Rehiring age will be raised to 67 in 2 to 3 years

Forcing firms to change practices immediately may backfire, says minister
By Amelia Tan, The Straits Times, 15 Dec 2014

THE Government has opted to give time to companies to re-employ workers to age 67 because forcing them to do so immediately may end up backfiring, said Manpower Minister Tan Chuan-Jin.

That is why changes in the law to raise the re-employment age to 67 will kick in only two to three years from now.

Currently, firms are required by the law to offer re-employment to eligible workers when they turn 62, up to the age of 65.

Mr Tan said not giving firms sufficient time to adapt may result in making older workers less employable.

"(Some) companies will feel that, well, if that's the case then I'd rather not take on someone at this age because, you know, these few years I will be tied down in a way where I'm not able to adjust," he added.

The minister made these comments in an interview to sum up the progress of the Ministry of Manpower (MOM) this year and outline its plans going forward.

The Government has taken a gradual approach of raising the re-employment age to 67 - a goal which it first set in 1993.

But it was not until 2012 that the new Retirement and Re-employment Act allowed senior workers to be re-employed to the age of 65.

In the meantime, MOM wants to get firms ready for the change in legislation by encouraging them to voluntarily rehire older workers.

To achieve this goal, the ministry announced in September that it will offer firms incentives to voluntarily rehire older workers above the age of 65.

Mr Tan declined to give details of the incentives but said that they will be announced next year and backdated to Jan 1 next year.

"We believe that by actually setting the conditions in the next few years and then for the actual Retirement and Re-Employment Act to kick in to 67 a few years later, would on balance be the best approach," said the minister.

Business groups and economists said that not all firms are convinced yet that the benefits of hiring older workers will outweigh the costs, and that incentives will help push the cause for older workers.

"Subsidies for re-designing jobs, investing in automation and training and co-sharing of medical insurance and salaries of older workers above the age of 62 will help firms a lot to bring down the cost of re-employing older workers," said the Singapore Business Federation's chief operating officer, Mr Victor Tay.

Singapore Management University economist Hoon Hian Teck said that some firms are reluctant to re-employ older workers above 65 as the productivity of the workers may not match their salary expectations.

"The Government can step in to subsidise part of the wage cost during this transition phase before legislation kicks in," said Professor Hoon.

Labour force will start to plateau in 2020: Tan Chuan-Jin
The Manpower Minister said that though the labour market outlook remains positive, it would get harder for businesses to find the required manpower from 2020, when the local labour force growth rate starts to plateau.
By Imelda Saad, Channel NewsAsia, 14 Dec 2014

In the short to medium term, the labour market outlook remains positive, but things would not be as rosy in the long term, said Manpower Minister Tan Chuan-Jin.

On the labour front, the Manpower Minister said it had been a relatively good year for Singapore, with positive business sentiments and an employment rate close to 80 per cent. The tight labour market and efforts to improve wages have also meant pay increases for those in the bottom 20th percentile.

The local labour force participation rate has also gone up thanks to more older workers and women back at work. But the Minister feels this may have negated efforts to up productivity.

"What we find is that there are companies which are struggling,” Mr Tan. “You do hear of companies who are saying that they are facing difficulties and we know that. But there are also many companies who are finding it a challenge because there are opportunities to grow but can't grow because the labour force is tight.

“So they have been looking at some ways to cope with that. One of which is actually to enhance employment terms, which in large part I think has resulted in the growth of wages as well. Terms of employment, more flexible work arrangements, we're going to see some of that coming in which is a good thing for the work scene.

“But what it means is that I (employers) am able to find more bodies coming in to do the things I need to do instead of perhaps really revamping the way I do business and becoming a lot more productive. So ironically, while it's a positive sign having a better labour force participation, high employment numbers overall may actually negate some of that push towards that drive to productivity."

The reality is the pool of local workers will start to shrink in time, though Mr Tan said that is just demographics.

"The baby boomer generation are going to begin to retire,” he said. “Even with the extension of the retirement age and the Re-employment Act kicking in and so on, you will begin to see more of them leaving the workforce. Correspondingly, because of lower birth rates, the workforce entering the job market is also beginning to decline."

“So what you will see in the next few years is these numbers declining. So even with Labour Force Participation measures still being in place, still being positive, that pool of labour force coming back will actually begin to reduce. So in the Population White Paper, we actually talk about how when you hit 2020s onwards, you will begin to see the labour force plateauing."

Hence, the critical need to power on with productivity measures such as automation, re-engineering processes and re-skilling the workforce. Sectors which the Government wants to focus on include construction, F&B and retail. Mr Tan said "the time to change is now".

"So companies who will still have that underlying demand have a couple of choices,” said the Manpower Minister. “One, they literally have to restructure and change the way they do things so that they are manpower leaner. The emphasis has always been being leaner in terms of manpower needs. It's not just about having fewer foreign workers. It's about being leaner in operations because the reality is even your own local labour market is going to be small.

“The other is to just demand for more foreign labour but we are keeping tabs on that. There will still be a growth in foreign labour but we are moderating that growth. We've done so in the last couple of years and we will maintain that because we need to keep that growth sustainable.

“So at the end of it what's the net impact? At the company level, I think it's about survival. It will be about whether they are able to transit. I think we will see more consolidation. You might see more mergers between companies. We are beginning to see some of that happening today. You probably would see more of that happening.

