Landmark Employment Act

Background

The Employment Act came into effect on 15 August 1968, and it standardised and regulated the terms and conditions of employment for all employees regardless of whether they were workmen, clerks or shop assistants.¹ The act also abolished certain discriminatory practices, rationalised the pay structure by removing abuses of overtime work, and protected industries and businesses against excessive retrenchment benefits.² With its promulgation, the act repealed three former legislations related to employment and working conditions. These were the Labour Ordinance 1955, the Shop Assistants Employment Ordinance 1957, and the Clerks Employment Ordinance 1957.³

The rationale for the Act
The Employment Act was one of the actions taken to prepare Singapore for the economic impact from the impending withdrawal of the British military forces in 1971.⁴ The government anticipated that the withdrawal would raise the unemployment rate which stood at 7.3 percent in 1968. Taking into account the existing number of unemployed and the addition of some 25,500 employed by the British military, the government estimated that the number of unemployed in 1971 could be as high as 120,000.⁵

Apart from the unemployment problem, the British withdrawal meant that some S$450 million of annual spending by the British armed forces would be lost. This constituted about 14 percent of Singapore’s Gross Domestic Product (GDP) at the time.⁶

To fill the gap and generate employment, the government determined that there was a need to accelerate economic growth through the expansion of various sectors such as manufacturing, tourism and shipping. In order to do this, the government had to ensure that there was a steady flow of foreign investment into Singapore. To increase the country’s attractiveness as a destination for foreign investment, the government had to maintain a climate of peace and stability in the labour market. It also had to increase labour productivity and efficiency in the business environment to increase the competitiveness of its exports. To create more convenient and systematic employment conditions for businesses and industries, the government sought to update or repeal outdated employment-related legislations.⁷ It was in this context that S. Rajaratnam, then Minister for Foreign Affairs and Minister for Labour, introduced the Employment Bill in parliament on 15 May 1968.⁸

Provisions in the Act
The Employment Bill contained a number of key provisions. First, it abolished the statutory definitions of clerks, industrial clerks, shop assistants and workmen. The bill brought all employees, other than those employed in a managerial, executive or confidential position, under a contract of service. This arrangement was to allow the government to establish standardised employment conditions for all employees across the workforce.⁹

Second, the bill provided a standard work week of 44 hours for all classes of employees.¹⁰ This standardisation of working hours was to remove the discrimination that existed between white-collar and blue-collar workers. The legislators wanted to ensure that “those who work with their hands” would be given the same respect and status as “those who sit in offices”.¹¹ The aim was to encourage young people to take up jobs in industries.

Third, the bill stipulated that overtime rates would only become operative after an employee had completed 44 work hours in one week. It also provided that an employee was not permitted to work more than 48 hours of overtime in one month. The provision was crafted following instances where some workers enjoyed excessive benefits from overtime by earning more than 200 percent of their substantive pay. In addition, the bill limited the amount an employee received when working on his rest day to a maximum of double his ordinary pay. Such regulations in the Employment Bill would help companies reduce costs by saving on overtime and rest day payments. This would in turn generate employment as companies could then channel the savings into creating more regular jobs.¹²

Fourth, the bill restricted the number of confinements for female employees due to pregnancy to three only. In this way, the Employment Bill discouraged the setting up of large families. It was the government’s view then that smaller families would result in better and happier living conditions because this reduced the cost of living.¹³

Fifth, the bill contained provisions to define the number of leave days to which each employee was entitled. It set 11 holidays a year for all employees, 14 days of annual leave for employees who had more than 10 years of service, and seven days of annual leave for those who had less than 10 years of service. The bill also provided each employee with 14 days of sick leave if hospitalisation was not needed and 28 days, including the 14 days, if hospitalisation was needed.¹⁴

Sixth, the bill removed retrenchment benefit from an employee with less than three years of service. This provision was necessary to ensure stability in new and developing industries. The government also felt it was likely that factories would hire workers on a short-term basis because of an increase in production for export markets. It was thought to be unfair if these new industries were saddled with retrenchment benefits to such workers once their services were no longer required.¹⁵

Seventh, the bill prohibited the employment of a person after the age of 55. This provision was included to ensure that unproductive and inefficient workers were removed so that job opportunities could be given to more productive and able youngsters.¹⁶ For those who were leaving service, an employee with less than seven years of continuous service with the same employer would not be entitled to any retirement benefit other than that payable under the Central Provident Fund (CPF) Ordinance.¹⁷

