16 January, 2017
In April 2016, the Singapore Government announced that it will increase the re-employment age from 65 to 67, with effect from 1 July 2017. On 9 January 2017, Parliament passed several amendments to the Retirement and Re-Employment Act (Cap. 274A), which will give effect to this change and introduce two other significant changes, which are also to take effect from 1 July 2017.
Based on these amendments, the Ministry of Manpower has also released Revised Tripartite Guidelines on the Re-employment of Older Employees (January 2017 Tripartite Guidelines).
In summary, the following changes will take effect from 1 July 2017:
- Employers must offer re-employment to a local employee (i.e., Singapore citizen or permanent resident) who turns 62 up to the age of 67, if the local employee meets the relevant conditions;
- Employers can transfer their re-employment obligations to another employer, provided that the relevant conditions are satisfied; and
- Employers cannot reduce the wages of a local employee who turns 60, but are not prohibited from offering reduced wages when negotiating a re-employment contract with a local employee who turns 62.
More details of these changes are set out below.
Increase in Re-Employment Age Limit
Currently, employers are obliged are required to offer all employees who are Singapore Citizens / Permanent Residents who are turning 62 (Eligible Employees) an opportunity for re-employment up to the age of 65, provided that they meet the following conditions:
- Have served the company for at least 3 continuous years before turning 62;
- Have satisfactory work performance, as assessed by the company; and
- Are medically fit to continue working, as assessed by a licensed medical practitioner.
With effect from 1 July 2017, employers will be obliged to offer Eligible Employees an opportunity for re-employment up to the age of 67, provided that the same conditions outlined above are satisfied. The new re-employment age of 67 will also apply to Eligible Employees who turn 65 on or after 1 July 2017, i.e. those born on or after 1 July 1952.
Allowing Eligible Employees to be Re-employed by Another Employer
Currently, re-employment obligations cannot be transferred from one employer to another.
However, under the new amendments, an employer will be able to transfer his re-employment obligations to another employer if his own organisation is unable to offer a re-employment opportunity, provided that (i) the Eligible Employee consents to this, and (ii) the second employer agrees to take over all applicable re-employment obligations. The government envisions that such a scenario will benefit all three parties: the original employer will have discharged his re-employment obligations, i.e., he will not be required to pay the employment assistance package, the Eligible Employee will have an opportunity to be re-employed, and the second employer will benefit from hiring an experienced employee.
Both conditions (i) and (ii) above have to be met before the re-employment obligations can be transferred. If either condition is not met, the original employer will continue to be obliged to fulfil his re-employment obligations.
In our view, this development is particularly helpful to employers which belong to a larger group of entities. Such employers who are unable to re-employ an Eligible Employee will now be able to explore the option of transferring their re-employment obligations to another, more suitable, entity within the same group of companies.
Removing the Option of Allowing Employers to Cut Employees' Wages at 60
Under the existing provisions, employers are expressly given the option of reducing an employee's wages when he turns 60, provided that reasonable prior notice is given. If such an employee does not agree with the proposed reduction in salary, he may either retire or be retired by his employer. The new amendments will remove such provisions.
However, while the amendments remove the option of reducing an employee's wages at 60, they do not expressly prohibit employers from reducing an Eligible Employee's wages when offering re-employment at 62. In fact, the January 2017 Tripartite Guidelines continue to ask employers to consider "re-employing employees in the same job, with appropriate adjustments in wages and benefits based on reasonable factors, where necessary", among other suggestions. It therefore appears that notwithstanding these amendments, employers are not prohibited from offering reduced wages to Eligible Employees when negotiating re-employment, provided that such a reduction is reasonable and necessary.
Conclusion
The re-employment regime has always been in place for the purpose of ensuring that the older employees in Singapore's workforce are properly utilised. It is with this aim and in light of the increase in proportion of older local employees that the re-employment age has been increased. However, it is clear that the new amendments are introduced with the additional aim of balancing the interests of employers against the interests of older employees.
For further information, please contact:
Kelvin Poa, Partner, Baker & McKenzie.Wong & Leow
kelvin.poa@bakermckenzie.com
