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Enactment of the Employment Act 15th Aug 1968

The Employment Act came into effect on 15 August 1968.[1] It standardised and regulated the terms and conditions of employment for all employees regardless of their occupations and titles.[2] The act also sought to abolish certain discriminatory practices, to rationalise the pay structure by removing abuses of overtime work, and to protect industries and businesses against excessive retrenchment benefits.[3] With its promulgation, the act repealed three former legislations related to employment and working conditions.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.[4]

Reasons for the Employment Act
The Employment Act was one of the planned efforts by the government to prepare Singapore for the economic fallout that would arise from the impending withdrawal of the British Armed Forces from Singapore by 1971.  As the British were employing some 25,500 Singaporeans, the government anticipated that the withdrawal would cause a rise in unemployment . Apart from the unemployment problem, the government was also aware that the British withdrawal meant that some S$450 million of annual spending by the British military would be lost.[5]

To fill the revenue gap and to generate employment, the government decided that there was an urgent need to accelerate economic growth through the expansion of various sectors such as manufacturing, tourism and shipping. In order to achieve this, the government had to ensure that there was a steady flow of foreign investment into Singapore. Hence, 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 had to also increase labour productivity and efficiency in the business environment in order to enhance the competitiveness of Singapore’s exports. To create more convenient and systematic employment conditions for businesses and industries, the government sought to update or repeal outdated employment-related legislations.[6] It was against this backdrop that S. Rajaratnam, who was then the Minister for Foreign Affairs and Minister for Labour, introduced the Employment Bill in parliament on 15 May 1968.[7]

Provisions in the bill
The Employment Bill contained a number of key provisions. First, it abolished the statutory distinctions between clerks, industrial clerks, shop assistants and workmen, and brought all employees, other than those employed in a managerial, executive or confidential position, under a contract of service. This arrangement was to facilitate the government in establishing standardised employment conditions for all employees across the workforce.[8]

Second, the bill specified a standard workweek of 44 hours for all classes of employees.[9] By standardising working hours, the bill effectively removed the discrimination that had previously existed between white-collar and blue-collar workers. The government was of the view that “those who work with their hands” should be accorded the same respect and status as “those who sit in offices”. The government had envisaged that more youths would be encouraged to take up jobs in the various industries, thereby giving rise to an industrial society.[10]

Third, the bill stipulated that overtime rates would only become effective after an employee had completed 44 work hours in one week. It also stated that an employee was not permitted to work more than 48 hours of overtime in one month. In addition, the bill limited the amount an employee would receive if he had to work on his rest day to a maximum amount that was equivalent to two times his ordinary pay. It was envisaged that such regulations in the Employment Bill would help companies to reduce costs by saving on overtime and rest day payments. Cost reductions would in turn generate more employment as companies could then channel the savings into creating more regular jobs.[11]

Fourth, the bill restricted the number of pregnancy confinement periods to only three for female employees. The Employment Bill, therefore, discouraged the creation of large families. It was the government’s view then that smaller families would result in better and happier living conditions because the cost of living would be reduced.[12]

Fifth, the bill contained provisions that defined the number of leave days each employee was entitled to. The provisions set out 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 with fewer than 10 years of service. The bill also provided each employee with 14 days of sick leave if hospitalisation was not required and 28 days, including the 14 days, if hospitalisation was needed.[13]

Sixth, the bill removed retrenchment benefits from employees with fewer than three years of service. This provision was necessary to ensure stability in new and developing industries. The government felt that factories would most likely hire workers on a short-term rather than long-term basis due to an emphasis on production for export markets. Hence, it would be unfair if these new industries had to pay retrenchment benefits to such workers once their services were no longer required.[14]

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. Employees who were leaving service and who had fewer 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.[15]

Eighth, the bill dismissed the payment of bonuses or ex gratia payments in collective agreements other than those given as incentives to employees to increase productivity or as a reward for performance.[16] 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, the government wanted to align rewards to more tangible and meaningful criteria such as efficiency, productivity, profits and economic growth instead of abstract and arbitrary principles of justice.[17]

Debate in parliament
The Employment Bill, which was given its second reading in parliament on 10 July 1968, resulted in much discussion that lasted until 15 July. Many Members of Parliament (MPs) agreed that the proposed legislation was likely to create more settled and stable labour conditions in Singapore and would in turn increase labour productivity and create more jobs.[18] However, some MPs, particularly Seah Mui Kok, who was then the 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 have an unsettling effect on the morale of workers.[19] The two provisions that drew the most debate were the termination of employment of a person after the age of 55 and the cessation of bonus payments in collective agreements. There were also debates concerning the number of days of sick leave and the eligibility conditions for retrenchment benefits.[20]

Regarding the issue over the termination 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, the 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.[21]

As for the removal of bonuses from collective agreements, the MPs asked that the provision be amended so that employees would be given a chance to negotiate with their employers for an annual bonus.[22] They felt that it was 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 working in the private sector.[23] Some MPs saw the payment of fixed bonuses as a necessity because most employees would need extra money at the end of the year for expenses incurred during festive occasions. They also noted that employees with families needed the additional money at year-end to buy school materials such as textbooks or uniforms for their children.[24] The Employment Bill was subsequently amended to incorporate a bonus payment not exceeding one month’s wages in collective agreements.  Anything more than  that amount would remain open for mutual negotiation or agreement between the employer and employee.[25]

