SINGAPORE: Every year, the National Wages Council (NWC) releases salary recommendations for workers in Singapore.
These provide guidance on pay increments, bonuses and one-off payments that affect all employees here, including white-collar professionals.
But they are not binding on employers – so can they still influence pay and bonuses?
NWC was set up in 1972 amid rapid industrialisation and a labour shortage in Singapore.
Facing the risk that rising wage costs could spiral out of control, the government proposed the council as a more stable approach towards wage-setting.
The tripartite body – comprising employers, workers and the government – is now chaired by Mr Peter Seah, a former banker who also chairs DBS Bank and DBS Group Holdings.
Employers are represented by groups like the Singapore National Employers Federation, Singapore Business Federation and business chambers.
Workers are represented by the National Trades Union Congress (NTUC) and associated unions.
The Ministry of Manpower (MOM) and other government agencies sit on the council.
It typically calls for public feedback before gathering to develop wage guidelines once a year. It may meet more than once during economic crises, like during the COVID-19 pandemic.
NWC's discussions take into account Singapore's economic competitiveness, labour market conditions, inflation, productivity growth and the global economic outlook.
Aside from wages, its guidelines also cover other employment-related issues, particularly around skills and training.
The recommendations are not mandatory and it is up to employers how they apply salary benchmarks.
NWC founding chairman Professor Lim Chong Yah has even said that "employers are free to ignore NWC guidelines".
But the reality is more complicated.
Let's look at the civil service, which is Singapore's largest employer. As expected, it makes reference to the NWC's guidelines when announcing salary adjustments. For example, when the civil service froze salaries and cut mid-year bonuses during the SARS outbreak in 2003, it cited NWC recommendations.
The government also tends to cite NWC on progressive wages, when it gives lower-wage workers one-time payments on top of their year-end bonuses.
Things are different in the private sector. One human resources practitioner in a firm with more than 800 employees pointed out that companies cannot afford to wait for NWC guidelines, before budgeting for the year ahead.
The HR executive, who asked to be identified only as Ms Lim, told CNA her company still does check its increment and bonus plans against the recommendations to see if it's in the clear or off the mark.
Let's say NWC does not call for wage increases for employees who are not lower-wage. Remaining relatively silent on this means such increments are left to market forces, said Ms Lim.
This means if her company plans to give the average worker a "decent" pay raise, then it can be assured it is already doing better than other firms, she added.
One part that stood out to Ms Lim in NWC's latest guidelines was the call for management to lead by example in wage restraint, in firms that have not done well.
She said this was not articulated by the council in previous rounds of advisories.
This group is a key focus for the council, which typically specifies the range of wage increases that companies should give such employees.
The NWC is also responsible for setting the job ladders and wage requirements for administrators and drivers, who come under the Progressive Wage Model (PWM).
These moves are aimed at narrowing the pay gap between lower-wage workers and the median worker.
Ms Lim described NWC guidelines as the "last line of defence" for employers to check if they are in line with PWM requirements.
Firms with workers covered by progressive wage schemes should not be waiting for the council's guidelines to plan salary adjustments, she pointed out.
Yes. It measures adoption of its recommended pay increments for lower-wage workers, through MOM's survey on annual wage changes.
The council found that adoption in 2024 was modest at 26.2 per cent, a level comparable to figures from 2021 to 2023, but lower than 2014 to 2020.
It also found that awareness of 2024 guidelines was stable in about three in five establishments.
The government also tracks adoption of the flexible wage system, which NWC has consistently recommended for some years.
This system involves having a monthly and annual variable component in the wage structure.
NWC has said this gives employers the flexibility to cut wages rather than jobs during downturns, while rewarding employees during upturns.
In 2024, 8.5 per cent of firms had both variable components, while 76 per cent had either a monthly or annual variable component.
While not legally binding, employers are motivated to heed the council's recommendations for different reasons.
Take Ms Lim's company, which is unionised. If wage increases and bonuses are below NWC recommendations, the union will take it up with the company, she said. Individual workers do so as well.
She hence pays attention to NWC guidelines to spot any potential risks to her company's branding as a good employer.
If her firm makes plans in line with NWC recommendations, referring to the council when communicating those plans to workers also gives the company a "stronger voice", Ms Lim added.
Even if not all companies follow the guidelines, some do – and that is already influential, according to HR consultant and educator Dr Fermin Diez.
"(It) will dictate how the market moves," said the adjunct professor.
By following the market of private sector compensation, firms that have not heeded NWC guidelines directly will still be tracking them indirectly, he pointed out.
