Companies urged not to short-change workers as a result of 1% increase in CPF rate

[Watchman]

Companies urged not to short-change workers as a result of 1% increase in CPF rate
By Saifulbahri Ismail | Posted: 03 May 2010 2200 hrs

Office workers in Singapore

Firms urged not to short-change workers as a result of CPF rate rise

SINGAPORE: Industry leaders have urged companies not to short-change workers following the announcement of a one percentage point increase in the CPF contribution by employers.

They expressed concern that companies may use it to offset any salary increase.

The announcement to increase the employers' CPF contribution rate by Prime Minister Lee Hsien Loong last Saturday was met with much cheer by workers.

The additional one point increase to 35.5 per cent will be done over two stages.

Amid the good news, concerns that companies may tamper wage increases to reduce the impact of the extra contribution they will have to make.

David Ang, executive director, Singapore Human Resource Institute, said: "We urge they pay according to performance and at the same time, don't short-change the workers as well as the executives who have been staying on with the organisation through difficult times and now they hope to enjoy the fruits of their labour."

Mr Ang also encouraged HR practitioners to take a pro-active role in establishing a robust reward system to assure workers get a fair deal.

Others said tempering wage increases because of the CPF hike is short term thinking.

Lawrence Leow, president, Association of Small & Medium Enterprises, said: "We cannot rule out the possibility of employers building this one per cent into the wage increase. So that effectively there's no impact on them. But you can only do for one year. At the end of the day, the demand for the workers is always there. So, if you're unable to pay your workers competitively, you're going to lose them."

Mr Leow also had a suggestion for companies.

He said: "One way is for companies to actually adopt this monthly variable component into their wage policy. Because that will really help you so that when there's a downturn then you can actually use MVC to cushion.

“So, don't worry about the one per cent overall CPF increase because that is actually something that we have taken away from the workers. So, I think it's only fair that we give it back to our workers."

Surveys by consulting firms are forecasting an average salary increase of three per cent this year.

Industry leaders added that the effects could only be felt next year when the full increase comes on in March.

By then, companies would have in place strategies to cope with the situation.

Mr Leow added: "So the impact this year will be very minimal because it's only happening at the last quarter. And over and above that companies are still receiving payment from the Job Credit scheme. So, this year I would say that literally there's no impact." - CNA/vm