I REFER to last Saturday's editorial, 'Pay cut at 60 a relic to be discarded'.

The Singapore National Employers Federation (SNEF) has taken note of the call by the labour movement to review the practice by some companies of reducing wages at 60. SNEF will consult its 2,000 members and the business chambers, and table feedback for discussion among the tripartite partners.

In extending the retirement age from 60 to 62, the tripartite partners addressed the cost impact of retrenchment benefits, seniority-based wages and medical and employee benefits. Feedback from the business community was that overall wage costs should be reduced after 60 to support the extension of the retirement age. Across the Organisation for Economic Cooperation and Development (OECD) countries, there is some evidence of a negative impact of seniority wages on employment opportunities for older (male) workers.

The purpose of the wage reduction measure at 60 was to strengthen the employability of workers in the same company. Feedback showed that when a worker who retired at 60 switched companies, he was likely to take a wage cut of 20 to 25 per cent.

According to a Ministry of Manpower survey, the maximum-minimum salary ratio for rank-and-file workers has narrowed to 1.58 as at December last year. Wage formation in small and medium-sized enterprises is less structured and wages may still continue to reflect loyalty, experience and age.

However, we recognise that generally, the impact of age on wages has diminished over the years.

According to an SNEF survey of 340 companies in 2005, only 15 per cent cut wages at 60. Thus, it is not correct to say in the editorial that employers have embraced this practice fully and with alacrity. In fact, legislation removed acrimony between employers and employees when discussing wage cuts at 60.

Companies that have not reduced salaries at 60 have assessed that their wage levels reflect the value of the worker's contributions and of the job. We will examine why some companies continue to reduce wages at 60 in order to continue to employ their workers. This will provide us with a more objective basis for a review of the practice.

Koh Juan Kiat
Executive Director
Singapore National Employers Federation

This article was first published in The Straits Times.