NWC Recommendations 2020/2021 — 5 Things You Should Know

Every year, worker unions, employers and government debate on workers’ wages at the National Wages Council (NWC) negotiations.

The NWC was formed by the government in February 1972 as a tripartite advisory body on wage adjustments, to be a solution to stabilise the labour market. The tripartite advisory body comprised representatives from trade unions, employers and the government.

These tripartite partners would formulate guidelines on wage policy, recommend wage adjustments that are in tandem with Singapore’s economic performance and prospects, and advise on incentive schemes that would spur operational efficiency and productivity.

This year, even with COVID-19, it is no different, although the guidelines were released a couple of months earlier than usual.

Today the NWC 2020/2021 Guidelines were released, keeping in mind the unprecedented economic crisis caused by the COVID-19 pandemic.

Here are the top 5 things you should know about the NWC 2020/2021 Guidelines.

1. NWC: cut costs to save jobs

Before cutting salaries, businesses should cut down on non-wage costs and manage excess manpower first.

Businesses can make use of the current lull period to train and upskill their workers and tap on the increased training subsidies announced by the government.
Businesses can also adopt flexible work schedules to reduce the workers’ working hours without cutting pay. This creates a “time bank” of unused working hours that can be used to offset the increase in working hours in subsequent periods, such as when the economic recovery comes.
If employers shorten work hours or have furloughed staff, employers should support employees who want to take on a second job to supplement their income.
NWC will release another advisory on secondary work soon.

2. If need wage cuts, management should lead the way

NWC says struggling companies considering wage cuts should have their management teams lead by example.

“Employers that are adversely impacted by COVID-19 and face uncertain prospects may exercise wage reduction, with management leading by example,” said NWC.

If there is no other choice but to cut wages across the board, NWC offered several ways companies can cut workers’ salaries if current levels are unsustainable.

For employees with a monthly variable component (MVC), employers can adjust it downwards. The amount depends on the company’s situation and key performance indicators. According to MOM, 700,000 employees have MVC as part of their salary.
For employers who have not implemented the variable component, they can consider cutting up to 10% of basic wages. Those in management positions could receive more than a 10% cut to lead by example.
Before cutting wages, employers should take into account employees who are on commission-based variable payments or who have been asked to go on no-pay leave, as they will already be living on a low base salary during this period.
Any wage reductions should be applied to local and foreign employees fairly.

3. If possible, pay the 13th-month bonus

NWC advised employers to pay out the annual wage supplement (aka 13th-month bonus) as far as possible to recognise employees and retain them.

4. Retrench as a last resort, but if this is necessary, employers should notify government and unions in advance

Retrenchments should not be the first resort, but the last after all other avenues have been exhausted.

NWC said if retrenchments are still necessary, they must be done in a responsible manner. Employers should notify both the government and unions ahead of the exercise.

Retrenched workers can approach e2i and WSG for career coaching.

5. Give low wage workers special consideration

Low-wage workers (who earn up to S$1,400 a month), especially those in the frontline of the COVID-19 response, should be given special consideration.

If the company is looking to reduce wages across the board, the NWC advised them to freeze the wages of low-wage workers instead of cutting their pay.
If the company is looking to either freeze or increase wages across the board, then they should increase the low-wage workers’ salaries by up to S$50.
Employers that can afford to support workers who have stepped up during this period can do so via ex-gratia payment.