6 September, 2019
During the recent National Day Rally speech, changes to Singapore's retirement and re-employment schemes were announced.
What is retirements and re-employment?
Singapore maintains a statutory minimum retirement age (currently set at 62), which allows an employer to require an employee to retire upon reaching of that age and prohibits the termination of employment on the ground of age prior to reaching that age. Termination of employment in contravention of that prohibition can expose an employer to a fine and/or imprisonment.
This position is in contrast to many other common law jurisdictions (such as Australia) where there is no retirement age, and where termination of employment based on age is prohibited.
However, the statutory minimum retirement age is not the age at which a Singapore citizen or PR employee can access his or her Central Provident Fund (CPF) savings (further information below). Rules regarding access to CPF savings are dealt with separately.
Co-existing with the statutory retirement age is the concept of "re-employment" to facilitate the continued employment of older workers, which requires an employer to "re-employ" a retired employee. Re-employment obligations apply up to a certain age, called the "re-employment age" (currently set at 67). An employee is eligible for "re-employment" if the employee is:
- a Singapore citizen or permanent resident;
- has worked for his or her employer for at least three years prior to reaching the minimum retirement age;
- has satisfactory work performance as assessed by the employer; and
- is medically fit to keep working.
The employee must be "re-employed" for at least one year, with the employment being renewable each year up to the "re-employment age".
Does the employee have to be employed in the same role?
Offers of re-employment must be made before the employee reaches the retirement age but need not be for the same position or on the same terms and conditions. However, any changes must be based on reasonable factors, such as the employee's duties and responsibilities, productivity, and performance. While "re-employment" technically resets the clock for service-related benefits, the minimum service requirements for annual leave and sick leave will not apply, and employers are encouraged to recognise all prior service for those purposes.
The Tripartite Guidelines on the Re-Employment of Older Employees (Tripartite Guidelines) provide further guidance for employers regarding re-employment, including planning for re-employment, consultation with employees and the benefits to be provided to employees when they are re-employed.
What if there is no "re-employment"?
An employee who does not wish to be "re-employed" is required to provide written notice to his or her employer, within a reasonable time before the employee retires.
If an employer is not able to re-employ an employee, despite having made reasonable attempts to do so in accordance with the Tripartite Guidelines, the employer must make an Employment Assistance Payment (EAP) to the employee. This payment is generally 3.5 months' salary, subject to a minimum of SGD5,500 and a maximum of SGD13,000.
Disputes regarding re-employment may be dealt with variously by the Manpower Minister or the Employment Claims Tribunal (ECT). The Manpower Minister has the power to both reinstate an employee to his or her employment, while the ECT may order an employer to pay an EAP of a specified amount.
Changes to retirement and re-employment age announced
Singapore's Manpower Minister has announced an increase to the retirement age and re-employment age, to take effective progressively as follows:
| 2019 | 2022 | 2030 | |
| Retirement Age | 62 | 63 | 65 |
| Re-employment Age | 67 | 68 | 70 |
CPF contributions
Singapore operates a mandatory statutory pension scheme for Singapore citizens and permanent residents, designed to provide sufficient savings for participants during retirement. The CPF scheme is administered and managed by the Singapore Government through the CPF Board.
CPF contributions are payable by both the employee and the employer. The employer is required to deduct the employee's contribution from the monthly wages and direct that money to the CPF Board (together with the employer's contribution). The employer's contribution is payable in addition to the employee's monthly salary. That is, the employer cannot deduct its share of contributions from the employee's monthly salary.
For most participating employees, contributions are currently required at the following rates:
|
Employee Age |
Contribution rate (% of monthly wage) | ||
| Employer contribution | Employee contribution | Total | |
| 55 and below | 17 | 20 | 37 |
| Between 55 and 60 | 13 | 13 | 26 |
| Between 60 and 65 | 9 |
7.5 |
16.5 |
| Above 65 | 7.5 | 5 | 12.5 |
Different contribution rates apply for employees in the first three years after they receive permanent residency status, and for employees who earn less than SGD750 per month. Further, limits apply to the contributions that can be made to CPF:
| Limit | Cap |
| Ordinary Wage Ceiling | SGD6,000 per month. CPF contributions are not payable on the portion of an employee's monthly salary in excess of SGD6,000 per month. |
| Additional Wage Ceiling | SGD102,000 less the total Ordinary Wage subject to CPF for the year. CPF contributions are not payable on the portion of an employee's annual additional wages (e.g. bonus payments) in excess of this ceiling. |
| Annual CPF Limit | SGD37,740. This is the maximum amount of contributions (including employee and employer mandatory contributions, plus voluntary contributions) that can be made to CPF for an employee in a year. |
Changes to CPF contribution rates
To support older workers, CPF contributions for older workers will be gradually raised over a ten year period from 2021, resulting in employees under the age of 60 receiving the same contributions as employees aged 55 and below.
Comment
While the changes outlined will not take effect for some time, they provide employers with a timely reminder to review their retirement and re-employment procedures and ensure that CPF contributions are being correctly calculated for all employees.
For further information, please contact:
Dawn Tan, Partner, Ashurst
Dawn.Tan@ashurst-adtlaw.com
