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Even GLCs are cutting older workers’ pay?

Leong Sze Hian -

“Singapore Airlines (SIA), SIAEC (SIA Engineering) and all other SIA-affiliated companies practise 10 per cent across-the-board pay cut for all employees the moment they turn 60 years old,” Ms Jennifer Tan wrote to the Straits Times in May this year. “When queries are made to the human resource department about such cuts,” Ms Tan wrote, “especially in relation to the new government push to extend the working life of experienced older workers, the reply given is that it is 'company policy'.” (Asia One)

Captain P James, president of the Airline Pilots Association (Singapore), had also expressed similar sentiments in his letter to the Straits Times a week earlier. Referring to Singapore Airline’s cutting wages of older workers the moment they turn 60, he wrote: “It was really a case of no cut, no job. This was despite the fact that there was no change other than the pilot turning 60 years old.” (See here) Legally, pilots are allowed to work up to age 65. Captain James thus could not understand why SIA needed to cut the wages of pilots who turn 60. “Here is a company that has been struggling to stay above water, and yet it is willing to hire the more expensive expatriate pilot on a longer contract term, with the attendant costs such as housing and child allowances,” he said.

“Why are they denying the national pilot, who helped build up the national icon, the same opportunity of a job until the end of his useful working life?”

Given that SIA is a government-linked company (GLC) and that the government itself has been encouraging older Singaporeans to work longer, it is puzzling that GLCs themselves would resort to penalizing older workers by cutting their wages for no other reason than that these workers have turned 60.

The Ministry of Manpower’s reply to these questions was: “Some wage adjustment is necessary in order to maintain the employability of workers as they age.” With regards to the specific question of employers cutting - or as MOM put it - “adjusting” wages of workers “as they reach 60”, MOM says:

“The Retirement Age Act does allow wage reduction of up to 10 per cent.  However, the Act also makes it clear that if there is any reduction, it should be based on "reasonable factors" like the employee’s productivity, performance, duties and responsibilities, and the market value of the job. It is worth noting that age does not qualify as a reasonable factor in the Retirement Age Act.”

It also said:

“[Wage] reduction at 60 should not be "automatic". We like to emphasise that it should only be based on the reasonable factors as stated clearly in the Retirement Age Act.” (MOM)

The government has announced that it will introduce the Retirement Age Act (RAA) in 2012 – five years after it was first proposed in 2007.

Even before the Retirement Act's expected enactment in 2012, many older workers may already have been terminated from their jobs or have had their pay cut substantially even before they reach 60 or 62. Employers may simply avoid the requirement to offer re-employment under the RAA, by letting go or cutting the wages of those approaching or who turn 62-years old, before the RAA takes effect in 2012.

Although the proposed Retirement Age Act is clear that a pay cut should be based on “reasonable factors” and age is not one such factor, employers can get around this simply by citing these “reasonable factors” as the reason for terminating a 62-year old from his job or cutting his pay – even though the real reason may be his age!

How do we effectively address issues of age discrimination like those highlighted by the Air Line Pilots Association?

From past experience, getting employers to heed guidelines have not have been an easy task.

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In Part Two, we ask: How many companies cut wages at 62?

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Picture from dianhasan blog.