'It's older workers or no workers'

Tight labour market means firms need them despite cost hike
By Aw Cheng Wei And Joanna Seow, The Straits Times, 27 Feb 2015

THE changes to the Central Provident Fund system may make older workers costlier to hire but they are still likely to be able to find jobs and hold on to them.

This is because there are just not enough workers in a tight labour market to do the jobs, said firms.

A dozen employers told The Straits Times that they would not shy away from re-employing older workers because of the hikes, which were announced in this year's Budget.

According to data from the Manpower Ministry, the median gross monthly income of a full-time worker aged between 50 and 54 was $3,100 last year.

The figure does not include the employer's CPF contribution.

This means that employers will pay about $30 more each month to the CPF accounts of this group from next year, when contribution rates go up 1 percentage point. This works out to about $360 a year per worker.

Employer contribution rates for workers aged above 55 to 65 also rise by between 1 and 0.5 percentage point.

But while costs will rise, it still makes sense to retain good older workers rather than hire a fresh, untrained young worker, said Mr Darren Tan, director of Chua Chu Kang Marble.

"It is still cheaper than training new ones," he said.

Ms Karen Tan, director of frozen foods manufacturer CS Tay, said that her company will absorb the increase.

About 20 workers in her company are over 50 and earn an average of $3,000 monthly.

She said: "As long as they are fit to continue working, hard-working and diligent, I don't mind paying the difference."

The Government will ease the transition through two wage subsidies.

Firms can claim the Temporary Employment Credit, which pays 1 per cent of wages this year and next, and 0.5 per cent of wages in 2017.

The Special Employment Credit also covers an extra 3 per cent of wages when companies rehire staff who are 65 and above this year, on top of the 8.5 per cent of wages they can already claim when they hire workers aged above 50.

But for those who had been hoping for more help, the 3 per cent may not be sufficient. "I think somewhere in the region of 5 to 6 per cent would have been a level of co-help SMEs (small and medium-sized enterprises) would have appreciated," said Association of Small and Medium Enterprises president Kurt Wee.

Bosses said that they will have to use other means to keep their operating costs low when the incentive schemes end.

Some may reduce a worker's yearly increment, which can range between $100 and $300, while others said they have to take the increase from other aspects of their business such as logistics.

The final option is to pass the extra costs to consumers.

For some companies in labour- scarce industries such as food and beverage, the choice is between older workers and no workers.

"There is always a shortage of workers," said Kimly Food Holdings general manager Vincent Chia.

"More CPF contributions could put us in a better position to attract older people to come back to the workforce," he said.

More savings, but technician prefers higher take-home pay
By Aw Cheng Wei, The Straits Times, 27 Feb 2015

TECHNICIAN Wong Soon Hee installs clothes-line systems for a living and earns a basic monthly wage of $1,900.

In December last year, his gross pay was about $2,200. Last month, it was about $2,400. These figures include his overtime pay and allowances.

The 50-year-old has fully paid for his three-room flat in Bukit Panjang, where he lives with his wife and two daughters, aged five and 13.

Come next January, both he and his employer will have to contribute an extra 1 percentage point to his Central Provident Fund (CPF) account.

He will also get an additional 1 percentage point on the first $30,000 in his account when he turns 55.

Together, the new CPF changes mean that Mr Wong may get as much as $10,000 more in his CPF accounts, compared to his savings under the current set of rules.

But despite the higher sums that will go to his CPF, Mr Wong, who has only about $12,000 in his Special Account, is not looking forward to the changes.

The extra percentage point that he has to put into his CPF account is about $20, which is money he could have used for his daily expenses.

"The extra money that I have to contribute is a week's expenditure for my younger daughter," said Mr Wong, who worked as a temporary worker for much of his working life.

His wife, who works in production, takes home about $1,000 each month. Together, the family of four has just about enough to make ends meet.

"We don't have any savings because our combined income is very low," he said.

"The $20 makes a big difference to us. For our family, it is hard to think about the future. We live from hand to mouth each month," he said.

Older staff may have to forgo pay rise for more retirement savings
By Aw Cheng Wei, The Straits Times, 27 Feb 2015

COMPANY director Angeline Tan tries to give her staff an annual pay rise of between $100 and $300, but it is unlikely that she will continue doing so next year.

Instead, the 49-year-old - whose company, Ezzi Living, sells and installs clothesline systems - intends to use that money to contribute more to her older workers' Central Provident Fund accounts, following Monday's announcement by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

Starting from next January, bosses will have to pay an additional 1 percentage point into the Special Accounts of workers aged above 50 to 60 and an additional 0.5 percentage point to workers aged above 60 until they are 65.

The change will affect 10 of her staff. Currently, she has 14 employees. By next year, six will be between 50 and 60 and another four will be above 61.

Workers in the range get paid about $2,500 each month, so that will mean that Ms Tan has to pay an additional $2,400 every year. On top of basic salary, she pays her employees performance bonuses and overtime.

"It's a good move because the money is going into the retirement savings for the workers," she said.

"But workers told me they would prefer to have the cash on hand instead, especially the older ones who may need it for a sudden medical emergency."

Currently, wages are subsidised by the Temporary Employment Credit and Special Employment Credit. But once they lapse, Ms Tan says that the extra costs will mean that she has to look at cutting expenses elsewhere in her company.

She said: "The last option is to pass the costs on to consumers, and that may reduce our competitiveness."