60, 62, 67 – what do the numbers mean for your career?

Jan 10, 2017 07.00PM |
 

by Suhaile Md

EMPLOYEES who turn 60 can no longer have their wages cut because of their age. The re-employment age will also be up from 65 to 67, with effect from July 1 this year. These amendments to the Retirement and Re-employment Act (RRA) were passed in Parliament yesterday (Jan 9). The retirement age still stands at 62.

Prior to the amendments yesterday, employers were allowed, by law, to reduce up to 10 per cent of their employees’ wages when they turned 60. So now, workers will continue earning the same after their 60th birthday. However CPF contributions, which drop from 13 per cent to 9 per cent for employers, and 13 per cent to 7.5 per cent for employees, upon hitting 60, will continue. No changes have been announced on that front.

When workers turn 62, they can either choose to retire, or take up an offer of re-employment. The RRA obliges employers to offer re-employment to citizens and permanent residents. Yet, it may not be in the same role with the same wage. Also, workers have to be medically fit, serve the company for at least three years before turning 62, and have performed well enough, as judged by their employer.

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Why not just increase the retirement age then?

“When you raise the retirement age, the expectation is same job, same pay.” For re-employment though, “the concept is not necessarily the same job, not necessarily the same pay,” said Manpower Minister Lim Swee Say in Parliament yesterday.

“When you raise the retirement age, the expectation is same job, same pay.”

So, it seems the removal of wage cuts when a worker reaches 60 is about “same job, same pay” being secured for at least two more years, with changes in a worker’s income only expected after 62. About 12 per cent of Singapore’s labour force was 60 or older in 2015, which is more than twice the 5.5 per cent proportion in 2006, reported The Business Times today (Jan 10).

About 12 per cent of the labour force was 60 or older in 2015, more than twice the 5.5 per cent proportion in 2006.

Also, CPF monthly payouts only kick in when Singaporeans turn 65. Increasing re-employment age to 67 provides older workers two more years of employment, hence reducing or even delaying their reliance on CPF payouts accordingly. On that note, current CPF contributions drop again at 65. Employers’ contribution decreases from 9 per cent to 7.5 per cent, while employee contribution drops from 7.5 per cent to 5 per cent.

 

Finding re-employment elsewhere

Another change: A company can find re-employment opportunities for its worker in another company, which is agreeable, and handover the obligation to that company. That is, the new company will be responsible for the re-employment of the worker until he’s 67 years old. This was not allowed prior to the amendments yesterday.

However, if the worker in question does not want to take up the offer to work in another company, his current employer must still find a role for him in-house. If there’s no opening available, the employee must be offered an Employment Assistance Payment (EAP). The one-off payment is to help with the loss of income, as former employees look for jobs on their own.

In response to the amendment in Parliament, the Ministry of Manpower, National Trades Union Congress, and Singapore National Employers Federation updated the joint guideline that recommends a payment range for the EAP. It’s recommended that the EAP be equal to three and a half months’ pay, with a minimum sum set at $5,500, and limited to $13,000. This comes into effect on July 1 this year. Presently, it’s set at three months’ pay, with the range between $4,500 and $10,000.

 

Incentives and help for employers

Businesses get some help too. Currently, employers who hire Singaporeans older than 55, and who earn less than $4,000 a month, will have up to 8 per cent of the monthly wage covered by the G under the Special Employment Credit (SEC) scheme. This scheme will end in 2019.

If a company voluntarily employs workers above 65, a total of 11 per cent of the monthly wage is offset.

If a company voluntarily employs workers aged above 65, an additional 3 per cent is offset. That is, a total of 11 per cent of the monthly wage is offset under the SEC scheme. The additional 3 per cent offset expires on June 30 this year, but the G is considering an extension, said Mr Lim. Details will be out later.

 

Featured image by Sean Chong.

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