LABOUR- MANAGEMENT RELATIONS

Text: “Employment
Relations in Singapore”

Prof. Tan Chwee Huat

1
T t
Text

„ “Employment Relations in
Singapore” by Tan Chwee Huat

Pearson Prentice Hall

4th edition

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 References

„ Chapter 1 – Pg 1~22
„ Chapter 2 – Pg 23~30
23 30
„ Chapter 5 – Pg 67~100
„ Chapter 6 – Pg 104
104~126
126
„ Chapter 7 – Pg 128~130
„ Chapter 9 – Pg 198~205
„ Chapter 10 – Pg 220~247
220 247
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Objectives
„ Define Labour-Management Relations
„ Describe
D ib D Dunlop’s
l ’ M Modeld l
„ Highlight the importance of harmonious
industrial relations
„ Provide brief historical developments
p of
Singapore’s IR System
„ Discuss the Tripartite System
„ Discuss the Flexible Wage System
„ Appreciate
A i t th
the needd ffor Wage
W Restructuring
R t t i
4
Definition of Labour
Labour-Management
Management
Relations
1. Broadly defined as the formal relationship
between the management of a company and the
union that represents the employees (labour) at
the workplace.
2. Oft called
Often ll d “industrial
“i d t i l relations”.
l ti ”
3. Includes the formal process of collective
b
bargaining
i i (f(for wages and d tterms and
d conditions
diti
of work), conciliation and arbitration (when there
is a dispute)
5
D l ’ M
Dunlop’s Model
d l
„ The model identifies three participants (or
actors,, as John Dunlop
p called them)) in the
relationship
„ The participants are:
… workersand their union
… management and its representatives
… government and its agencies

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D l ’ M
Dunlop’s Model
d l

Environment Three actors Outcome

1. Market or 1. Union
budgetary 2. Management
constraints Rules of
3 Government
3. G t
2. Technology the
(linked by an ideology
3. Distribution of workplace
or common objectives)
j )
power in society

Source: Dunlop (1993)

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S’
S’pore’s
’ TTripartite
i tit GUM Model
M d l
„ S’pore’s
S pore s system has the following characteristics:
… tripartism, with strong informal as well as formal
network of communication
… dominance of the government as policymaker
… primary concern with economic growth, political
stability and industrial harmony
… strong centralized labour movement
… symbiotic relationship between government and the
unions
… non-adversarial p problem-solvingg approach
pp

8
S’pore’s
S pore s Tripartite GUM Model
Environment Participants Outcome

•Economic •Government
•Union •Industrial peace
•Political
•Management •Investment growth
•Legal Mechanism •Quality of work life
•Social •Teamwork
•Competitiveness
•Ecological •Collective
C ll i b
bargaining
i i
•Productivity
•Dispute settlement
•Labour Market
Process •Mutual trust
•Technology
•Tripartism •Social justice
•Shared values •Consultation

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Definition of harmonious employment relations
„ Employees are provided opportunity for:
… fair compensation
… safe & healthy working conditions
… opportunity
pp y to use one’s capabilities
p
… opportunity for self-improvement, career advancement
& job security
… social
i l iintegration
t ti & id
identity
tit iin th
the organization
i ti
… compatibility between the work role & the employee’s
other life roles
… involvement in decisions affecting their working life
„ Implies there must be trust, responsibility & mutual
understanding in the organization
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Phases of developing harmonious
employment relations
Phase Characteristics Profile
1 Rejection & blockage Antagonistic
2 Competition & confrontation Adversarial
3 Passive & reactive Mutually tolerant
4 Acceptance & teamwork Cooperative
5 Proactive & innovative Creative

Source: Adapted from NPB (1985b)

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Benefits from harmonious employment
relations

„ Atmosphere of trust and understanding between

managers & employees
„ problems can always be openly discussed to seek a
solution
„ employees
l will
ill b
be more committed
itt d tto th
the organization
i ti
and willing to find better methods of doing things & to
improve the products or services

