Last Drawn Salary Cap for Employment Assistance Package

Mr Gerald Giam Yean Song asked the Minister for Manpower whether the Employment Assistance Package under the Retirement and Re-employment Act can be pegged to an employee’s last drawn salary instead of the current cap of $5,500 to $13,000 regardless of last drawn salary.

The concept of re-employment was implemented to enable Singaporeans to work for as long as they are willing and able to and to raise our senior worker employment rates to maximise the potential of our limited manpower resources. If an employer has considered all available re-employment options within the organisation and is unable to identify a suitable job for the senior worker, the firm may offer him or her an Employment Assistance Payment (EAP). The EAP is to be offered only as a last resort and is meant to help the worker tide over a period of time while he or she seeks alternative employment. With these objectives in mind, the tripartite partners agreed on three key principles for the EAP.

First, the EAP should be set at a reasonable number of months of last drawn salary. If the EAP is too high, it may have the unintended consequence of encouraging workers to stop work earlier. If the EAP is too low, employers may too readily offer to pay the EAP.

Second, there should be a minimum EAP amount. This protects lower wage workers, by better ensuring that firms offer them re-employment and by providing greater support if they are not re-employed since they may have greater difficulty than other workers in seeking alternative employment.

Third, there should be a maximum EAP amount to moderate the financial burden on employers. This is so that it does not discourage employers from considering older job applicants, who may be eligible for EAP in a few years.

The EAP was last reviewed in 2019 by the Tripartite Workgroup on Older Workers. The current position preserves these key principles, which remain relevant.

Our re-employment framework, including the EAP, have supported raising the employment rate for senior workers. In 2018, our Average Effective Retirement Age, which provides a gauge of what age people actually stop working, was 68 and 66 years old for males and females respectively, as compared to the OECD average of 65 and 64 years old respectively1 – higher than some countries that do not have a statutory retirement age, such as Australia and the UK. To date, well over 90% of eligible workers have been offered re-employment and did not require the EAP.