June 18, 2024


Savvy business masters

COVID-19: National Wages Council suggests management lead by example when cutting pay

SINGAPORE: With the unprecedented economic crisis caused by the COVID-19 pandemic, struggling companies considering wage cuts should have their management teams lead by example, the National Wages Council (NWC) said on Monday (Mar 30). 

Its recommendation came after official estimates released last week showed that Singapore’s economy contracted by 2.2 per cent year-on-year in the first quarter, as the COVID-19 outbreak and global measures to prevent its spread threw a wrench in the construction and services industries.

The grim data has prompted the Government to further downgrade Singapore’s GDP growth forecast for 2020 to between -4 per cent and -1 per cent.

In its annual wage guidelines and training recommendations, NWC offered several ways companies can cut workers’ salaries if current levels are unsustainable. 

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

For employees with a monthly variable component (MVC), employers can adjust it downwards, with the amount depending on the company’s situation and key performance indicators.

About 37 per cent of employees in private sector companies with 25 or more workers as well as the public sector have an MVC as part of their salary, according to the Ministry of Manpower’s 2018 report on wage practices. This is equivalent to 700,000 employees.

For employers who have not implemented the variable component, they can consider cutting up to 10 per cent of basic wages. Those in management positions could receive more than a 10 per cent cut, in line with the principle of leading by example. 

Given that employees with commission-based variable payments or who have been asked to go on no-pay leave will already be living on a low base salary during this period, employers should take this into account before they cut wages further. 

As for the annual wage supplement – commonly called the 13th month bonus – employers should aim to pay it out as far as possible, the council said, to recognise employees and retain them. 

Any wage reductions should be applied to local and foreign employees fairly, NWC added. 

If retrenchments are still necessary, the council said that they must be done in a responsible manner and notify both the government and unions ahead of the exercise. 

READ: Firms must report cost-saving measures that affect employees’ salaries: MOM

“The core principle of the tripartite movement is always all parties should always act responsibly. If we all stick to that principle, then we can only achieve the overall good and build up Singapore to where it is,” said NWC’s chairman Peter Seah at a media briefing.

“We certainly would not condone any parties from acting irresponsibly and weakening … this tripartite partnership,” he added.


Low-wage workers, particularly those in the frontline of the COVID-19 response, should be given special consideration, said NWC. These are workers who earn up to S$1,400 every month.

If the company is looking to reduce wages across the board, they can freeze the wages of low-wage workers instead. 

But 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 to assist the firm during this period can do so in the form of ex gratia payment. 


However, before cutting salaries, businesses should pare non-wage costs and manage excess manpower first, NWC said. 

They can make use of the current lull period to train and upskill their workers, since training subsidies have been increased as announced at this year’s Budget. 

READ: Budget 2020: More support for transformation of workforce, including SkillsFuture top-ups

Adopting flexible work schedules is another way to go, the council said. 

Flexible work schedules are such that employers reduce the workers’ working hours without cutting pay, creating 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 recovery comes. 

Employers that have shortened work hours or furloughed staff should support employees who want to take on a second job to supplement their income, NWC added, noting that it will release an advisory on secondary work on Monday evening

“The NWC strongly encourages all employers to make full use of government support measures to press on with business and workforce transformation,” the council wrote.

“Singapore should remain focused on longer-term industry transformation through this period.”

The Government has accepted the NWC guidelines.

In separate statements, the Singapore National Employers Federation and National Trades Union Congress (NTUC) also stated their support for the latest guidelines. 

“Workers will have to be adaptable – go for training, be open to flexible work schedules, accept new job roles or opportunities, and if necessary, accept wage reductions so that (they) can retain (their) jobs,” said NTUC president Mary Liew. 

“In times of crisis, we share the pain – each making mutual sacrifices to sustain businesses and save jobs,” Manpower Minister Josephine Teo added.

The Manpower Ministry’s permanent secretary Mr Aubeck Kam said that discussions are ongoing within the public sector, and announcements about public servant wages will be made in June.

READ: COVID-19 Budget: Self-employed people, firms, first-time jobseekers to receive more support


When asked whether one of the cost-cutting measures could be lowering employers’ CPF contribution rates, the NWC committee said there was no need to do so given that the government is going to co-fund salaries. 

Mr Kam said that with at least 25 per cent of wage support, it exceeds the maximum employers’ CPF contribution rate of 17 per cent. 

Ms Liew added that this would affect many workers. For instance, some of them have mortgages to pay off, she said. ​​​​​​​

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