In the event that wages need to be reduced, it has been suggested by the National Wages Council (NWC) that the Monthly Variable Component (MVC) be adjusted downwards. How much adjustment depends on the company’s key performance indicators, the firm’s situation or guidelines agreed with unions.
An equivalent reduction of up to 10 per cent in basic pay has also been suggested by NWC for companies with no MVC, like most small and medium-sized enterprises.
On Monday (30 March), the NWC stated that “In the case of management, depending on the circumstances and requirements of the company, the MVC set aside could be more than 10 per cent of basic wages, in line with the principle of leadership by example.”
Because employees may have already been getting less or no income from no-pay leave, commissions or overtime work, companies should factor in these situations when considering a pay reduction, NWC remarked.
NWC also stressed that any cut in costs should come from non-wage areas before wages and that companies should make full use of government support schemes, and strive to transform their workforce and business so that wage and business costs can be offset.
“Where wage reductions are necessary, employers should adopt a graduated approach, with deeper reductions at the management level and for higher-wage employees to effect the desired extent of reduction in total wage cost,” NWC further added.
Different treatment should be given towards low-wage employees with basic monthly wage of up to S$1,400, NWC proposed. For example, the wages could be frozen instead of reductions: “If employers are implementing a policy of wage freeze or reduction, then, with respect to such workers … consider a built-in wage increase of up to S$50 instead.”
Companies “should provide special consideration to workers who have stepped up to assist the business during this challenging period” if they can afford it, NWC suggested, and depending on firm performance, this could be an ex gratia payment.
Furthermore, the NWC recommended that companies which are managing well in the midst of the pandemic should continue to pay workers with variable payment in accordance with worker’s contributions and firm’s performance: “If their business prospects are uncertain, they may exercise moderation in built-in wage increases.”
Firms should strive to pay the Annual Wage Supplement to “retain and inspire loyalty” among their workers and be “well positioned for the recovery” where possible, the NWC encouraged.
Lastly, the NWC reminded that firms should come up with measures to use and manage surplus manpower while retrenchment should be a last resort and only done in a responsible manner.