Employers Encouraged To Temporarily Cut Wages To Avoid Retrenchment

The National Wage Council (NWC) said today (October 16) that companies that have already exhausted cost-cutting measures should implement temporary pay cuts to minimize staff cuts.

The tripartite group said pay cuts should depend on the performance and outlook of the company as well as the industry in which it operates.

Companies should also seek employee support before implementing pay cuts and only make cuts if they are necessary to avoid layoffs.

Employees should also be made aware of how wages will eventually be restored, and management should lead by example and cut wages earlier and deeper.

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The updated guidelines will apply from November 1 to June 30 of next year.

Guidelines have been updated to keep businesses afloat and minimize entrenchments.

Although the guidelines are not mandatory, they were accepted by the government after the council met for the second time this year.

The NWC is made up of representatives from business, unions and government and usually meets once a year. However, in view of the difficult economic situation, a second meeting was held.

National Trade Union Congress President Mary Liew said it was necessary to take “more radical and immediate action” after efforts to retain and redeploy existing workers have already been exhausted.

Guidelines for salary cuts

When implementing pay cuts, employers should adopt the flexible pay system.

A flexible salary is one that has a large variable component that allows companies to quickly adjust salaries in the event of a severe economic downturn.

Under this system, the variable components are expected to account for 30 percent of the annual wage bill for core workers, 40 percent for middle managers and 50 percent for senior managers.

However, the board did not set a quantum for the salary.

In addition, the council called for special attention to be paid to low-paid workers. He said employers should implement a wage freeze for workers who earn a basic monthly salary of S $ 1,400 or less.

“There has been a lot of give and take and, above all, a lot of trust between the tripartite partners to find the best solutions not only for the companies but also for the employees,” said Board Chairman Peter Seah.

Featured Image Credit: Investvine

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