re-engineering labour administration to promote … · vi re-engineering labour administration to...

RE-ENGINEERING LABOURADMINISTRATION

TO PROMOTE DECENT WORK

ROLE OF SOCIAL DIALOGUE

Edited byGiuseppe CasaleA. Sivananthiran

C.S. Venkata Ratnam

Indian Industrial RelationsAssociation (IIRA)

New Delhi

International Labour Office (ILO)Social Dialogue, Labour Law and LabourAdministration Branch, Geneva

Copyright © International Labour Office 2006

Publication of the International Labour Office enjoys copyright under Protocol 2 of the Universal CopyrightConvention. Nevertheless, short excerpts from them may be reproduced without authorisation on conditionthat the source is indicated. For rights of reproduction or translation, application should be made to thePublications Branch (Rights and Permissions), International Labour Office, CH-1211 Geneva 22,Switzerland. The International Labour Office welcomes such applications.

First published 2006

Re-engineering Labour Administration to Promote Decent Work

ISBN 978-92-2-119534-492-2-111912-2

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The responsibility for options expressed in signed articles, studies and other contributions rests solelywith their authors, and publication does not constitute an endorsement by the International LabourOffice of the opinions expressed in them.

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Printed in India

Contents

List of Contributors iv

Foreword v

1. Introduction 1

— Giuseppe Casale, A. Sivanathiran and C.S. Venkata Ratnam

2. Good Practices in Labour Administration – The Singapore 9Experience— Hing Ai Yun

3. The Role of Labour Administration in the Globalized Economy: 63Singapore’s Perspective— Ong Yen Her

4. Wage Restructuring and the Implementation of the Flexible and 87Performance-based Wage System in Singapore

— Weng Hong Lau

5. Strengthening Labour Administration – Innovative Practices in the 97Delivery of Employment Services – Hong Kong Experience— Kin-Woo Tsang

6. Labour Administration and Promotion of Decent Work in Vietnam 119— Dao Quang Vinh

7. Ministry of Labour Relations and Foreign Employment – A Case 141Study on Restructuring and Revitalization, Sri Lanka— Robert Heron

8. Strengthening Labour Inspection Services as an integral part of 193Labour Administration to promote Decent Work— Alagandram Sivananthiran

9. Linking Research Institutions with Labour Administration in Korea 209— Injae Lee

10. The Korean Labour Administration Model: 239Lessons for Developing Countries— Injae Lee

List of Contributors

Alagandram Sivananthiran, Senior Specialist, Labour Administration, Social dialogue,Labour Law Labour Administration Branch, ILO Geneva.

C. S. Venkata Ratnam, Director, International Management Institute, New Delhi.

Dao Quang Vinh, Vice Director of Institute of Labour Science and Social Affairs, Vietnam.

Giuseppe Casale, Chief Social Dialogue, Labour law and Labour Administration Branch,ILO Geneva.

Hing Ai Yun, Head of Department of Sociology, University of Singapore, Singapore.

Injae Lee, Research Fellow, Korea Labour Institute.

Kin-Woo Tsang, Directorate Officer of the Labour Department, Government of theHong Kong Special Administrative Region, People’s Republic of China.

Weng Hong Lau, Senior IR Consultant/Conciliator Labour Relations Department.Ministry of Manpower, Singapore.

Ong Yen Her, Divisional Director Labour Relations and Workplaces Division. Ministryof Manpower, Singapore.

Robert Heron, Former Senior Specialist, Labour Administration ILO, Bangkok.

ForewordIn the past, one of the main components missing in development strategies in manydeveloping countries was good governance of the labour market. In fact, the quality ofgovernance is a major factor which determines whether countries are successful ornot in reducing their poverty levels; it is vital to sustaining or enhancing productivity andcompetitiveness, particularly in the face of mounting pressure from governmentpolicies to open up markets in order to meet the challenges of globalization.

One of the most important institutions of governance of the labour market is the labouradministration system. In line with the Decent Work Agenda and the ILO’s response toglobalization, labour administration is entrusted with the broad responsibility of respondingto the diverse forces driving economic, social and technological change in the labourmarket. Its responses must be rapid, flexible and able to anticipate challenges. Withinthis framework, labour ministries have a pivotal role as they can influence governancefrom the level of the workplace to the wider labour market and at the national level.

