Yahoo Finance How Much More Should You Pay Your Employees In 2023 As Recommended By National Wages Council?
Reward employees with wage increases or variable payments that are fair and sustainable – the latest National Wages Council (NWC) 2022/2023 guidelines has called on employers to do just that amid improved economic conditions and a rise in labour productivity this year.
This is a timely effort to help elevate workers’ concerns about inflation and rising costs of living as strong external inflationary pressures has impacted the prices of goods, with the Consumer Price Index (CPI) headline inflation projected to be almost 3 times higher than in 2021 (CPI to average around 6% in 2022, higher than the 2.3% recorded a year ago).
However, we must also note that the rising inflation does not only impact the employee – it will also affect the employer’s business costs and prospects. In the NWC report, differentiated wage guidelines catering to various business’ outlook and performance was suggested.
The wage guidelines are applicable from 1 Dec 2022 to 30 Nov 2023. The council meets every year to deliberate and forge national consensus on wage and wage-related matters. The NWC issues the wage guidelines every year based on the tripartite consensus (employers, trade unions, and government) reached during deliberations.
Read Also: Guide To Understanding Singapore’s National Wages Council – And How They Affect Your Salary
Applying Differentiated Wage Guidelines To Businesses Due To Mixed Outlook
Singapore’s economy picked up significantly this year with Gross Domestic Product (GDP) up 4.2% in the first 3 quarters of the year. For the full year, the Ministry of Trade and Industry (MTI) projects a growth of around 3.5%, supported by a continued recovery in aviation- and tourism-related as well as consumer-facing sectors with the lifting of border and domestic restrictions.
However, MTI notes that growth will be uneven as some sectors (outward-oriented sectors) have weakened due to softening external demand. Other downside risks in the global economy remain, such as the Russia-Ukraine conflict which could worsen global supply disruptions, intensified financial stability risks, and escalations in regional geopolitical tensions. For 2023, MTI expects Singapore’s GDP growth to be at 0.5% to 2.5% due to the projected slowdown of the global economy.
Meanwhile, Singapore’s labour market improved in the first 3 quarters of 2022, supported by growth in resident employment and a slowdown in resident unemployment, Ministry of Manpower (MOM) data showed.
However, the recent massive layoffs in the tech sector due to over hiring and weak business results are worrying some businesses.
With such a mixed bag of growth outcomes and uncertainties, the differentiated wage guidelines for employers is a reasonable method to cater to the different performance and business outlooks expected.
NWC’s Wage Guidelines Applies To All Employees
The NWC wage guidelines apply to all employees (professionals, managers, executives, technicians, rank-and-file, in unionised and non-unionised firms, in both the public and private sectors). They also apply to re-employed employees.
Employers are called by the NWC to reward employees with wage increases or variable payments that are fair. The adoption of the flexible wage system (FWS) is a method suggested by NWC to help employers in implementing the wage guidelines, by making full use of variable wage components. Some suggestions include putting wage increases into variable wage components, and transferring part of fixed wages to variable wage components as needed.
The NWC noted in the wage guidelines that employees who contributed during Covid-19 should be recognised as well, especially to those employees that experienced wage cuts and freezes, and supported other cost-cutting measures.
For Employers That Have Done Well And Have Good Prospects, Here’s What You Can Do
For employers that have done well and have good business prospects, they are recommended to reward their employees with built-in wage increases and variable payments to commensurate with the employers’ performance and employees’ contributions.
The NWC called on these employers to reward their staff with wage increases that are fair, in line with economic growth and the improvement in labour productivity.
These employers should provide their lower-wage workers (LWWs) with a built-in wage increase at the upper bound of 5.5-7.5% of gross monthly wage, or a wage increase of at least $80-$100, whichever is higher.
Note: The wage guidelines for LWWs apply to employees who are earning a gross monthly wage of up to $2,200. This threshold corresponds to the 20th percentile wage level of the workforce, and provides the attention required for this segment of workers.
For Employers That Have Done Well But Face Uncertain Business Prospects, Here’s What You Can Do
Employers in this category may exercise moderation in built-in wage increases, but should still reward employees with variable payments commensurate with the employers’ performance and employees’ contributions.