"Not following the guidelines in terms of salary increases is a risky move, because you still end up having to deal with the market movement," he added.
Dr Diez said unions can in turn reference these movements when using the guidelines to negotiate with employers for better terms.
Mr Aslam Sardar, CEO of the Institute for Human Resource Professionals, said NWC guidelines provide a "credible reference" for employers and workers, that anchors wage decisions on fairness, productivity and long-term business sustainability.
This makes them useful for smaller businesses that do not have HR specialists, providing a practical benchmark when they review salaries and bonuses, he added.
This benchmarking can also extend to salary disputes.
NWC recommendations form the basis of mediation if an employment dispute related to an area covered in the guidelines is referred to MOM, NTUC assistant secretary-general Patrick Tay noted in a recent LinkedIn post.
If the dispute remains unresolved, it can then be escalated to the Industrial Arbitration Court.
Mr Tay, a lawyer and Member of Parliament, said he has previously referenced NWC guidelines in his submissions to the court, and that judges have given weight to the guidelines in their decisions.
Dr Diez said Singapore's NWC is unique for its tripartite approach and national-level recommendations.
Businesses and unions are "antagonistic" in other countries, and leaving salary decisions entirely to the business often leads to mass lay-offs, he said.
Guidance on increments and bonuses also tends to be given at the industry level or is limited to the public service in other countries, he added.
In most jurisdictions, wage committees are instead primarily concerned with recommending or setting minimum wages.
Malaysia and Indonesia have national wage councils that advise the government, which then sets the national minimum wage. Indonesia also has regional minimum wages set by governors, who are advised by wage councils.
In Thailand, the national wage committee is a tripartite body that determines the minimum daily wage in different regions.
The United Kingdom has a Low Pay Commission that recommends to the government the mandatory national living wage and national minimum wage.
In Australia, an expert panel under a Fair Work Commission sets minimum wages. It also has remuneration tribunals that determine salaries for key public office holders.
Singapore does not have a universal minimum wage, although the PWM sets mandatory basic wages for specified sectors and occupations.
Want an issue or topic explained? Email us at digitalnews [at] mediacorp.com.sg (digitalnews[at]mediacorp[dot]com[dot]sg). Your question might become a story on our site.
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These provide guidance on pay increments, bonuses and one-off payments that affect all employees here, including white-collar professionals.
But they are not binding on employers – so can they still influence pay and bonuses?
What is the National Wages Council, and what does it do?
NWC was set up in 1972 amid rapid industrialisation and a labour shortage in Singapore.
Facing the risk that rising wage costs could spiral out of control, the government proposed the council as a more stable approach towards wage-setting.
The tripartite body – comprising employers, workers and the government – is now chaired by Mr Peter Seah, a former banker who also chairs DBS Bank and DBS Group Holdings.
Employers are represented by groups like the Singapore National Employers Federation, Singapore Business Federation and business chambers.
Workers are represented by the National Trades Union Congress (NTUC) and associated unions.
The Ministry of Manpower (MOM) and other government agencies sit on the council.
It typically calls for public feedback before gathering to develop wage guidelines once a year. It may meet more than once during economic crises, like during the COVID-19 pandemic.
NWC's discussions take into account Singapore's economic competitiveness, labour market conditions, inflation, productivity growth and the global economic outlook.
Aside from wages, its guidelines also cover other employment-related issues, particularly around skills and training.
What do employers then do with NWC's recommendations?
The recommendations are not mandatory and it is up to employers how they apply salary benchmarks.
NWC founding chairman Professor Lim Chong Yah has even said that "employers are free to ignore NWC guidelines".
But the reality is more complicated.
Let's look at the civil service, which is Singapore's largest employer. As expected, it makes reference to the NWC's guidelines when announcing salary adjustments. For example, when the civil service froze salaries and cut mid-year bonuses during the SARS outbreak in 2003, it cited NWC recommendations.
The government also tends to cite NWC on progressive wages, when it gives lower-wage workers one-time payments on top of their year-end bonuses.
Things are different in the private sector. One human resources practitioner in a firm with more than 800 employees pointed out that companies cannot afford to wait for NWC guidelines, before budgeting for the year ahead.
The HR executive, who asked to be identified only as Ms Lim, told CNA her company still does check its increment and bonus plans against the recommendations to see if it's in the clear or off the mark.
Let's say NWC does not call for wage increases for employees who are not lower-wage. Remaining relatively silent on this means such increments are left to market forces, said Ms Lim.
This means if her company plans to give the average worker a "decent" pay raise, then it can be assured it is already doing better than other firms, she added.
