Why Are We Outsourcing Social Responsibility In Singapore?

We are often quick to point out and even lodge complaints against dirty public spaces but are we equally efficient with giving compliments and fair wages for a great job done when it comes to public cleanliness? Cleaners do the most unappreciated work to ensure a clean environment for us and our loved ones. Unfortunately in Singapore, they are not only amongst the lowest paid, but they are also the ones who have a higher risk of being taken advantage of.

In the past few years, NTUC has been advocating for outsourced service buyers and outsourced service providers to jointly ensure their outsourced workers are accorded fair treatment and wages. Before the government legislated NTUC’s Progressive Wage Model in Singapore, the estimated 69,000 cleaners here were amongst the lowest-paid, earning a median gross monthly wage of $815 (that includes overtime payments, commissions, allowances, and other regular cash payments!).

In 2014, only 30% of non-unionised companies gave their employees earning below $1,000 a $50 pay raise. Many of the workers who are left out of the wage increment worked for outsourced service providers.

What is the problem actually?

As corporate employees, we should be pretty familiar with the usual 3 quotes policy where we need to call for quotations from 3 separate outsourced service providers so as to eventually award the job to the most competitive (cheapest) bidder.

In order to win the bid at a low price (which means the vendor will get less revenue) but yet maintain a certain profit margin, outsourced service providers usually keep their workers’ wages constant or worse still, may cut their pay if the new contract was priced lower than the previous one.

Outsourced service buyers usually go for cheaper quotations as substantial justification is required during annual audit if they do not award the contract to the cheapest quotation. Outsourced service providers are also pressured by competition to reduce their quotations to win the bid, and still need to craft out a decent profit margin for themselves.

Instead of passing the buck to each other, raising outsourced workers’ wages should be the shared responsibility of both the outsourced service buyers and outsourced service providers.

Is setting a minimum wage the best option?

Looking at the situation at hand, our first knee jerk reaction will probably be looking at our government to implement a minimum wage to force both service buyers and service providers to increase the wages of these low income outsourced workers immediately.

I admit that was my initial thoughts when I first read about the issue. After further pondering, I came to realise that despite being able to instantly resolve the problem. It is unfortunately only a myopic, short term solution.

Taken by surprise, service buyers will be compelled to absorb the sudden increase in outsource service cost and give these low wage outsourced workers their minimal wage. But we should be very familiar with how companies usually react to defray their operating cost. They will pass the cost like a baton from one company to another in the supply chain till it eventually reaches the end consumers – people like you and me.

The end game may result in an even higher inflation in our economy which works to further erode our low income outsourced workers purchasing power. That will have them in a worse off plight than now.

What are the actions taken by our government & union?

Our government has introduced Workfare Income Supplement (WIS) Scheme which amounts to more than $450 million a year. The main objective behind the scheme was to add on 20 – 40% more wages to low income and older workers which includes outsourced workers.

NTUC has also succeeded in securing the mandatory licensing of cleaning contractors in 2014. This licensing will include the Progressive Wage Model (PWM) so that all cleaners, including outsourced cleaners will be put on a progressive wage ladder. With this model, the increase in wages for workers is justified by productivity improvements of the company and workers, which will alleviate the rise in costs that are passed down along the value chain.

As part of the licensing requirements, National Wages Council recommended minimum monthly increment of S$60 for workers earning a basic salary of up to S$1,100 a month have to be adopted as well.

I Care For My Cleaners Celebrations

What are our other options?

Zainal Sapari, NTUC’s advocate for low wage workers and Labour MP, gave a few suggestions in his 2016 Speech on President’s Address

1. Reduce Cost & Enhance Productivity

“Companies must also adopt a more pro-active gain sharing mindset to ensure the workers will benefit from their share of productivity improvements”

The more sustainable approach can be pursued through our government and union working together with outsource service providers to better understand their business model and uncover cost leakages, redundant procedures or possible inefficiencies that may be hampering their productivity.

In fact, the government and union have been actively contributing co-payment and subsidies to help service providers embark on initiatives to enhance their productivity.

Service providers have to stop taking the easy way out and start working on making their services cheaper, better and faster.

2. Change The Nature Of The Industry

“The Government has shown strong support for the Progressive Wage Model in the three low-wage sectors. Beyond these three sectors, the PWM should be introduced to other sectors to better the livelihoods of more low-wage workers. All government-linked companies must be encouraged to be the catalysts to take the lead in implementing the PWM; by insisting all major projects and tendering should incorporate PWM for the workers.”

Outsourced service buyers(like the government) have a responsibility to develop a more holistic tender criterion for service providers which takes into account other factors such as quality of service offering, productivity and welfare of outsourced workers. These may reduce the propensity of outsourced service providers undercutting cost at the expense of their outsourced workers.

With a shift in focus from competitive pricing to competitive service offering, service providers will be exploring new avenues to differentiate themselves from the competitors and take up the responsibility to improve in the area of better skilled workers and raising productivity.

3. Making the National Wages Council (NWC) Recommended Wage Increment Mandatory

“The dollar quantum wage increments should be made mandatory for employees in the 20th and 30th percentile, in terms of basic salary. Alternatively, the Government could explore making this mandatory in the three industries – cleaning, security and landscape — by factoring these as part of the licensing conditions.”

A quick survey will tell you that many non-unionized companies (or so as they claim) do not know about NWC recommended wage increment for workers earning not up to S$1,100 monthly.

If NWC is a tripartite body that forms tripartite consensus, shouldn’t there be tripartite action? If the government and union are already working with companies to implement wage increments, shouldn’t the Singapore National Employers Federation (SNEF) also do its part to inform and convince employers?

4. Stop Outsourcing Social Responsibility

“The difference between the impossible and possible in SG100 will depend on the determination of every Singaporean to make it happen.”

Instead of pointing the finger at someone else to do something, you can also take the lead to do something special for your office cleaners such as giving them small gifts or flowers to show your appreciation for the great work that they have done!

Happy International Cleaners’ Day! =) from Tiffany Tan.

So Singapore, let us all come together and show our thanks for our cleaners!

Labour MP Zainal Sapari penned a rather moving blogpost earlier this week and there’s so much gem in his sharing. Opening his post with how his own father, too, once worked as a cleaner and he also talked about the challenges of helping the low wage workers, and how the tipping point came during a break of a particular Parliament sitting and how DPM Tharman, too, had a hand in it.

I have penned my thoughts on my first blog piece on http://www.labourbeat.org/.Like I’ve said… our work for these…

Posted by Zainal Bin Sapari on Thursday, January 28, 2016

7 Comments on this Post

  1. ,Michael Bian

    Outsourcing is important for several reasons.

  2. michael bian

    Business is largely about competition.

  3. 60 is still too little.. what is they are only getting around 600 – 700?

  4. YingYing

    So poor thing….. glad there is a day to say thank you to these cleaners

  5. Mr Bar-ry

    Administrators have to go by the book and give to the lowest bidder. We are answerable to management and auditors. You have to understand from our point of view as well.


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