The recommendation for employers in this segment is to provide their LWWs with a built-in wage increase at the lower to middle bound of 5.5-7.5% of gross monthly wage, or a wage increase of at least $80-$100, whichever is higher.
What To Do If You Are An Employer Whose Business Has Not Done Well This Year
Employers that have not done well may exercise wage restraint, with management leading by example, suggested NWC. Employers should also invest in upskilling their employees and make greater efforts to improve business processes and productivity.
For employers that have not done well but face good business prospects, the recommendation is for them to consider setting out future variable payments that are linked to appropriate business indicators.
As for their LWWs, employers are recommended with a built-in wage increase at the lower bound of 5.5-7.5% of gross monthly wage. Further wage increases are urged, if business prospects subsequently improve.
Read Also: 6 Enhancements Announced In Budget 2022 That Affect Lower-Wage Workers
Should Employers Follow NWC’s Recommendations To Train And Upskill Workers?
Data from MOM indicated that wage growth in the last 10 years have matched productivity gains. But the NWC expressed concern that there has been a decline in employers providing structured training to employees, as the proportion of such employers fell from 65.4% in 2020 to 57.1% in 2021.
Wage increments should go hand-in-hand with training and business transformation, as this raises productivity growth and ensures that wage growth is sustainable. According to the OECD, raising skills is key to reconnect median wages with productivity as higher skilled workers do not head-on compete with machines.
When you raise the skills of workers, it will justify the increment in salaries too as the company’s output increases per worker.
To nudge employers, some recommendations were provided by NWC to implement training and productivity initiatives:
Recommendations
Employers can work with NTUC to establish Company Training Committees which will help to drive business transformation to increase productivity and implementing training plans, and can tap into the wider NTUC training and placement ecosystem, which includes NTUC’s employment and employability institute e2i.
Employers should adopt a proactive approach to reskill and upskill existing employees to prepare them for changes in job functions. Employers and employees can refer to SkillsFuture Singapore’s quarterly Jobs and Skills Insights Reports, as well as the Skills Demand for the Future Economy report published in December 2021 to learn about emerging trends, growth areas and in-demand skills.
Employers can also tap on government subsidies to reskill and upskill employees, e.g., Workforce Singapore’s Career Conversion Programmes which provide up to 90% of monthly salary for training duration. Individuals can also tap on the SkillsFuture Mid-Career Enhanced Subsidy, which provides subsidies of up to 90% of course fees for SSG-supported courses.
Employers can also seek the assistance of SNEF, Singapore Business Federation, other trade associations & chambers, the unions and NTUC LearningHub, access consultancy services offered by the National Centre of Excellence for Workplace Learning, or join a SkillsFuture Queen Bee network in their sector to raise their capability and capacity for training their own workers.
Employers should also recognise and support the acquisition and demonstration of skills in decisions affecting hiring and career advancements.
Other than these top down efforts, employers can keep their workers relevant by looking for industry-related courses, or set a career plan for their workers so they can upgrade progressively in their careers.
What To Do If You (The Employer) Have Difficulties In Implementing The Wage Guidelines
If you are facing difficulties in implementing NWC’s guidelines, you can work with employers’ associations and unions to address the issues that you face. You can also approach ethnic chambers and trade associations for guidance if required.
As employers, you may question why you should increase the salaries of your employees regardless of the state of your business condition. One can justify that when you raise the salaries of your workers, it brings about meaningful improvement to their income stability in the long run and that leads to a contented worker who wants to work hard for the company.
When increments are made especially to peg with inflation, employees will also be more satisfied with their work and will not go looking around for a new job just for a pay jump as the current employer is already providing an increment.
It is fair to increase wages to match the industry average too, as that helps attract and retain talent in your company. You will also get better online anonymous employee reviews (like those on Glassdoor), which will lead to a continuous cycle of talents wanting to join your company.
As for raising the salaries of LWWs, consider it as your contribution to maintain a strong social compact as Singapore progresses. NWC’s recommended wage growth for these workers is, according to them, supposed to balance business sustainability and bolster ongoing efforts to narrow the income gap.
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