The aim: to move towards pay packets that are 70% fixed, 30% variable, giving employers room to act fast in bad times

By EUGENE LOW and SUE-ANN CHIA

IN ONE of the most extensive reviews of the way in which Singapore's pay packets are structured, a Government-appointed taskforce has recommended moving away from a rigid and seniority-based system to one with more flexibility built into it.

After more than six months of meetings and canvassing views, it has come up with several recommendations it believes can help companies to respond to economic shocks and downturns.

Chief among them is the call for companies to move gradually towards having a sizeable portion of wages as a variable component that is linked to the performance of the employee and the company itself.

The ideal would be to have an employee's basic wage - the fixed component - making up 70 per cent of his total annual salary, with the remaining 30 per cent being variable.

For middle managers, it should be 60 per cent fixed and 40 per cent variable, while for top management, it should be 50-50.

The variable component should be made up of two parts - a monthly variable component, and an annual variable component.

With three components - fixed basic wage plus monthly and annual variable components - the employee is assured that his basic wage remains intact in bad times, when companies in trouble need only cut the variable components.

And in good times, they can look forward to bigger bonuses paid via the variable components.

The Tripartite Taskforce on Wage Restructuring, chaired by Manpower Ministry Permanent Secretary Yong Ying-I, said that external shocks in recent years and intensified global competition highlighted the need to change the wage system here.

More than 100 representatives from the ministry, Singapore National Employers Federation (SNEF), National Trades Union Congress and private companies were involved.

Their reports will be presented at a national conference today where Deputy Prime Minister Lee Hsien Loong is expected to outline targets and a timeframe for implementing the recommendations.

The Government is not expected to use legislation to compel companies to adopt the recommendations, nor is it likely to offer tax incentives.

Instead, persuasion will be the approach, with assistance for interested companies from 'Swat teams' of officials.

There will be some funding for training workshops for small and medium enterprises, along with implementation subsidies.

SNEF chief Stephen Lee, like Ms Yong, acknowledged there would be some initial difficulties given the technicalities involved, but he believed that after Sars and the downturn, companies were now more open to making the change.

One of the more sticky points is the call to bosses to rethink how they view the Annual Wage Supplement (AWS) - the '13th month pay' employees look forward to every December.

Over half of all firms paid this in 2002, with some regarding it as part of fixed basic wages, while others view it as a variable component.

Most pay the equivalent of a month's pay, and this is enshrined in collective agreements.

The taskforce said companies should decide whether the AWS should be a fixed or variable component.

But it felt that the AWS should be a variable item for executives, managers, or those not covered by collective agreements.

If the AWS is regarded as a part of the basic wage, the company should aim instead to build up the annual variable component to the recommended 20 per cent.

Also, if the AWS is more than one month's pay, anything in excess of one month's pay should be converted to the variable component of wages.

NTUC deputy secretary-general Matthias Yao said the recommendations were the 'strongest signal that a flexible wage system should be the norm'.

But he cautioned that for wage restructuring to succeed, employers 'cannot choose to implement only the cost-cutting measures and ignore the other key components'.