Like many industrialized nations, Singapore faces an increasingly aging population that continues to overtake its younger counterparts. In fact, the number of employed citizens over age 60 has more than doubled, rising from 5.5% to 12% between 2006 and 2015. Consequently, this means a larger number of mandatory retirees (aged 62) were only eligible for re-employment until the age of 65. If the age trend continues, this portion of the workforce will continue to grow exponentially.
While youth certainly offers advantages when it comes to employability, it’s important to note that older workers literally carry a lifetime of valuable experience. That being said, the Ministry of Manpower decided to address the above issue, benefitting employers and employees alike.
Effective July 1, 2017, new re-employment regulations offer increased opportunities for older workers to obtain new positions. That being said, it’s important to understand just what these laws entail and how they’ll affect everyone involved.
What is Re-Employment?
Put simply, re-employment is a process in which employers can offer a plan to rehire staff after the mandatory retirement age of 62; again, this eligibility period used to expire by age 65.
By law, employers must identify eligible workers and begin discussing re-employment options six months prior to their 62nd birthday. If the employee accepts the contract, organizations may rehire them. The contract length is up to the employer’s discretion, but cannot legally be shorter than one year. Following expiration, organizations can review the agreement and decide whether or not to renew it.
If re-employment is not an option, due to things like unsuitability or flat-out rejection of an offer by the worker in question, then the organization must offer an Employment Assistance Payment (EAP) amount, typically equal to three months’ salary. Specifics about duration and amounts can be found at the Ministry of Manpower website.
In 2016, parliament passed the Retirement and Re-employment (Amendment) Bill to change the existing laws under the Re-employment Act (RRA). This amendment introduced a variety of fundamental changes that offer financial and professional assistance.
The central aspect of this new bill is that the re-employment eligibility age has been extended from age 65 to 67.
With the previous regulation, staff members who were unable to be re-employed had to be provided with an EAP to help them. Now, the law offers a third option. Companies that are unable to re-hire someone after the 62 year cutoff age can defer re-employment to another company. Naturally, this is all conditional on the employee’s agreement to accept the alternate offer. If the candidate is unable or unwilling to do so, then the original company must provide an EAP.
Another major change affects the employer’s ability to reduce staff members’ wages by as much as 10% by age 60. This was an option until the recent amendment. As of July 1, 2017, this is no longer permitted; however, Minister of State Sam Tan explains that 98% of organizations don’t engage in this practice to begin with, so the regulatory change’s impact is minimal.
Eligibility criteria are virtually identical, with one specific exception (highlighted below). In order to be considered for re-employment in Singapore, the worker must:
- Be a citizen or permanent resident.
- Have at least three years of tenure with their employer before turning 62.
- Be considered a good employee based on objective review.
- Meet all applicable medical requirements.
- Must have been born no earlier than July 1, 1952.
How Will This Affect Employees?
Suffice to say, these changes are excellent news for eligible employees. Perhaps the biggest advantage is the increased time period allotted for re-employment. Many citizens need to or want to continue working after age 65.
Workers also now have more options. An EAP – while helpful – isn’t a long-term solution. Those seeking financial stability will gladly opt to take their skills elsewhere if their current employer can’t rehire them.
Removing the wage cut provision is a huge step, as it essentially eliminates institutionalized ageism – although again, only 2% of employers seem to apply this to their workforce.
As some critics have pointed out, however, the changes still allow employment to be reviewed annually, which doesn’t provide much in the way of added job security.
How Will This Affect Employers?
A significant benefit to the new regulations is that organizations are no longer faced with a large EAP payout if they are unable to re-employ a worker. Deferring re-employment to another company is the very definition of a win-win scenario for all parties.
Second, employers looking for skilled labor can benefit from taking in staff from other businesses. Since these individuals must have a satisfactory employment record in order to be eligible for re-employment, receiving companies already know they have a reliable candidate with the appropriate skills and abilities.
Third, this referral process will help cut down on the time-consuming and costly process of finding, interviewing and training new applicants.
HR issues like re-employment are complex, which is why it’s absolutely critical that human resources departments remain informed. Non-compliance carries strict penalties, both in terms of expenses and public perception. Don’t let this happen.
Our e-book, Singapore HR Compliance Guide, contains all of the information you need to stay on top of the latest HR requirements and regulations. With key issues like payroll, retirement and everything in between, this handy reference contains everything you need to protect yourself from accidental non-compliance. Download the free e-book today!