Flexible Wages A Competitive Advantage in a Global Economy

1. Flexible Wages A Competitive Advantage in a Global Economy 30 January 2004 Ms Yong Ying-I, Permanent Secretary(Manpower)

2. Key Questions Where is Singapore going? How do I get there? What do I do next? Where am I today? Should I take part? X

3. What I will cover • Introducing the Tripartite Taskforce • Explaining the national wage restructuring agenda • Where does this conference fit in? • Taskforce recommendations

4. The Tripartite Taskforce John De Payva Teo Yock Ngee Lim Chin Siew Stephen Lee Alexander C Melchers Christopher James Koh Juan Kiat Yong Ying-I Leo Yip Ng Wai Choong Ong Yen Her • ALSO: • Sector Working Groups • HR Resource Persons

5. 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 Part I of the Taskforce’s Work Understanding reasons for slow progress by employers It’s easier to retrench or cut basic wages when crisis hits employees will understand

6. 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”? Part I of the Taskforce’s Work Understanding employees’ concerns

7. 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 Taskforce Report – a “how to” guide Wage model “The devil is in the details”

8. 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 Reducing “cost” of implementation

9. Building consensusBuilding trust Platforms to share, and to listen to query, and to understand to co-create & move forward together

10. Wage Restructuring - national programme Jun-Nov Developing 03 (a) main wage model (b) sectoral models for 4 industries Building consensus Oct thru Discussion with many Jan 04 groups of companies (CEOs & HR Dirs) 30 Jan 04 National Tripartite Conference on Wage Restructuring Issue Taskforce report

11. National Programme- what happens next? Implementation - 2004 Publicize – 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

12. 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

13. 70 20 10 60 40 50 50 Basic Variable 20 40 60 80 100 120 Proposed Wage Structures Annual Monthly AVC MVC Rank & File AVC + MVC Mid Mgt & Execs AVC + MVC Senior Mgt

14. Proposed Wage Structures Reducing rigidities by clarifying and collapsing allowances • Sectoral workgroup reports give specific examples of how to proceed • Allowances should have current-day relevance & motivate performance Present Recommended

15. Rewards How to trigger wage changes • Define corporate & individual key performance indicators • System to link change in variable component to change in KPIs • Critical to provide upside to motivate employees • Discuss with union; communicate clearly to employees Key performance indicators Corporate performance Individual performance MVC AVC

16. Monthly Variable Component • 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

17. Additional Flexibility Options Flexible work schedule Shorter workweek No-pay Leave Temporary lay-offs Flexibility Toolbox

18. Market Pressure Implementing Competitiveness $$

19. $$ Implementing Competitiveness How to reduce ratio to target How to raise frommin to max Ratio = 1.5 Experience + Productivity Seniority-based wages

20. There is tripartite consensus: What should be the wage structure, in detail How to implement National Wages Council will adopt model There is a template to follow, & tripartite facilitation to support implementation So what’s new?

21. Increasing Flexibility Increasing Competitiveness Recap 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 Key Recommendations Foundation: good HR; leadership & employee communications

22. Thank You 30 Jan 2004