Eighth, the bill dismissed the payment of bonuses or ex gratia payments in collective agreements other than as an incentive to an employee to increase his productivity or as a reward for his performance.¹⁸ The government explained that the reason for the clause was to curb unrestrained demands for bonuses that could affect profit margins of new industries. Furthermore, it was to relate rewards to more tangible and meaningful norms like efficiency, productivity, profits and economic growth instead of abstract and arbitrary principles of justice.¹⁹

The debate in parliament
The Employment Bill drew much discussion during its second reading which lasted for four days from 10 to 15 July 1968. Many Members of Parliament (MPs) agreed that the proposed legislation was likely to create more settled and stable labour conditions in Singapore. This would in turn attract foreign investment and expand Singapore’s industries. The MPs were also confident that the Employment Bill would increase labour productivity and create more jobs.²⁰

However, some MPs in particular Seah Mui Kok, who was then MP for Bukit Ho Swee and secretary-general of the National Trades Union Congress (NTUC), were concerned that certain provisions in the Employment Bill would unsettle the morale of workers.²¹ The two provisions that drew the most debate were the abolition of employment of a person after the age of 55 and the disallowing of bonus payments in collective agreements. There were also debates concerning the number of sick leave days and the eligibility conditions for retrenchment benefits that were stipulated in the Employment Bill.²²

Regarding the concern with the abolition of employment of a person after the age of 55, the MPs requested that the provision be removed from the Employment Bill. After taking into consideration that the economically active life of a Singaporean could stretch well into his 70s, some MPs felt that the legislative measure was “extremely unwise”. They also thought that the provision was redundant as most existing collective agreements already contained provisions to retire employees at the age of 55. Even then, a few MPs pointed out that some companies might not discharge these employees because of their accumulated skill and experience.²³

As for the removal of bonuses from collective agreements, the MPs asked that the provision be amended so that employees were given a chance to negotiate with employers for an annual bonus.²⁴ They felt it would be unfair to deprive employees of any fixed bonuses especially as the practice was already an entrenched feature of the salary or wage structure of employees in the commercial sector in Singapore.²⁵ Some MPs saw the payment of fixed bonuses as a necessity because most employees would need money at the end of the year for expenses incurred during festive occasions. They also noted that employees with families needed the extra money to buy school materials such as textbooks or uniforms for their children.²⁶ The proposed amendment in collective agreements allowed a bonus payment not exceeding one month’s wages. Anything more than that would remain open for mutual negotiation or agreement between employer and employee.²⁷

Regarding annual sick leave for employees, the MPs requested that the number of days for hospitalisation leave be revised from the proposed 28 days to 60 days. This was because in the event of illness, hospitalisation was not a fringe benefit but a necessity for a worker's health. Furthermore, it was unlikely that any employer would object to an employee’s request for longer hospitalisation leave.²⁸
 
Finally, the MPs recommended that the length of service that qualified an employee for retirement benefits be amended from seven to five years. It was felt that seven years was too long especially for employees in the private sector who did not always have the benefit of a collective agreement. This meant that they had nothing more than money saved up through the contributions to the CPF. The sum payable under the CPF on cessation of service was deemed inadequate to sustain an employee after his retirement.²⁹

The recommendations were accepted and the Employment Bill was passed on 31 July 1968³⁰ and given the president’s assent on 6 August the following month.³¹ The Employment Act came into effect on 15 August 1968.³² To help workers understand how they would be affected by the act, A guide to the Employment Act was published.³³

Impact of the act
The 1968 Employment Act had the desired effect of attracting foreign investments. The reduction in labour costs and improved stability of labour conditions made Singapore’s manufacturing sector more attractive. This led to the rapid expansion of the Singapore economy, which grew at an average annual rate of 13.4 percent between 1968 and 1972. Singapore’s unemployment rate began to fall. By the time the British completed their withdrawal in 1971, the unemployment rate had dropped from 7.3 percent in 1968 to 4.8 percent in 1971.³⁴ Singapore’s unemployment rate continued to slide throughout the 1970s, hitting 3.9 percent in 1974 before a further decline to 3.5 percent by the end of 1980.³⁵ By then, Singapore had experienced a labour shortage and brought in foreign workers to relieve the tight labour market.³⁶