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Structure to maintain harmonious relations
„ The legal structure:
… Industrial Relations Act
… Employment Act
… Trade Unions Act
… Factories Act
„ Role of the Government, unions & employers:
Co-operation
p & Consultation
„ National shared values:
… nation before community & society before self
… family as the basic unit of society
… community support & respect for the individual
… consensus, nott conflict
fli t
… racial & religious harmony 13
Fostering harmonious employment
relations through:
„ Labour management committee for joint
consultation
„ QC to encourage employee participation
„ proper handling of grievances
„ newsletter, suggestion scheme
„ safety committee
„ recreation committee

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Brief historical developments
… Turbulent sixties
… 1959 -self-governing state
… 1960 -Industrial Arbitration Court (IAC) set up
… 1961
1961- Industrialization program started
… 1965 - Singapore separated from Malaysia
… 1967 - British withdrew their military bases
… Industrial climate made more attractive to foreign
investors
… 1968 - Introduction of Employment Act and amendment
of Industrial Relations Act
… 1969 - Trade Union Movement’s Modernization Seminar
… Union Co-operatives - NTUC Fairprice, COMFORT
Taxi NTUC Income
Taxi, Income, CASE,
CASE Denticare
Denticare, e2i
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Brief historical developments
„ By 1970s
1970s, move from labour intensive
industries to high value-added & hi-tech
industries.
industries
„ In 1979, the NTUC charted new directions
„ By 1980s
1980s, Union’s
Union s role was to promote
good employment relations, improve
working conditions, enhance the social &
economic status of workers & encourage
workers to be more p productive
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The Tripartite System - Unions
„ Role of Trade Unions
… promote good industrial relations between
workers & employers
… improve
i th
the working
ki conditions
diti off workers
k
through collective bargaining to enhance their
economic & social status
… co-operate with employers to increase
productivity for the benefit of workers,
employers
p y & the economy y of Singapore
g p
… safeguarding jobs: ensure no unfair dismissal,
adequate compensation
… NTUC,
NTUC www
www.ntuc.org.sg
ntuc org sg
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The Tripartite
p System
y - Employers
p y
„ Role of Employers’ organizations:
… Represent members in presenting views to
government
… Advise members on employment laws
… Provide members a forum for discussion on
employment-related issues
… Concerned with keeping
p g business costs low to remain
competitive.
„ Singapore Business Federation (SBF), www.sbf.org.sg
„ Singapore National Employers’
Employers Federation (SNEF),
(SNEF)
www.sgemployers.com
„ Singapore International Chambers of Commerce (SICC).
www.sicc.com.sg
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The
e Tripartite
pa e SysSystem
e - Go
Govt
„ Role of the Government
… Provide legal structure, www.mom.gov.sg
… Administer employment laws by Ministry of Manpower
… Assist in settling
g disputes
p / conciliation by
y MOM
… Participate in tripartite organizations such as the NWC
„ MOM generates manpower blueprint
… “Manpower 21” Report - 6 strategies to build Spore
into a talent capital
„ Industrial Arbitration Court (IAC), www.iac.gov.sg
… Hear & settle disputes
… Register & certify collective agreements (CAs)
… Interpret awards & CAs

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NWC: A Tripartite
p Example
p
„ In the 1970s, the success of industrial development had
created many jobs. In a tight labour market, wages began to
rise.
i Thi
This bbecame a major
j concern ffor employers
l & th
the
government.
„ The National Wages Council (NWC) was formed in 1972 with
representatives from unions, employers & government. The
main objective: to bring about orderly wage increase without
undermining g Spore’s
p competitiveness
p & without takingg away
y
the right of unions & employers to decide individually on wage
increase recommendations.
„ The role:
… monitor wage trends
… advise the government on wage adjustments
… develop a wage system consistent with long term
economic & social development 20
Th interaction
The i t ti process
„ Collective bargaining - negotiate terms
and conditions of employment
p y & benefits
„ Dispute settlement through:
… Conciliation by MOM
… Arbitration by Industrial Arbitration Court (IAC)