Improved labour administration and labour relations lead to better working conditions,a decline in the number of industrial disputes and accidents and an increase in themotivation of workers, resulting in higher productivity and better quality products.The key to competitiveness in the global economy today is quality, and products (andservices) of high quality can only come from high quality workplace practices andproduction methods.

In this regard, responding to globalization, social change, migration and the changingneeds of both workers and employers requires greater levels of innovation in labouradministration policies. It needs increased levels of investment in infrastructure, moreresearch and development and continuing improvement in the quality of publicservices. Perhaps more difficult will be the development of greater organizationalcapacity, meaning the capacity of employers and workers not just to bring aboutchange but to anticipate and manage change. Indeed, this is the greatest challenge, inmy view, in the future of labour administration. Thus, countries need to prioritize theirplans of action in order to turn change to their national advantage. As we can witness,labour administrations need to build the capabilities of managers, workers and theirorganizations in the public and private sectors to proactively introduce and managechange. Competitiveness and productivity must be kept in strategic sectors of the

vi Re-engineering Labour Administration to Promote Decent Work

economy and barriers to work-related training removed. In a way, re-engineering labouradministration means to set up policies and programmes which promote diversityand work-life balance as an integral part of the every organization’s culture andmanagement. This is in parallel with the revitalization and refocusing of goodlabour-management relations in every work unit.

Labour administrations should not fear the challenges ahead or the transition that eachcountry needs to make. Achieving the goal of a sound labour administration system willprovide the basis for competitive enterprises, high quality public services, broadaccess to employment opportunities and decent work conditions for all.

This publication shows that labour ministries in a number of countries have adaptedand responded to the current challenges by using new methods of management andevaluation, evidence based policy-making and other public administration reforms. Also,it examines how social dialogue at the national level has played a positive role in thispublic policy and institutional reform process.

The Social Dialogue, Labour Law and Labour Administration Branch of the ILO (Geneva)views this publication as a contribution to the ongoing discussion on the changing roleof labour ministries. It hopes that the examples of good practices highlighted in thispublication will stimulate labour ministries in different countries to reflect on their ownsituations and encourage them to develop innovative responses to the challenges theyare facing. It is a matter for each ministry of labour, in consultation with the socialpartners, to find their own path to reform. The examples in this paper may provide auseful starting point for such reflection.

Giuseppe CasaleChief,

Social Dialogue, Labour Law andLabour Administration Branch

IntroductionG. Casale, A. Sivananthiran, C.S. Venkata Ratnam

The International Labour Office (ILO) has a long-standing commitment to strengtheninglabour ministries with the overall goal of enabling these ministries to make significantinputs into broader economic and social policy-making as well as carrying out theirregular functions with greater efficiency and impact. Labour ministries are the maininterlocutors between the ILO and the governments of the ILO member States. The ILOrelies on the labour ministries, as well as the social partners, to highlight the importanceof the ratification and implementation of ILO Conventions. It is also normally the labourministry that has the main responsibility at national level for ensuring that the socialpartners have a place in policy-making and are recognized by governments as keyeconomic and social actors. Greater consistency between economic and socialpolicies and wider participation in the formulation of economic policies are essential toachieving the ILO’s global goal of Decent Work :

The fundamental importance of good governance in all countries at all levels ofdevelopment for effective and equitable participation in the global economy hasbeen a cornerstone of the ILO’s work on the Social Consequences ofGlobalization. Consequently, the basic principles, which are key to guideglobalization, are democracy, social equity, respect for human rights and therule of law. These need to be reflected in institutions including labour marketinstitutions, rules and political systems within countries, and respected by allsectors of society.

In the 2006-07 biennium, one of the priority areas of work for the Social Dialogue, Labourlaw and Labour Administration Branch was re-engineering labour administration topromote decent work. Requests for ILO technical assistance received from time totime from governments and social partners in all regions also confirm that labour marketgovernance is high on their list of priorities. In a globalized world, where competition hasintensified, labour markets work best when there is an institutional environment thatallows enterprises the flexibility to adjust to changing circumstances whilst ensuringincome, social and job protection for workers. This situation implies that developingcountries operating very often in unstable environments that impair development, have

1

2 Re-engineering Labour Administration to Promote Decent Work

to find ways to stabilize and gradually formalize, rather than to destabilize, make tooflexible and informalize their labour markets in order to climb higher up the developmentladder. Labour market stabilization which achieves productivity and quality targets, impliesadherence to certain labour standards and the introduction and strengthening of labourmarket institutions. Without such regulatory and institutional support, productive, stableand secure employment relations would not have been possible for many in developedcountries. In other words, there is now a need to find a new balance between labourmarket flexibility, job stability and security, achieved through a much higher continuinginvestment in human resources and greater reliance on functional flexibility (internaladjustment) rather than numerical flexibility (external adjustment) in enterprises.

