Tripatite Workgroup on older workers releases all 22 recommendations

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As affirmed by PM Lee Hsien Loong during his NDR 2019 speech, older workers will soon get more support when the Government raises the ages for retirement, re-employment and the CPF rates.

PM Lee explained that the Tripartite Workgroup on Older Workers which was formed in 2018 to study how best to do so, has delivered its final report and recommendations, which the government has accepted in full.

To enable older workers to continue to be gainfully employed and financially independent, the retirement and re-employment age will be raised in stages to 65 and 70 respectively, by 2030.

For CPF contribution rates, the plan is to raise the contribution rates for those between 55 to 60 to be the same as those under 55. Currently, total CPF contribution rate is 37% for workers aged 55 and below.

Eventually, those aged 60 and below will enjoy the same CPF rates as younger workers, and CPF rates will only begin to taper down after the age of 60, levelling off after 70.

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How the workgroup cautioned that “Raising their CPF contributions could affect their employability with not much boost to their retirement savings, as employers have no obligation to re-employ workers beyond 70,” it said. ”As a start, employers and workers should each increase their CPF contribution rate by either 0.5%-point or 1%-point in 2021."

Here’s your easy reference to staying on top of the upcoming changes and a closer look at all the 22 recommendations as listed below:

Retirement and re-employment

1. Relevance of the Retirement and Re-employment framework

The Workgroup reaffirms the validity and usefulness of the statutory Retirement Age and Re-Employment Age to safeguard the interests of older workers as well as expand the labour pool for companies.

2. The workgroup recommends both the retirement age and re-employment age should be raised by three years to 65 and 70 respectively. “This is a realistic goal, taking into account improvements in healthy life expectancy, the better-educated and higher-skilled workers today, and enhanced organisational capacity to manage older workers well.”

3. However this should be done guadually over the next decade (i.e. by 2030). The workgroup said that this would give enough lead-time for businesses to plan.

4. The first increases in the retirement age (to 63) and re-employment age (to 68) should take effect from 1 July 2022.

5. The minimum re-employment contract duration should be retained at one year, to accord businesses some flexibility. However Employers are encouraged to offer re-employed workers longer contracts beyond what is required under the RRA.

6. The Employment Assistance Payment formula should be updated and take effect from 1 July 2022.

The Employment Assistance Payment (EAP) requires employers who are unable to offer older workers re-employment with a cash payout to help them transition to a new job or adjust to not being employed.

7. For employees hired at age 55 and over, the qualifying period to be eligible for re-employment should be reduced from three to two years.

8. The Government should continue to work with employers, including public sector agencies, to conduct periodic reviews to ensure the relevance of the current exemptions for specific groups.

9. The Government should provide a wage offset scheme to accompany the raising of the retirement age and re-employment age to 65 and 70 respectively.

Retirement adequacy for older workers

10. Raise CPF contribution rates for workers aged 55 to 70, retaining a stepped reduction in CPF contribution rates by age bands.

  • The total CPF contribution rate for those aged 55 to 60 should be raised to 37% in the longer term.

  • For workers aged 60 to 70, the CPF contribution rate increase should be smaller but meaningful.

  • For workers above 70, the total CPF contribution rate should remain unchanged at 12.5%. Raising CPF contributions risks making these workers less employable, with no significant gains in retirement adequacy, as employers have no obligation to reemploy workers beyond the age of 70.

11. As a first step, the CPF contribution rates should be raised from 1 January 2021. Employers and workers will each increase their contribution by either 0.5%-point or 1%-point.

12. Both employers and workers should be involved at each step of the series of rate increases. This is consonant with the tripartite approach to improving retirement adequacy, with CPF contributions, and Government providing progressive and risk-free interest rates to grow CPF savings.

13. Each subsequent increase in CPF contribution rates should not exceed 1%-point for workers or employers. This will minimise the impact on takehome pay and wage costs. There may be a need to defer the contribution rate increases in some years if economic conditions warrant. While aiming to complete the full increase within a decade, we should also retain the flexibility to stretch the timeline beyond 2030 if necessary.

14. The contribution increases should be fully allocated to the Special Account (SA). This will maximise the interest earned and provide a bigger boost to workers’ retirement incomes.

15. Given the economic slowdown and uncertain outlook, employers feel strongly that the Workgroup’s recommendations are ambitious in scale. The Government should provide transitional support to employers, in the form of one-off wage offsets, to mitigate the higher CPF contribution rates.

Recommendations for an inclusive and progressive workplaces that value older workers

16. Employers should engage mature and older workers in structured career planning sessions. Conversations with mature workers (around age 45) can be centred on their future career plans and potential support from companies, while those with older workers (around age 55) can focus on relevant skills needed for re-employment.

17. Employers should embark on job redesign to effect organisation-wide and systems-level changes so as to (i) increase the number of older workers who can perform the job; and/or (ii) extend upwards the age at which workers can do a job.

18. Employers should be encouraged to provide part-time re-employment opportunities, and commit to do so via their HR policies and employment contracts. The approach should be promotional.

19. Employers should restructure employer-provided medical benefits from GHS schemes to additional MediSave contributions or other flexible benefits. Such MediSave contributions or flexible benefits could be used by employees to purchase portable medical benefits, such as Integrated Shield Plans that ride on MediShield Life.

20. Employers’ determination of a worker’s fitness for work in a particular role should not be based solely on age, but also on the objective assessment of (i) job requirements; and (ii) relevant health or physical conditions that would affect his performance of those job requirements.

21. Employers should implement workplace health programmes that are appropriate for the ageing profile of their workforce. At the same time, the Workgroup calls on workers to take responsibility for their health, keep themselves fit for work, and participate in workplace health programmes.

22. The Government should support employers to undertake key shifts in their HR policies. In particular, to: (i) systematically create part-time opportunities for employees seeking re-employment; (ii) raise awareness of structured career planning sessions, and build capabilities to conduct such sessions; and (iii) support transformational job redesign to overhaul organisation-level systems and processes, so as to benefit more older workers.

The Workgroup recommends initiatives be launched by the government on a national level to support employers in carrying out some of the specific recommendations outlined previously, in particular, #16, #17, #18.