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Collective Bargaining
„ Defined as negotiation
g between employers
p y &
employees about working conditions & terms of
employment, with a view to reaching agreement
„ employers are represented by their own
management team that comprises the HR
manager and d others.
th E
Employees
l are
represented by the union of which they are
members.
members
„ Contents for bargaining: matters related to
salary & conditions of employment
22
 Wage Reform
&
W
Wage Negotiation
N ti ti

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Wage Reform & Wage Negotiation
„ Brief history of Wage System
… after
ft Independence
I d d - in
i order
d tto create
t more
jobs, the Govt encouraged export-oriented
industries. The Employment Act and the
Industrial Relations Act were introduced in
1968.
… As a result, the economy grew rapidly.
Unemployment rate fell from 8.9% in 1966 to
4 7% in 1972
4.7% 1972. The Govt had to admit 100 100,000
000
foreign workers from neighbouring countries.
Workers & their unions demanded high
b
bonuses & ffringe
i b
benefits.
fit
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National Wages
g Council ((NWC))
„ In order to avoid a wage explosion
because of the tight labour market, in
1972, the Govt set up the NWC to ensure
an orderly wage rise & to formulate wage
guidelines for the economy.
„ Since 1972, annual wage increases were
guided by
g y the NWC recommendations.
„ Introduction of the AWS (annual wage
supplement), more popularly known as the
13th month pay.
25
Wage Reform
„ In the 1970s and early 1980s, the quantitative
guidelines recommended by the NWC worked
well for an expanding Spore economy. It
allowed for a steady wage rise and yet
maintained good relations between
management & the unions.
„ In 1985, Spore suffered a severe economic
recession. Employers were no longer able to
pay high wages. The Economic Committee of
1986 recommended changes in the wage
system
system.
26
Problems in the Wage
g System
y
„ Rigid Wage System because of:
… Seniority-based - wage increases based on the
length of service rather than company profitability or
p y
individual contributions to the company.
… Long time scale – for each job, a time scale specified
the minimum and maximum pay and the number of
annual increments to reach the maximum pay.
… High maximum wage due to long service
… Fixed annual increments – all employees were
entitled to the annual increments. This practice
p
became a financial burden when the increments were
built into the basic wage structure. Older more
expensive workers ended up being the first to be
retrenched
retrenched.
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Solution: To Enhance Competitiveness

„ Ensure employees are rewarded based on the value

off the
h job,
j b productivity
d i i & their
h i contribution
ib i
… pegging salary ranges to market value of job
… narrowing the max
max-min
min ratio of salary range to 11.5
5
„ Move away from seniority-based wages system
… avoid locking in pre-determined annual increment
… negotiate salary increments based on market
conditions,, company
p yp performance & p productivity
y
… give annual increments only if they are
sustainable

28
 Tripartite Taskforce on Wage
g
Restructuring
„ In Jan 2004, the Tripartite Taskforce on Wage
Restructuring announced a generic flexible
wage model.
d l
„ The objective was to help speed up the
implementation of a more flexible wage system
to:
… protectjobs in an economic downturn
downturn,
… reward workers in an upturn and
… make business more competitive.
p

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Towards a Flexible & Competitive
p Wage
g System
y
„ Guided by a set of wage principles:
… Sustainable growth – the wage structure should support
b i
business growth,
th iinvestment,
t t jjob
b creation.
ti
… Competitiveness – the wage structure should reflect the
value of the job and enable the company to be competitive
in the g
global market
… Flexibility – a greater portion of wages should vary with the
profitability of the company to allow employers to respond
quickly to volatile business conditions
… Motivation – Management should incentivise employees to
give their best & add greater value. Management should
also take the lead in wage restructuring in bad times
… Income stability – the wage structure should allow
employees
l tto have
h some stability
t bilit off income
i through
th h basic
b i
regular wages
„ Two key thrusts:
… Increase flexibility
… Enhance competitiveness
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Increase Flexibility

„ Expand the variable components in wages

& link the payment closely to performance.
This includes introducing an additional
variable component viz. Monthly Variable
Component (MVC)
„ Use wage-related
g options
p to help
p cope
p
with the sudden business downturn

