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EMPLOYERS should raise the monthly variable component (MVC) of workers' wages beyond 10 per cent, so that their companies have greater flexibility to deal with future economic shocks, said Manpower Minister Gan Kim Yong.
He was speaking at a National Day Observance Ceremony for the electronics and precision- engineering cluster held at Yokogawa Electric Asia in Bedok South yesterday when he made that suggestion.
Mr Gan credits Singapore's flexible wage system for helping firms respond and adjust quickly to save jobs.
"During the recent downturn, many companies were able to make use of the flexible wage system, such as the MVC and annual wage components (AVC) in their wage structures, to reduce wage costs quickly and save jobs," he said.
The MVC, first proposed by the National Wages Council in 1999, is a percentage of an employee's salary which can be removed to reduce labour costs when the situation warrants.
The wage structure recommended by the Government is 70 per cent basic wage, 10 per cent MVC and 20 per cent AVC.
Market uncertainty in the United States and Europe, as well as an expected tight labour market in Singapore, are reasons why companies should still remain flexible, said Mr Gan.
He added: "We need to help companies to build up a greater buffer, greater flexibility, and that's why I encourage more companies to consider putting more wage increases into the MVC.
"For those who have reached the 10 per cent, they can consider going beyond 10 per cent."
Companies can explore other alternatives to inject flexibility into their wage structure, such as by tying the company's or an individual's performance to pay.
Asked by reporters whether employees would feel unhappy that their basic wage would be lowered, Mr Gan pointed out that it was important for an employee to have flexibility too. It would mean greater rewards during good times and safekeeping their jobs during bad times, he said.
As at last December, 35 per cent of employees were working in establishments that had adopted the MVC, according to a Ministry of Manpower report. More unionised workers than those working in non-unionised establishments had MVC in their wages, at 72 per cent versus 18 per cent.
The MVC percentage at unionised establishments and non-unionised establishments were 9.5 per cent and 9.6 per cent on average, respectively.
Mr Lai Ah Keow, managing director of Yokogawa Electric Asia, said that although his firm has adopted the MVC during the downturn, none of his 1,500 employees had their pay cut.
On an aside, Madam Halimah Yacob, NTUC deputy secretary- general and executive secretary of United Workers of Electronic and Electrical Industries, said that public servants can expect a growth bonus this year as the economy has done well.
