Enable Greater Business Agility with the Flexible Wage System

One of the levers in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment is the Flexible Wage System (FWS) which allows organisations to be nimble in managing wage costs to stay agile and sustainable in the long run. An effective FWS allows businesses to better sustain themselves to ride out volatile business cycles and shocks, make quick adjustments to wage costs in line with changing business conditions; and maintain wage competitiveness to attract and retain valued employees.

As the COVID-19 pandemic severely impacted the tourism and hotel sector, here’s how Raffles Hotel capitalised on the FWS, adjusting wages temporarily to protect employee jobs to avoid a retrenchment exercise.

Saving Jobs in Times of Pandemic and Economic Crisis

Sharing by Ms Jennifer Tan, Raffles Hotel Singapore

Monthly Variable Component (MVC)

Raffles Hotel implemented the MVC back in 2001, based on the recommendations by the National Wage Council (NWC), with the support of the Food, Drinks And Allied Workers’ Union (FDAWU); with senior management taking the lead with larger wage adjustments.

To sustain the trust of employers during the pandemic, the company focused on  communication and engagement with impacted employees. Employees were issued a letter detailing the need and reasons for adjustment in MVC, as well as the details of the new MVC. Heads of Division also had one-to-one conversations with each employee to communicate and explain the content and details in the letter. Employees were provided assurance that their monthly basic salary will be reinstated when there is no longer a need for such a wage adjustment.

Annual Variable Component (AVC)

Raffles Hotel’s AVC is centred around formula defined by the hotel and the FDAWU, based on the financial performance of the hotel and individual employee’s performance for the year.

The hotel utilises the “EBITDA” indicator to determine the AVC payment. 

Key Success Factors in Implementation

• Setting clear parameters as to when and how wage adjustments will be implemented. This includes communicating the details of the MVC and AVC upfront, e.g. during the offer of employment contracts, to prepare employees mentally and financially should there be a future need for MVC to be temporarily deducted from their monthly basic salary; and reflecting it in the monthly payslip.
• Clear and transparent communication of FWS. Developed with the support of the FDAWU, the hotel and union jointly communicated and explained to colleagues the details of the hotel’s FWS.
• Continuous demonstration of care, building trust and employee engagement, e.g. through regular one-to-one conversations with the manager.

Other Cost Saving Measures

Apart from wage adjustments, which were implemented as a last resort, the hotel also:

• Actively participated and tapped government grants, as well as government initiatives to train and upskill our local workforce – this includes the Job Redesign Place and Train Programme by Workforce Singapore, Mentor Assistance Programme by the Employment and Employability Institute and Enhanced Training Support Programme by SkillsFuture Singapore.
• Extended voluntary no-pay-leave to all colleagues.
• Deployed employees as social distancing officers and temperature screening officers.

Hear more from the team from Raffles Hotel on their experience having to make wage adjustments under the FWS and subsequently having their wages restored.

The Outcome?

Raffles Hotel’s manpower strategies, action plans and ability to swiftly adjust its wage structure enabled them to continue operations throughout the COVID-19 pandemic, while maintaining its service standards and global reputation.

Importantly, the hotel protected its workforce from a retrenchment exercise throughout the pandemic and are now well-prepared to manage the future business upturn.

At TAFEP’s ‘Enable Greater Business Agility with Flexible Wage System’ webinar, Ms Zarina Piperdi, 8-List HR Consultancy Pte Ltd, also shared that an effective wage system recognises employees for their performance, skills or competency levels; and is transparent and easy for employees to understand. 

Gain a broad understanding of the various components of the FWS, the supporting systems and practices which need to be in place for FWS, and useful resources if employers need to seek further assistance on implementing the FWS.