SINGAPORE – To help workers cope with rising living costs, employers should consider giving a one-off lump sum payment to employees in the year ahead, said the National Wages Council (NWC) on Tuesday.

It is the first time in over a decade that the council has included this recommendation in its annual guidelines. It also called on employers to consider giving a larger sum to lower- to middle-income employees.

The guidelines, which were accepted by the Government, cover the period from Dec 1, 2023, to Nov 30, 2024.

They come amid an uncertain economic outlook requiring the council to balance between cushioning inflation for workers while keeping business costs manageable even for employers facing subdued demand.

Singapore’s core inflation rate has moderated since 2022, but is expected to edge up in the first quarter of 2024, reflecting the goods and services tax increase due on Jan 1, 2024, as well as increases in the costs of water, electricity and public transport.

Lower-wage workers earning up to $2,500 in gross monthly wages should receive a pay bump of at least 5.5 per cent to 7.5 per cent in the coming year, said the council, while varying its guidelines to take into account differences in companies’ performance and outlook.

Employers that have done well and face positive business prospects should provide lower-wage workers with a built-in wage increase at the upper bound of the percentage range, or at least $85 to $105, whichever is higher.

Employers that have done well but face uncertain prospects should give these workers a built-in wage increase at the lower to middle bound of the percentage range, or at least $85 to $105, whichever is higher.

If employers have not done well, they should provide lower-wage workers with a built-in increase at the lower bound of the percentage range.

“If business prospects subsequently improve, employers should consider further wage increases,” the council added.

It said the $2,500 threshold for these recommendations targets the 20th percentile wage level of residents in full-time jobs.

The NWC, which comprises representatives from unions, employers and the Government, also called on firms to provide higher-percentage increases for those lower-wage workers earning the least.

“In implementing these wage increases, employers should ensure sustained basic wage growth for their employees,” it said, noting that this is in line with one of 18 recommendations by the Tripartite Workgroup on Lower-Wage Workers that the Government accepted in August 2021.

The council’s general recommendations on lower-wage workers are not compulsory, and are similar to those in the 2022/2023 guidelines.

It reiterated its call for employers to implement a flexible wage system amid continuing economic uncertainty. This comprises built-in wage increases given out in line with firms’ business prospects, and variable payments reflecting firms’ performance and workers’ contributions.

For example, employers that have done well but face uncertain business prospects may moderate their built-in wage increases, but should still reward employees with variable payments.

The council said: “Employers who have not done well may exercise wage restraint, with management leading by example. These employers should make greater efforts to improve business processes and productivity, especially by investing in upskilling their employees.”

Although noting that wage growth should generally be in line with productivity growth, the NWC urged employers to take into account the sustained productivity gains over the longer term in setting wage increases.

This comes as labour productivity declined 5.7 per cent year on year in the first half of 2023, after increasing by 2.7 per cent per annum from 2016 to 2022.

Mr Kenny Tan, deputy secretary (workforce) at the Ministry of Manpower (MOM), said at a press conference on Tuesday that the decline in productivity stems from growing employment here despite a general economic slowdown globally.

One reason is that businesses are holding on to workers, having faced labour shortages after Covid-19 when demand rose much faster than they could hire workers who had been let go, he said.

“There is a greater appreciation of the cost of losing talent and then reacquiring talent, so businesses are now more prepared to hold on to talent as they transform and pivot to new opportunities.”

Because of such cyclical factors that affect productivity, wage recommendations need to take a long-term view on productivity, Mr Tan added.

In a statement on Tuesday, MOM accepted the NWC’s recommendations.

While productivity has improved over the longer term, economic headwinds and higher costs will adversely impact the prospects of some businesses, the ministry said, expressing support for the differentiated wage guidelines for employers.

Singapore National Employers Federation president Robert Yap said at the press conference that taking into account employers’ performance in the guidelines ensures that they have guidance on raising wages in a sustainable manner.

The NWC also set out the schedule of increases in minimum pay for full-time lower-wage administrators and drivers up to and including June 30, 2026.

Employers must adhere to these increases in Occupational Progressive Wages in order to renew existing work passes for foreigners or apply for new work passes. The framework was developed by the council and took effect in March.

Progressive wages refer to a wage ladder tied to productivity and skill improvements.

About 52,000 Singaporeans and permanent residents can expect better pay from July 1, 2024, picking up from the first round of baseline wages stipulated in February 2023.

Under the latest schedule, administrative assistants must be paid a gross monthly wage of at least $1,980 from July 1, 2025, up from at least $1,500 now. This represents a 32 per cent increase in their minimum pay.

General drivers must be paid at least $2,190 by the same date, up from at least $1,750 now – a 25 per cent increase in their minimum pay.

Administrative assistants and executives will see a larger jump in 2024 than other roles with Occupational Progressive Wages, owing to an additional “one-off adjustment” to account for increases in market wages since the prevailing requirements were set in 2021, the council said.

Noting that drivers’ wages typically comprise more variable, performance-based wage components such as trip incentives, the NWC said the wage requirements for drivers in 2024 and 2025 are intended to support good wage growth while allowing variable wage components to be retained within the wage structure.

This would mitigate the impact on firms’ operational and manpower planning, as well as workers’ livelihoods, it added.