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Singapore raises retirement age to tackle ageing workforce
04/11/2021
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Shani Alexander
Shani Alexander, Senior reporter

Faced with falling birth rates, longer life expectancy, and a reliance on migrant workers, Singapore will progressively increase its retirement age from next year, eventually raising it to 65 by 2030. Looking to tackle the challenge of an ageing workforce, the city state will also raise the age at which employers will be able to re-employ workers to 70, to allow older Singaporeans to continue working.

From 1 July 2022, the minimum retirement age will be raised from 62 to 63 and the re-employment age will increase from 67, currently, to 68. Since 1 July 2017, Singapore employers have had to offer re-employment opportunities to eligible employees who turn 62, up until the age of 67.

“Under this [statutory retirement and re-employment age] framework, employers cannot terminate an employee on grounds of age before the statutory retirement age,” said Tan See Leng, Minister for Manpower. “Workers have the assurance of continued employment up till the statutory re-employment age if they are able and wish to do so.”

Like many other developed countries, Singapore must deal with an ageing population and is thus having to adapt it laws to fit in with the changing demographic.

“Singapore has an ageing population, and its birth rate is falling, with fewer working residents for every person aged 65 and above” says Ian Lim, head of employment at TSMP Law Corporation. “At the same time, people in Singapore are living longer, and will need income for longer. It makes sense, therefore, to have people work for longer as well, provided they want to.”

In 2020, around one-quarter of Singapore’s labour force was aged 55 and above, up from 16.5% a decade ago. And the number of citizens aged 65 and over is expected to double between 2018 and 2030, reaching approximately 900,000, or one-in-four Singaporeans.

“Rather than placing the economic burden of an ageing population on the younger generation, the Singapore government has opted instead to increase the retirement and re-employment age to take advantage of its high life expectancy to keep its seniors active and gainfully employed if they choose to continue working into their twilight years,” says Clarence Ding, of counsel in Simmons & Simmons’ labour and employment practice.

What is re-employment?

Re-employment is the work model adopted in Singapore for employees who have crossed the statutory retirement age, Lim explains. “When an individual passes retirement age, the company can continue with the present employment, or make reasonable adjustments to the terms of employment by way of a re-employment contract. These tend to be rolling contracts of at least a year.

“If the employer has considered all re-employment options within the company and is still unable to identify a suitable role for the employee, it will then have to either transfer the re-employment obligation to another company if possible – with the employee’s consent, or end the employment with an employment assistance payment to the employee,” he added.

To be eligible for re-employment, a person must be a Singapore citizen or permanent resident; have worked with their current employer for at least three years before turning 62; have satisfactory work performance, as assessed by the employer; be medically fit to continue working; and born on or after 1 July 1952.

Ding advises that many employers in Singapore are already voluntarily keeping their older employees in employment past the retirement age without attempting to reduce salaries or working hours. “As companies start to place more emphasis on human capital, there is a growing recognition that older employees are a wellspring of wisdom and experience – qualities that can only be gained through years of experience.”

However, there may be unintended consequences of the government’s latest move. “Increasing the retirement and re-employment age may end up sending the wrong signal that employers must retire employees when they reach the retirement age, and thereafter only re-employ them with reduced terms and pay if they meet the eligibility criteria,” says Ding.

“This is a misconception, and regrettably one that several less progressive employers have accepted as the default legal position. This has resulted in the Retirement and Re-employment Act being used as a threshold to signal the minimum obligation which an employer must meet with respect to its older employees.”

Age discrimination

Age discrimination is another issue employers should be wary of. “Some employers tend to think that younger employees are better,” Lim says. “A company has to be careful here that it doesn’t force older employees out purely on account of age if they still have satisfactory work performance and are able to continue working, as those employees can potentially then claim age discrimination.”

Talent retention and succession planning should not be ignored either, Ding suggests: “Based on what we are seeing, the overriding concern for employers is their obligation to keep older employees re-employed for a longer period of time. This concern stems largely from the need for renewal, business continuity, and succession planning.

“There is a perception that if older employees, particularly senior employees, remain employed for a longer period of time, they will continue to occupy these plum positions, thereby creating a glass ceiling which younger, often hungrier and more innovative, employees cannot breach until those older employees eventually retire. This may have the effect of stifling innovation and renewal within the organisation.”