Authors
Nurhidayahti Miharja & Lim Tin Seng



References
1. Parliament of Singapore, Addendum to President’s Speech, vol. 27 of Parliamentary Debates: Official Report, 6 May 1968, col. 15. (Call no. RCLOS 328.5957 SIN)
2. “Goh: What We Offer to Encourage New Industries,” Straits Times, 21 July 1968, 5 (From NewspaperSG); Goh Keng Swee, The Practice of Economic Growth (Singapore, Federal Publications, 1995), 9. (Call no. RSING 330.95957 GOH)
3. Parliament of Singapore, Addendum to President’s Speech, col. 15.
4. Parliament of Singapore, Second Reading of Employment Bill, vol. 27 of Parliamentary Debates: Official Report, 10 July 1968, col. 483. (Call no. RCLOS 328.5957 SIN)
5. Parliament of Singapore, Second Reading of Employment Bill, 484.
6. Parliament of Singapore, Second Reading of Employment Bill, 483–4.
7. Parliament of Singapore, Second Reading of Employment Bill, 485–6.
8. Parliament of Singapore, First Reading of Employment Bill, vol. 27 of Parliamentary Debates: Official Report, 15 May 1968, col. 278. (Call no. RCLOS 328.5957 SIN)
9. Parliament of Singapore, Second Reading of Employment Bill, 473.
10. Parliament of Singapore, Second Reading of Employment Bill, 476.
11. Parliament of Singapore, Second Reading of Employment Bill, 476.
12. Parliament of Singapore, Second Reading of Employment Bill, 476.
13. Parliament of Singapore, Second Reading of Employment Bill, 480.
14. Parliament of Singapore, Second Reading of Employment Bill, 478.
15. Parliament of Singapore, Second Reading of Employment Bill, 479.
16. Parliament of Singapore, Second Reading of Employment Bill, 473.
17. Parliament of Singapore, Second Reading of Employment Bill, 479.
18. Parliament of Singapore, Second Reading of Employment Bill, 479.
19. Parliament of Singapore, Second Reading of Employment Bill, 482.
20. Parliament of Singapore, Second Reading of Employment Bill, vol. 27 of Parliamentary Debates: Official Report, 15 July 1968, col. 629–30. (Call no. RCLOS 328.5957 SIN)
21. Parliament of Singapore, Second Reading of Employment Bill, vol. 27 of Parliamentary Debates: Official Report, 11 July 1968, col. 529. (Call no. RCLOS 328.5957 SIN)
22. Parliament of Singapore, Second Reading of Employment Bill, 630–1.
23. Parliament of Singapore, Second Reading of Employment Bill, 660–1.
24. Parliament of Singapore, Third Reading of Employment Bill, vol. 27 of Parliamentary Debates: Official Report, 31 July 1968, col. 721. (Call no. RCLOS 328.5957 SIN)
25. Parliament of Singapore, Second Reading of Employment Bill, 677.
26. Parliament of Singapore, Second Reading of Employment Bill, 529.
27. Parliament of Singapore, Third Reading of Employment Bill, 722.
28. Parliament of Singapore, Second Reading of Employment Bill, 673.
29. Parliament of Singapore, Second Reading of Employment Bill, 675.
30. Parliament of Singapore, Third Reading of Employment Bill, 722.
31. Parliament of Singapore, Assent to Bills Passed, vol. 27 of Parliamentary Debates: Official Report, 3 December 1968, col. 5. (Call no. RCLOS 328.5957 SIN)
32. The Employment Act, 1968, Sp.S 237/1968, Government Gazette. Subsidiary Legislation Supplement, 12 August 1968, 471. (Call no. RCLOS 348.5957 SGGSLS)
33. A Guide to the Employment Act, 1968 (Singapore: Government Printer, 1968). (Call no. RCLOS 344.595701 SIN)
34. Lim Chong Yah and Rosalind Chew, eds., Wages and Wages Policies: Tripartism in Singapore (Singapore: World Scientific, 1998), 95. (Call no. RSING 331.295957 WAG)
35. W. G. Huff, The Economic Growth of Singapore: Trade and Development in the Twentieth Century (Cambridge: Cambridge University Press, 1994), 291. (Call no. RSING 338.95957009 HUF)
36. Lim and Chew, Wages and Wages Policies, 95.



The information in this article is valid as of 9 April 2014 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.