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Singapore’s Oil, Chemical Unions Blocking Pay Cuts after Age 62

7 November, 2011

With Singapore’s Retirement and Re-Employment Act (RRA) set to take effect on 1 January 2012, two of ICEM’s affiliated unions in the city-state have successfully entered into Memorandums of Agreement with employers and employer organisations stating that salary decreases will not happen once companies are mandated to offer jobs to workers when they reach age 62.

The United Workers of Petroleum Industry (UWPI) and the Singapore Shell Employees’ Union (SSEU) announced last week that the agreements go beyond what will be required in the new law by guaranteeing that salaries and bonus payments will be maintained for workers between the ages of 62 and 65.

The RRA amends a 1999 law that mandates retirement at age 62. The new Act requires employers to offer re-employment to a worker who reaches age 62 after January 2012, but a provision allows bosses to make “reasonable” adjustments in salaries, employment terms, and job assignments.

Last week, the UWPI got 13 employers to agree to the memorandum stating no lowering of salaries or elimination of bonus payments for oil or petrochemical workers choosing to continue to work after age 62. SSEU reached a similar deal with the Royal Dutch Shell subsidiary in Singapore two months ago. UWPI must now convince 13 other companies to do the same, and the precedent created by the Shell memorandum and last week’s deal is expected to convince most to sign such accords with UWPI.

Employers in Singapore, many of whom have begun offering re-employment ahead of the new law, have argued that pay cuts for older workers are necessary because seniority-based salary schemes inflate payrolls. Last week’s signing was praised as a “win-win” result by one governmental minister who said the companies benefit from the loyalty and experience of the older workers.

About half of Singapore’s 5,000 oil and petrochemical workers are now covered by the no-cut agreements. The RAA, passed by Singapore’s Parliament on 11 January 2011, is aimed at giving more financial security to older citizens, and these labour agreements recently signed in the ICEM sectors now go further to fulfil this.