Singapore: Amendments to the Retirement and Re-employment Act

On 9 January 2017, the Parliament of Singapore passed the Retirement and Re-employment (Amendment) Bill 2016 (Bill). The Bill abolished employers' right to reduce the salary of workers who reach the age of 60, and introduced a provision which exempts employers from having to either re-employ an eligible employee or offer an Employment Assistance Payment to such an employee where the employee secures employment with another employer. The Minister for Manpower has also announced that the re-employment age will be increased from 65 to 67 in a bid to improve the employment outcomes of Singapore's senior workers.

Abolition of employers' right to reduce the wages of senior employees

Under the Retirement and Re-employment (Amendment) Act (Cap 274A) (Act) as it stood before the Bill was enacted, employers were entitled to reduce the salary of their employees by up to 10% when they attained the age of 60. These provisions were inserted into the Act in 2012 to make senior workers, many of whom enjoyed the benefit of rigid seniority-based remuneration, more attractive to employers. However, as 98% of employers did not make use of these provisions, they were considered to be 'no longer relevant' and are removed from the Act with the enactment of the Bill.

Exemption to the obligation to re-employ

Another key change that the Bill implements is the introduction of an exemption to the obligation to re-employ eligible employees. Previously, where an eligible employee reached the re-employment age, the employer was under an obligation to either re-employ the employee, or to provide the employee with a one-off payment known as the Employee Assistance Payment, equivalent to three months' salary.

The Bill provides employers with an additional option. Where the eligible employee is able to secure employment with another employer before leaving their current employer, their current employer's obligation to re-employ or pay the EAP is discharged. This is a useful option for an employer that cannot find a suitable internal position for its senior employees but is able to offer them positions in a sister company or a subsidiary.

Increase in the re-employment age from 65 to 67

The Act provides that the Minister for Manpower may prescribe the re-employment age. Before the enactment of the Bill, the prescribed re-employment age stood at 65. The Minister has announced that the re-employment age will be increased to 67, the highest age prescribed under the Act. This means that employees now have an obligation to re-employ workers aged between 65 and 67 in addition to their existing obligation to re-employ workers aged between 62 and 65.

Key takeaways

Although these changes will only take effect on 1 July 2017, employers should prepare for the changes proposed in the Bill. Employers should give some thought to the types of roles that could be filled by their senior employees who wish to continue working beyond the retirement age. Employers are also advised to review their existing remuneration practices and policies to see whether they currently reduce the wages of their employees when they turn 60, a practice that will become unlawful in July this year.

By Fatim Jamubhoy, Tess Lumsdaine, Sarah Yazid and Barry Wang