Flexible Wages

A Competitive Advantage

in a Global Economy

30 January 2004

Ms Yong Ying-I, Permanent Secretary(Manpower)

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

What I will cover

• Introducing the Tripartite Taskforce

• Explaining the national wage restructuring agenda

• Where does this conference fit in?

• Taskforce recommendations

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

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

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

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”

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

Building consensusBuilding trust

Platforms to share, and to listen to query, and to understand to co-create & move forward together

Wage Restructuring - national programme

Jun-Nov Developing 03 (a) main wage model

(b) sectoral models for 4 industries

Building consensusOct thru Discussion with

many Jan 04 groups of companies

(CEOs & HR Dirs)

30 Jan 04 National TripartiteConference on WageRestructuringIssue Taskforce report

National Programme- what happens next?

Implementation - 2004Publicize – 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

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

20 40 60 80 100 120

50 50

60 40

70 20 10

Senior Mgt

Mid Mgt & Execs

Rank & File

Basic

VariableAVC MVC

AVC + MVC

AVC + MVC

Proposed Wage StructuresAnnual Monthly

Reducing rigidities by clarifying and collapsing allowances

Proposed Wage Structures

Present Recommended

1. Sectoral workgroup reports give specific examples of how to proceed

2. Allowances should have current-day relevance & motivate performance

How to trigger wage changes

Key performanc

e indicators

Corporate performanc

e

Individual performanc

e

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

• 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

Additional Flexibility Options

No-pay Leave

Flexible work

scheduleShorter

workweek

Temporary lay-offs

$$

$$

Mark

et P

ressu

reImplementing Competitiveness

Experience + Productivity

$$

$$ Ratio = 1.5

How to reduce ratio to target

Implementing Competitiveness

Seniority-based wages

How to raise frommin to max

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

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

Thank You

30 Jan 2004