One part that stood out to Ms Lim in NWC's latest guidelines was the call for management to lead by example in wage restraint, in firms that have not done well.
She said this was not articulated by the council in previous rounds of advisories.
How do NWC guidelines support lower-wage workers?
This group is a key focus for the council, which typically specifies the range of wage increases that companies should give such employees.
The NWC is also responsible for setting the job ladders and wage requirements for administrators and drivers, who come under the Progressive Wage Model (PWM).
These moves are aimed at narrowing the pay gap between lower-wage workers and the median worker.
Ms Lim described NWC guidelines as the "last line of defence" for employers to check if they are in line with PWM requirements.
Firms with workers covered by progressive wage schemes should not be waiting for the council's guidelines to plan salary adjustments, she pointed out.
Does NWC track the take-up rate for its recommendations?
Yes. It measures adoption of its recommended pay increments for lower-wage workers, through MOM's survey on annual wage changes.
The council found that adoption in 2024 was modest at 26.2 per cent, a level comparable to figures from 2021 to 2023, but lower than 2014 to 2020.
It also found that awareness of 2024 guidelines was stable in about three in five establishments.
The government also tracks adoption of the flexible wage system, which NWC has consistently recommended for some years.
This system involves having a monthly and annual variable component in the wage structure.
NWC has said this gives employers the flexibility to cut wages rather than jobs during downturns, while rewarding employees during upturns.
In 2024, 8.5 per cent of firms had both variable components, while 76 per cent had either a monthly or annual variable component.
Related:
What good are NWC guidelines if not enforceable?
While not legally binding, employers are motivated to heed the council's recommendations for different reasons.
Take Ms Lim's company, which is unionised. If wage increases and bonuses are below NWC recommendations, the union will take it up with the company, she said. Individual workers do so as well.
She hence pays attention to NWC guidelines to spot any potential risks to her company's branding as a good employer.
If her firm makes plans in line with NWC recommendations, referring to the council when communicating those plans to workers also gives the company a "stronger voice", Ms Lim added.
Even if not all companies follow the guidelines, some do – and that is already influential, according to HR consultant and educator Dr Fermin Diez.
"(It) will dictate how the market moves," said the adjunct professor.
By following the market of private sector compensation, firms that have not heeded NWC guidelines directly will still be tracking them indirectly, he pointed out.
"Not following the guidelines in terms of salary increases is a risky move, because you still end up having to deal with the market movement," he added.
Dr Diez said unions can in turn reference these movements when using the guidelines to negotiate with employers for better terms.
Mr Aslam Sardar, CEO of the Institute for Human Resource Professionals, said NWC guidelines provide a "credible reference" for employers and workers, that anchors wage decisions on fairness, productivity and long-term business sustainability.
This makes them useful for smaller businesses that do not have HR specialists, providing a practical benchmark when they review salaries and bonuses, he added.
This benchmarking can also extend to salary disputes.
NWC recommendations form the basis of mediation if an employment dispute related to an area covered in the guidelines is referred to MOM, NTUC assistant secretary-general Patrick Tay noted in a recent LinkedIn post.
If the dispute remains unresolved, it can then be escalated to the Industrial Arbitration Court.
Mr Tay, a lawyer and Member of Parliament, said he has previously referenced NWC guidelines in his submissions to the court, and that judges have given weight to the guidelines in their decisions.
Related:
How does NWC compare with wage bodies around the world?
Dr Diez said Singapore's NWC is unique for its tripartite approach and national-level recommendations.
Businesses and unions are "antagonistic" in other countries, and leaving salary decisions entirely to the business often leads to mass lay-offs, he said.
Guidance on increments and bonuses also tends to be given at the industry level or is limited to the public service in other countries, he added.
In most jurisdictions, wage committees are instead primarily concerned with recommending or setting minimum wages.
Malaysia and Indonesia have national wage councils that advise the government, which then sets the national minimum wage. Indonesia also has regional minimum wages set by governors, who are advised by wage councils.
In Thailand, the national wage committee is a tripartite body that determines the minimum daily wage in different regions.
The United Kingdom has a Low Pay Commission that recommends to the government the mandatory national living wage and national minimum wage.
In Australia, an expert panel under a Fair Work Commission sets minimum wages. It also has remuneration tribunals that determine salaries for key public office holders.
Singapore does not have a universal minimum wage, although the PWM sets mandatory basic wages for specified sectors and occupations.
Want an issue or topic explained? Email us at digitalnews [at] mediacorp.com.sg (digitalnews[at]mediacorp[dot]com[dot]sg). Your question might become a story on our site.
Continue reading...