions and give adequate notice as to the timing for any increase,” it said.

The Association of Small and Medium Enterprises, however, welcomed the National Trades Union Congress’ (NTUC) suggestion. Its President Kurt Wee said: “Employers have to recognise that they have to be part of the social solution as well. I think we have to build an inclusive ecosystem between employers and employees.”

The NTUC’s proposal is aimed at helping workers in this age group save more for retirement and healthcare.

Asked if higher employer CPF contributions would help attract and retain older employees, bosses were mostly sceptical.

Mr Wong Koi Hin, who owns software development microenterprise Planetary, said workers will not see 1 to 1.5 percentage point increases as significant, especially those who are no longer servicing mortgage loans.

SNEF also cautioned that the cost impact of increasing employers’ CPF rates should not be seen in isolation. “We also need to be mindful of the employability of the unemployed when overall wage costs are increased.”

The Special Employment Credit (SEC) could be extended or made a permanent feature, it suggested, to incentivise the hiring and retention of older workers. The SEC subsidises employers for the wages of its workers who are aged above 50 and earning up to S$4,000 a month.

Raising older workers' CPF rates 'has gains'
It would add to costs but hopefully draw more back to work, say bosses
By Yasmine Yahya And Chia Yan Min, The Straits Times, 12 Feb 2014

A PROPOSED increase in contributions to the Central Provident Fund (CPF) accounts of older workers would add to business costs, but also has its plus points, company bosses say.

They hope such a move would attract more older people back to the workforce, which would help alleviate the labour crunch.

The labour movement has called on the Government to raise the CPF rates of those aged 50 to 55 so that they are on a par with younger workers.

The CPF rate of these older workers is 32.5 per cent compared with 36 per cent for younger workers.

The rate was cut in 2003 along with other CPF tweaks amid an economic downturn.

Mr Francis Koh, the group chief executive of property and construction firm Koh Brothers, said that any move to raise the employers' CPF contribution rate for older workers would add to the already high costs for companies here.

"We will have to see how we can do things in a much better way and mitigate costs in other areas, like in utilising technology," he said.

But the firm will not look to reduce the headcount of its older workers and is committed to ensuring that they can stay active for as long as possible.

"We owe it to these long- serving workers and their years of contribution for helping Koh Brothers be what it is today," said Mr Koh.

Excluding foreign construction workers, the company employs about 400 staff. An estimated 15 per cent of them are in their 50s or 60s.

Super Bean International operations director Thomas Koh said the company has not done any analysis of what an increase in the CPF contribution rate would mean for it, but that costs will certainly rise as a result.

"Still, we are more than happy to reward our staff. The labour crunch is a major issue for us so if this attracts more people to come back to work, that would be fantastic," he added.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said that businesses are already facing a "myriad of challenges, and have to balance a lot on their plate".

"We hope that the Government will take a progressive approach, as this will give businesses time to adjust and plan," he said.

Given the tight labour market, however, Mr Wee said the gains from older workers moving back into the workforce are likely to be only "incremental".

"To some extent, we might be able to get some incremental yields... but Singapore is already at full employment," he added.

Still, "any labour is welcome by SMEs, as long as they are capable and willing to contribute".

CPF rates for older workers 'may go up'
Labour chief calls for parity with younger workers but it can be done progressively
By Toh Yong Chuan And Melody Zaccheus, The Straits Times, 11 Feb 2014

OLDER Singaporean workers face the pleasant prospect of seeing a rise in their Central Provident Fund (CPF) contributions.

The labour movement yesterday called on the Government to raise the CPF rates of those aged above 50 to 55 so that they are on a par with younger workers.

But it need not be done "in one go", said labour chief Lim Swee Say, who is also Minister in the Prime Minister's Office.

Union leaders, he said, are not pushing for the 3.5 per cent gap to be closed "in one go, because we do understand it should be done progressively", he told reporters after an official visit to restaurant chain Eighteen Chefs.

The CPF rate of these older workers is 32.5 per cent compared to 36 per cent for younger workers.

It had been cut in 2003, along with other tweaks to the CPF scheme, when Singapore suffered a recession because of Sars.

But during Budget 2012, it was partially restored to the current level. At the same time, the Government had promised to give this group the same CPF contributions as younger workers.

"However, we cannot make this major move in one step," Deputy Prime Minister Tharman Shanmugaratnam, who is also the Finance Minister, had said then.

Yesterday, Mr Lim gave a broad hint that another step towards parity could be taken as early as next week, on Budget Day.

Mr Tharman is scheduled to present the national Budget in Parliament on Feb 21 and Mr Lim said these older workers hope to hear "some good news from the Finance Minister".

The National Trades Union Congress (NTUC) is also expected to make known this week its plans to push for CPF rates to be tweaked to help Singaporeans save for medical and other financial commitments in their old age.

Besides the CPF rates, Mr Lim also commented on the newly announced Pioneer Generation Package, saying union leaders are "very positive" about it.

The package of health-care subsidies is for Singaporeans who are 65 and older by the end of this year, in recognition of their contributions to nation-building.

Mr Lim said younger workers who miss the cut-off age also hope to see their CPF accounts grow.