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Increase Flexibility – expand variable
components
„ Total Wage = Basic Wage + sizeable Variable
Component
„ B i wage – to
Basic t provide
id stability
t bilit off iincome
„ MVC – a standby emergency lever to allow
companies to adjust wage cost in sudden
business downturn
„ AVC ((Annual Variable Component
p – comprising
p g
the 13th month & other variable bonuses given at
the end of the year) – to be linked with the
company’s
company s & individual
individual’s
s performance
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Increase Flexibility – expand variable
components
AVC MVC
Rank
& file 70 20 10

AVC + MVC
Mid Mgt
g
& execs 60 40

AVC + MVC
Sr Mgt 50 50

Basic Variable
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Local Examples

34
Local Examples
p

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 Local Examples
„ CEO Liew Mun Leong, CapitaLand – Bonus $ 6.36M in 2006
$20.52M in 2007
$ 22.17M
17M in 2008
„ Chairman Kwek Leng Beng, City Developments – [ base salary
13%, bonuses & allowances 76%, board/committee fees 4%,
other benefits 7% ] - total package $7
$7.5~7.75M
5 7 75M in 2008
„ OCBC CEO David Conner - total package $6~6.24M in 2007
$3.75~3.99M in 2008
„ OCBC Chairman Cheong Choong Kong - $2.75~2.99M in 2007
$2~2.24M in 2008
Source: TODAY, March 25, 31 & April 1, 2009

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Increase Flexibilityy – expand variable
components

MVC
„ Recommended level: 10% for all employees
„ Reclassify from future wage increases or from
future wage increases + basic wage
„ Companies should draw up key performance
indicators (KPI’s) & clear guideline to trigger
MVC cuts or restoration

37
Increase Flexibilityy – expand
p variable
components
AVC
„ Co p ses Annual
Comprises ua Wage
age Supp
Supplement
e e ((AWS) S) &
Variable Bonus
„ Build up to desirable level
„ AWS or 13th month payment, is often
contractually fixed but Employment Act allows
for variation
„ To draw up key performance indicators to link
AVC to company and individual performance

38
Increase Flexibility – expand variable
components

Rationalising
g Allowances:
„ To review the nature of allowance
„ T convertt outdated
To td t d allowances
ll that
th t
no longer serve any purpose into
variable components

39
Linking Variability to Performance

„ Objective & transparent

performance appraisal
„ Employee clarity of how rewards
are linked to performance
„ Upside important to employee
acceptance
t & motivation
ti ti

40
Increase Flexibility – other wage-related
wage related
options

„ Temporary
p y lay-offs
y
„ Shorter work week
„ No-pay
No pay leave
„ Flexible work schedule

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To summarise:
„ Wage restructuring = cutting wages
„ It is about making our wages more flexible
flexible,
competitive and performance-based
„ How it benefits employers? They can make
quick adjustment to wage cost in adverse
business climate to remain viable & preserve
j b ffor employees
jobs l
„ How it benefits employees?
… Better
job security
… Employees can have better rewards in good times
… Enhance older workers’ cost-competitiveness &
employability
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Issues & Challenges
„ Ageing workforce - retirement age raised to 62 in
1999 L
1999. Legislation
i l ti ffrom 2012 tto progressively
i l
raise to 65 and 67.
„ Older unskilled workforce - re-skilling,
re-skilling upgrading
„ Income divide - Workfare Income Supplement
scheme ((WIS), ), higher
g for >55,, costs $432M
„ “Women Back to Work” committee
„ CPF draw-down age, from 62 to 65 by 2018
„ Singapore’s declining birth rate
„ Influx of foreign talent
„ 2008 – Financial Turmoil, economic uncertainty
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U f l websites
Useful b it
„ www.ntuc.org.sg „ www.sbf.org.sg
„ www.mom.gov.sg „ www sgemployers com
www.sgemployers.com
„ www.wda.gov.sg „ www.sicc.com.sg
„ www iac gov sg
www.iac.gov.sg „ www shri org sg
www.shri.org.sg
„ www.stada.org.sg

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