THOSE companies which cannot find a way to re-employ their workers at retirement age should offer them a severance pay-out of between $4,500 and $10,000.

Known as the Employment Assistance Payment (EAP), it should be a last resort for employers who cannot offer re-employment despite their best efforts.

The sum will tide workers through a period of job search or training.

The EAP range has been set to strike a balance between being so low that it becomes an easy alternative for employers, and so high that it is an onerous burden, said Manpower Minister Gan Kim Yong in Parliament yesterday.

It is a key feature of the tripartite guidelines on re-employment, which were also released yesterday.

The guidelines will form the core of the law to be passed by 2012 for the re-employment of workers up to age 65, and later, up to 67.

Mr Gan was questioned by several MPs during his ministry's Budget debate on the challenges facing mature workers, with Madam Halimah Yacob (Jurong GRC) and Mr Ang Mong Seng (Hong Kah GRC) pressing the issue of the EAP in particular.

Bringing up fears that the Government's new focus on productivity would leave older workers behind, Madam Halimah said that there was concern from workers that the EAP would be a 'convenient device' for employers to get rid of them.

Mr Gan said that feedback from tripartite partners indicated that three months' salary would be a practical reference point.

The minimum sum of $4,500 is roughly three months' salary for the 25th percentile of workers, while the ceiling of $10,000 would cover the same period for two thirds of the workforce.

Besides the EAP specification, the guidelines also featured one other change from the draft version, released last November for a period of public consultation.

The original draft called for employers to start engaging employees on re-employment issues one year before they hit retirement age. With feedback from employers, a more 'realistic' period of six months has been set, said Mr Gan.

He also announced additional assistance for companies wanting to put in place procedures for re-employment before the 2012 legislation.

The Advantage Scheme, run by the Workforce Development Agency, will offer a new grant of $10,000 to small- and medium-sized enterprises (SMEs).

Called the Capability Development grant, it will go towards helping SMEs implement human resource systems to facilitate re-employment.

This is on top of the up to $400,000 in grants available to any company to recruit, retain and re-employ older workers.

Opposition MP Low Thia Khiang brought up the issue of wage cuts for those at retirement age, noting that such provisions 'dampen the zest of an ageing society to continue working beyond retirement age'.

But Mr Gan defended the provision, introduced in 1998, to allow companies to cut, by up to 10 per cent, wages at retirement age. Seniority-based wage systems, he said, adversely affect the employability of older workers.

This article was first published in The Straits Times.