“Offshoring perhaps might accelerate slightly more so there's going to be a lot more real pressure being placed on the companies. But at the macro level, what's the impact on the economy? Well, I think if we are not able to embrace the improvement in productivity and if you have to continue to keep your growth of foreign labour moderate, then it will have an impact on your headline GDP growth numbers."

The labour market will remain tight as the Government continues to moderate the growth of foreign labour, so it is inevitable that labour intensive industries will need to restructure their processes. Mr Tan said businesses need to remain competitive for a healthy economy, better jobs and better pay for Singaporeans.

Firms 'yet to accept they must adapt as labour pool shrinks'
By Amelia Tan, The Straits Times, 15 Dec 2014

MANY firms here have not yet accepted the reality that they need to shape up in the face of shrinking manpower resources.

And for those continuing to believe that supply of manpower remains strong, they will be in for a rude shock when the supply tapers off, warned Manpower Minister Tan Chuan-Jin.

The Government has been urging firms to become more efficient by tightening rules on hiring cheap foreign labour in recent years.

But instead of becoming more productive, Mr Tan said some firms are hiring more Singaporeans who are re-entering the workforce, such as the elderly and housewives.

"What it means is that I'm able to find more bodies coming in to do these things that I need to do, instead of perhaps really revamping the way I do business and becoming a lot more productive," he said in an interview last Thursday.

Overall productivity figures have been dismal.

In 2010, the Government embarked on a 10-year economic restructuring drive with the target of achieving an ambitious 2 to 3 per cent productivity growth per year.

However, the numbers averaged just 0.1 per cent from over the past three years.

Mr Tan cautioned firms against relying heavily on locals re-entering the workforce - it is not sustainable as their numbers will shrink in the future.

Government estimates show that overall labour force growth will plateau in about 10 years as more baby boomers retire and fewer younger workers replace them.

"It is not just about having fewer foreign workers. It's about being leaner in operations because the reality is that your own local labour market is going to be small," Mr Tan added.

He predicted that the pressure on firms to adapt to a manpower-lean economy will mount.

"I think it will be about survival. It will be about whether they are able to transit and I think we will see perhaps more consolidation. We might see more mergers in companies," he said.

Some firms yet to have policies for new rehiring age
Sectors with tight manpower most ready, but not IT, engineering firms
By Amelia Tan, The Straits Times, 16 Dec 2014

CHANGE is coming, but some employers have yet to put in place policies to adapt to legislation that will compel them to offer re-employment to older workers up to age 67.

Many companies said they are open and want to hire and keep older workers, but not all have actually thought about how to do so.

Bosses and human resource directors of about a dozen companies said the job functions and salary scales of older staff need to be redesigned. Some older employees also have to be retrained to ensure their skills are updated.

Those most ready are companies in sectors struggling for manpower such as restaurants, hotels and hospitals.

Mr Brenton Ong, human resource director of Concorde Hotel, said the hotel has been looking at the pool of older workers as a viable source of manpower for years. "We try to fit their schedules, as some older workers have family commitments. We also invest in technology such as bigger computer screens to make things easier for older administrative staff," he said.

Manpower Minister Tan Chuan-Jin said in an interview last week that changes in the law to raise the re-employment age to 67 will kick in two to three years from now.

Currently, companies are required by the law to offer re-employment to eligible workers when they turn 62, up to the age of 65.

National Trades Union Congress deputy secretary-general Heng Chee How backed Mr Tan's comments, saying that employers should "quickly do whatever is necessary to re-employ their workers beyond 65".

He also hoped that the incentives, which will be announced next year to help companies adapt to the new re-employment laws, will help not just in costs, but also in re-designing jobs and skills.

But not all companies are ready, especially those in sectors such as information technology (IT) and engineering, which have not yet been confronted with the need to employ older workers.

"We need digital natives, not migrants, for sophisticated computer programs... however, we need to get ready for an ageing workforce," said Mr Brandon Lew, head of HR operations at information technology firm T-Systems. Most of T-Systems' 120 employees are in their 30s.

Other bosses are grappling with issues such as allowing for retention of experienced staff while ensuring that the younger workers can continue to move up.

"The up and coming leaders will have to wait longer. It may lead to a retention issue," said Mr Tay Cheng Hoo, human resource director of German electronics company Rohde & Schwarz, which has a few workers turning 60 next year.

Mr Melvin Tan, managing director of engineering and construction services company Cyclect, who hires 30 senior engineers in their 50s and 60s, said there is no easy solution. "We need to keep growing our business and creating more roles for our staff so that the younger staff will have a chance to move up," said Mr Tan.

For other employers, the worry is rising costs.

"The fact is cost goes up when hiring older workers, and their productivity may not be as high. It is important to study the impact on the bottom lines during these two to three years before the law is changed," said Singapore Business Federation's chief operating officer Victor Tay.

Some older workers are happy just to get a job.

Madam C.P. Lum, 65, used to work as a contract counter staff member in the civil service until two years ago. When her contract was not renewed, she took up jobs such as retail assistant and cafe service crew member. "It was quite a big change for me. But I told myself not to be choosy. Not many companies are willing to hire older workers," she said.