On the issue of annual sick leave for employees, the MPs requested that the number of days of hospitalisation leave be increased from the proposed 28 days to 60 days. This was because in the event of certain illnesses, hospitalisation was not a fringe benefit but a necessity for the well-being of workers. It was unlikely that any employer would object to an employee’s request for a longer hospitalisation leave.[26]

Finally, the MPs recommended that the number of years an employee needed to be in service in order to be eligible for retirement benefits be revised from seven to five years. The period of seven years was deemed too long especially for employees in the private sector as they did not have the benefit of a collective agreement. This meant that these employees had nothing more than money saved up through contributions to the CPF. The sum payable under the CPF on cessation of service was deemed inadequate to sustain an employee after his retirement.[27] Hence, the number of years in service was amended to five years instead.[28]

Based on the recommendations by the NTUC, the amended Employment Bill was committed to a Select Committee on 15 July and 31 July 1968.[29] Rajaratnam accepted these recommendations on 31 July.[30] The Employment Bill was read for the third time and passed on the same day on 31 July.[31] The president’s assent  was given on 6 August [32] and the Employment Act came into effect on 15 August.[33]

Impact of the bill
Following the enactment of the act, foreign investment began to pour into Singapore’s manufacturing sector, bolstered by the reduction in labour costs and improved labour conditions. An increase in foreign investment led to the rapid expansion of the Singapore economy, which grew at an average annual rate of 13.4 percent between 1968 and 1972. With the rapid economic growth, Singapore’s unemployment rate began to fall. By the time the British completed the withdrawal of their troops in 1971, the unemployment rate had decreased from 7.3 percent in 1968 to 4.8 percent in 1971.[34]

References
1. Republic of Singapore. Government Gazette. Subsidiary Legislation Supplement. (1968, August 12). The Employment Act (Commencement) Notification 1968 (S 237/1968, p. 471). Singapore: Government Printing Office. Call no.: RCLOS 348.5957 SGGSLS; Republic of Singapore. Government Gazette. Acts Supplement. (1968, August 12). The Employment Act 1968 (Act 17 of 1968, pp. 141–207). Singapore: Government Printing Office. Call no.: RCLOS 348.5957 SGGAS.
2. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, May 6). Addendum to President’s Speech (Vol. 27, cols. 15–32). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
3. Goh K. S. (1995) The practice of economic growth (p. 9). Singapore: Federal Publications. Call no.: RSING 330.95957 GOH.
4. Parliamentary Debates: Official Report, 6 May 1968, Addendum, Vol. 27, col. 15.
5. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, July 10). Second Reading of Employment Bill (Vol. 27, cols. 483–484). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
6. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, cols. 485–486.
7. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, May 15). First Reading of Employment Bill (Vol. 27, cols. 278). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
8. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 473.
9. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 476.
10. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, cols. 475–476.
11. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 476.
12. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 480.
13. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 478.
14. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 479.
15. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, cols. 473, 479.
16. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 479.
17. Parliamentary Debates: Official Report, 10 Jul 1968, Second Reading, Vol. 27, col. 482.
18. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, July 15). Second Reading of Employment Bill (Vol. 27, cols. 621–656). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
19. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, July 11). Second Reading of Employment Bill (Vol. 27, cols. 529). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
20. Parliamentary Debates: Official Report, 15 Jul 1968, Second Reading, Vol. 27, cols. 630–631.
21. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, July 15). Considered in Committee of the Employment Bill (Vol. 27, cols. 660-661). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
22. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, July 31). Considered in Committee of the Employment Bill (Vol. 27, cols. 719–722). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
23. Parliamentary Debates: Official Report, 15 Jul 1968, Considered in Committee, Vol. 27, col. 677.
24. Parliamentary Debates: Official Report, 11 Jul 1968, Second Reading, Vol. 27, col. 529–530.
25. Parliamentary Debates: Official Report, 31 Jul 1968, Considered in Committee, Vol. 27, col. 722.
26. Parliamentary Debates: Official Report, 15 Jul 1968, Considered in Committee, Vol. 27, col. 673.
27. Parliamentary Debates: Official Report, 15 Jul 1968, Considered in Committee, Vol. 27, col. 675.
28. Parliamentary Debates: Official Report, 31 Jul 1968, Considered in Committee, Vol. 27, col. 721.
29. Parliamentary Debates: Official Report, 15 Jul 1968, Second Reading, Vol. 27, col. 656; Parliamentary Debates: Official Report, 31 Jul 1968, Considered in Committee, Vol. 27, col. 719.
30. Parliamentary Debates: Official Report, 31 Jul 1968, Considered in Committee, Vol. 27, col. 722.
31. Republic of Singapore. Parliament. Parliamentary Debates: Official Report (1968, July 31). Third Reading of Employment Bill (Vol. 27, col. 722). Call no.: RCLOS 328.5957 SIN.
32. Republic of Singapore. Parliament. Parliamentary Debates: Official Report. (1968, December 3). Assent to bills passed (Vol. 28, col. 5). Singapore: Government Printing Office. Call no.: RCLOS 328.5957 SIN.
33. Government Gazette. Subsidiary Legislation Supplement, 12 Aug 1968, S 237/1968, p. 471.
34. Lim, C. Y., & Chew, R. (Eds.) (1998). Wages and wages policies: Tripartism in Singapore (p. 95) Singapore: World Scientific. Call no.: RSING 331.295957 WAG.

 

The information in this article is valid as at 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.

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