"They hope more can be done to strengthen their Special Account savings because it goes into CPF Life," said Mr Lim, referring to the annuity scheme for retirement.

Some businesses, however, are worried at the prospect of a CPF rate increase.

Mr Luke Pang, group manager of dessert and pastry chain Canele, said: "We may have to increase prices."

Mr Kurt Wee, president of the Association of Small and Medium Enterprises (ASME),asked for early notice of any rate increase "because many employers are already in a tight and difficult situation".

He was referring to the tight labour market and rising rents.

MP Zainudin Nordin, who chairs the Government Parliamentary Committee for Manpower, feels that since "the economy is doing fine, we should just do it".

"There is never a good time to increase... Any further wait will affect the workers' ability to save for retirement."

Changing CPF rates over the years
By Alvin Foo & Lin Zhaowei, The Straits Times, 12 Feb 2014

The labour movement on Monday called on the Government to raise the CPF rates of those aged above 50 to 55 so that they are on a par with younger workers.

Currently, the CPF total contribution rate of these older workers is 32.5 per cent compared to 36 per cent for younger workers.

Contribution rates for all age groups were the same from 1955 - the year the savings scheme was started - until 1988.

Here are some of the key changes over the years:

1986: Employers’ contribution rate was cut by 15 percentage points following 1985 recession.

1988: Lower rates for workers aged above 55 were introduced to encourage their employment.

1999: To regain Singapore's cost competitiveness and preserve jobs after a year of recession, employers’ contribution rates were cut by 10 percentage points for workers aged 55 years and below.

2000: Rates were restored progressively as economy recovered.

2003: Cut in employers’ contributions due to economic restructuring.

2005: Contributions for employees aged above 50 to 55 years cut to increase their employability.

Problems with raising CPF rates for older workers

THE labour movement has called on the Government to raise the Central Provident Fund contribution rates for older workers, to help them save for retirement ("CPF rates for older workers 'may go up'"; Tuesday).

The reason why the Government cut the rates in the first place was to improve the employability of older workers.

Restoring them will adversely affect their employability as businesses will have little incentive to hire them.

When older workers cannot get jobs, they will find it hard to cope with daily expenses, let alone save for retirement.

There are potential social costs as well. Older folk who are not gainfully employed will experience more rapid mental and physical deterioration.

Solving one problem should not lead to others.

Clayton Teo
ST Forum, 14 Feb 2014

Take-home pay may be hit

AS A 61-year-old business owner who is also a wage earner, I feel that raising the Central Provident Fund (CPF) rates for older workers will do more harm than good.

Paying lower CPF contributions has been a mild enticement for businesses to hire older staff, and is better than offering them lower salaries.

Raising CPF rates may deprive older workers of money that could have gone straight to their pockets rather than their CPF accounts.

I hope there has been a lot of thought and debate about this issue before its possible implementation.

Bernard Allen Utchenik
ST Forum, 14 Feb 2014

What about those aged above 55?

THE proposal to raise the CPF rates for older workers is laudable.

But why does it cover only workers aged 50 to 55? The rates for workers aged above 55 should also be raised.

Elsie Loo (Ms)
ST Forum, 14 Feb 2014

Inclusive CPF review to benefit all workers

THE labour movement recently called for an inclusive review of the Central Provident Fund (CPF) contribution rates for workers of all ages ("Problems with raising CPF rates for older workers" by Mr Clayton Teo, "Take-home pay may be hit" by Mr Bernard Allen Utchenik, and "What about those aged above 55?" by Ms Elsie Loo; all published last Friday).

We hope to see enhancement in the employer contribution to the Medisave accounts of workers in all age groups, in view of rising health-care costs and medical insurance premiums.

And for workers who are above 55 years old, we asked for strengthening of their Special Accounts so that they have more savings for retirement, especially with longer life expectancies now.

With Singaporeans entering the workforce, getting married and having children at a later age, the financial commitments of workers in their 50s today are akin to those of workers in their 40s in the past.

The age band of above 50 up to 55 was created in 2005 to improve employability, as the employment rates of those in this group were lower than those of the younger ones, and seniority-based wages discouraged employers from hiring them.

Their total CPF contribution rates were cut in 2005 and 2006.

Employers have since moved towards a performance-based wage system, there is re-employment legislation in place now, and employers who hire workers aged above 50 receive the Special Employment Credit from the Government.

The resident employment rate of this group of workers rose by about 10 percentage points over the last decade. Hence, in 2012, there was consensus among employers, the Government and unions to raise their CPF contribution rates gradually, towards the same rates for younger workers.

The National Trades Union Congress (NTUC) is pleased to note that the Singapore National Employers Federation supports this call, so that more are attracted to enter the workforce and help ease the current labour crunch; likewise, the Association of Small and Medium Enterprises thinks this increase will not adversely impact the workers' employability.

Bearing in mind that workers may have ongoing financial commitments, the NTUC has called for employers to contribute more than employees, and that contributions from employees should be channelled into their Ordinary Accounts, so that workers can use both private savings and CPF savings to meet these commitments.

Heng Chee How
Deputy Secretary-General
National Trades Union Congress
ST Forum, 18 Feb 2014