In brief

  • The Singapore Parliament has now passed re-employment legislation. While that legislation has not yet been gazetted, the Government has indicated that it will take effect on 1 January 2012.
  • The new provisions set out the eligibility criteria for re-employment and impose obligations on employers to re-employ eligible employees or provide an employee assistance payment (EAP). Provision is also made for remedies for employees in the event of a dispute over their re-employment or payment of the EAP.
  • Employers should be aware that they should start planning now for the implementation of the new scheme and start consulting with affected employees as necessary, as it appears that the prior consultation obligations under the Retirement and Re-Employment Act may apply with respect to employees who turn 62 on or after 1 January 2012.

Background

As we reported in our May 2010 edition of the Freehills Asia-Pacific Employee Relations Update,1 the Tripartite Implementation Workgroup released the Tripartite Guidelines on the Re-Employment of Older Employees (Guidelines) in March 2010.

The Singapore Parliament has now passed re-employment legislation to codify the re-employment scheme set out in the Guidelines, which is intended to take effect on 1 January 2012. The Retirement Age (Amendment) Act was passed on 11 January 2011. It amends and renames the Retirement Age Act as the Retirement and Re-Employment Act (RRA).

The RRA will impose obligations upon employers to either re-employ older eligible workers or pay them an employee assistance payment (EAP), consistent with the recommended re-employment practices set out in the Guidelines. The RRA also sets out certain remedies for employees in the event of a dispute over their re-employment or payment of the EAP.

Amendments to the Guidelines

Following consultation with employers, employees and trade unions, a number of amendments were made to the Guidelines in 2010. In particular, it is notable that the guidelines for the payment of the EAP have been amended, as follows:

  • As a guide, the EAP could be three months’ gross salary.
  • For low-wage earners, a minimum EAP of SG$4,500 could be considered and to moderate the financial burden on employers, a maximum EAP of SG$10,000 could be considered.
  • The EAP should decrease over time as the re-employment obligation diminishes as the employee approaches the age of 65. For employees nearing age 65, the amount of EAP should not be greater than the salary payable for the remaining period of employment up to age 65.
  • For employees who have been re-employed for at least 18 months since attaining the age of 62, the employer could consider a lower EAP of two months’ gross salary, subject to a minimum amount of SG$3,000 and a maximum amount of SG$7,000.

The role of the Guidelines

The Guidelines will continue to be non-legally binding for the remainder of 2011, with their purpose being to assist employers and employees to prepare for the implementation of the re-employment provisions in the RRA in 2012.

After 1 January 2012, the Ministry of Manpower has indicated that the Guidelines will continue to be a reference point for employers and employees in identifying good re-employment practices. In addition, the RRA grants the Minister for Manpower the power to issue tripartite guidelines relating to re-employment and the terms and conditions of that re-employment, which will then be incorporated into the obligations imposed on employers by the RRA. While no such guidelines have yet been gazetted, the government has indicated that the Guidelines will continue to apply and will be gazetted in the future.

Summary of the re-employment legislation

Pursuant to the new legislation, employees will be eligible for re-employment if they are:

  • aged above the statutory retirement age (currently 62), or if their contract of employment specifies a higher retirement age, that higher retirement age, and
  • aged not greater than 65 (the RRA provides for this maximum age to be increased to 67 years in the future),

provided that they are medically fit to continue working and their performance is assessed to be at least satisfactory.

Employers will be under an obligation to offer re-employment to eligible employees, prior to employees reaching the statutory retirement age. If an employer is unable to offer an eligible employee re-employment, despite reasonable attempts to do so in accordance with the Guidelines, the employer must retire the employee and offer an EAP. Employees who are to be retired are to be given reasonable notice of the termination of their employment.

If an employer does not re-employ an eligible employee who has reached the statutory retirement age or terminate their employment, then the employment relationship continues under the pre-existing contract of employment and the employer will be deemed to meet the re-employment obligation.

Employees who will be re-employed should be employed under a new contract of service. The job scope and the terms and conditions of employment may vary from those previously in place. These variations are to be based on reasonable factors, for example the employee’s productivity, performance, duties and responsibilities and the wage system (such as a seniority system) applicable to the employee. The RRA also sets out a number of other requirements for re-employment contracts.

Employees who are offered an EAP should be paid a single lump sum or as otherwise agreed. In determining the amount of the EAP to be paid, the employer should take into account the relevant Guidelines.

The RRA also provides for the conciliation of disputes that arise between employers and employees with respect to re-employment. It also sets out possible remedies for employees if that conciliation is not successful. Employees may make representations to the Minister for Manpower, who may direct the employer to either re-employ the employee or pay compensation. The Commissioner for Labour is also given certain powers of investigation into complaints and offences and may order the payment of a just and equitable EAP to an employee.

Implications for employers

The RRA imposes significant obligations on employers with respect to their older workers.

Many multi-national employers do not have any practice of adjusting employee terms and conditions upon reaching retirement age, or indeed requiring or encouraging employees to retire. Rather, employees are treated in the same manner for the purposes of wages, benefits and terms and conditions, regardless of their age. For employers in this category, the principles set out in the Guidelines and the RRA will be most unusual and may even be inconsistent with company policies and values around rewarding employees based on merit and not discriminating based on age. So while these employers will need to be aware of their obligations under the RRA, they will be able to continue to employ their employees beyond the statutory retirement age without entering into new re-employment contracts with those employees.

For employers who currently have a practice of compulsorily retiring employees or reducing wages and benefits upon reaching retirement age, the obligations imposed by the RRA will have more impact. Employers should be aware that there are penalties for non-compliance, and the RRA gives employees additional options for seeking redress in the event that they are not re-employed or do not receive an appropriate EAP, further to the dismissal remedies already set out in the Employment Act.

Employers should therefore familiarise themselves with the new provisions of the RRA, as well as the Guidelines, and ensure that company policies and practices are aligned to the statutory obligations.

In particular, affected employers should be aware that, while the legislation and the Guidelines are yet to be gazetted, it appears that the legislation will apply with effect from 1 January 2012. While not entirely clear, it is possible that this means that the obligations imposed on employers by the RRA will apply with respect to all employees whose 62nd birthday falls on or after 1 January 2012. Therefore, it is recommended that employers of employees who will be eligible for re-employment soon after the anticipated implementation date start consulting with affected employees from mid-2011, given that a six month consultation and planning period is recommended by the Guidelines.