The rise of global production systems, expansion of cross-border trade, intensifiedcompetition and the rapid integration of markets under globalization have orchestrateddemands for labour market reform to facilitate enterprise and workforce adjustments inresponse to market demand and supply. The current debate around labour market reformin various countries is increasingly being driven on the basis of the need to balance“efficiency and flexibility” in the labour market with “employment stability and security”for workers.

Labour ministries have a crucial role to play in this transformation. In this regard, thereis a need to review and re-engineer existing institutional capacities to implementappropriate labour-market policies. The experience of some Asian, particularly EastAsian economies, has suggested that it is possible to transform institutions and createefficient policy delivery mechanisms within a short time span to promote and supporteffective labour market reform. The reform of labour market institutions in conjunctionwith other policies will enable countries to grow faster and this growth will lay thefoundation for sustained reductions in poverty.

As established in the ILO Labour Administration Convention, No. 150, 1978, the term“system of labour administration” covers all public administration bodies responsiblefor and/or engaged in labour administration. It thus includes ministerial departments orpublic agencies, including parastatal and regional, or local agencies or any other formof decentralized administration, and any institutional framework for the co-ordination ofthe activities of such bodies and for consultation with and participation by, employersand workers and their organizations.

The system of labour administration, usually organized around a ministry of labour,normally has specialized units to manage each of the principal programmes entrustedto it by national legislation. Thus, for example, as indicated in the Labour AdministrationRecommendation, No. 158, 1978, there should be units for such matters as theformulation of standards relating to working conditions and terms of employment; labourinspection; labour relations; employment, manpower planning and human resources

Introduction 3

development; international labour affairs; and, as appropriate, social security, minimumwage legislation and questions relating to specific categories of workers. Within thisbroad framework of ILO promoting good governance at national level, labour ministrieshave a pivotal role as they can influence governance from the level of the workplace tothe wider labour market and at national level.

This volume entitled “Re-engineering Labour Administration to Promote Decent work”,documents how labour ministries in a number of countries have adapted and respondedto the current challenges using new processes and mechanisms and other publicadministration reforms. This volume also examines how social dialogue at nationallevel has played a positive role in this public policy and institutional reform process. Thepapers examine the industrial relations and labour administration issues from theperspective of their contribution to labour market governance, including what might bedone to improve its capacity to service the constituents with respect to governanceissues.

The various countries studied, Hong Kong, Singapore, South Korea, Sri Lanka andVietnam1 are at different levels of economic development and hence have varyingdevelopment in labour markets. The stage of economic development impacts theevolution of labour market policies and the instruments deployed by the Labouradministration systems.

In the case of Singapore2 , advances in technology with increasing mobility of capitaland labour had signalled that Singapore’s future growth could rest only on a globallycompetitive workforce. With a view to steward the country to this goal, the Ministry ofLabour was revamped as the Ministry of Manpower with enlarged functions. Severalinitiatives were put in place to constantly upgrade and retrain the workforce, with a viewto promote career longevity.

Although Singapore has offered a wide variety of training programmes that span the fullspectrum of the employment arena, it wants to move beyond the realm of labour andemployment policies, and the aim is to attain a knowledge-based economy. This requiresalso upgrading of skills of the managerial cadre, who should be qualified, competentand motivated to guide and coordinate the various functions of the enterprise. As such,Singapore does not have an unemployment benefit scheme or the retrenchment andlayoff benefit scheme. However, the Workplace Development Agency seeks to enhancethe employability and competitiveness of the workforce by developing a comprehensive,market-driven and performance-based, continuing adult education and trainingframework. It is also looking into the upgrading of managerial skills. The QualityWorkplaces Department had developed a framework which looks at workplaces fromboth employers’ and employees’ perspective and set out a range of tools to raise thequality of workplaces and make them great. The Skill Development Fund, the Skill


Redevelopment Fund, the National Wages Council, and the Tripartite Task forces etc.,are institutions which have contributed to the shaping of the Singapore model.

The Labour Relations Department (LRD) in Singapore promotes and maintains industrialpeace and stability by providing a legal framework to balance the interests of employersand employees. The department also formulates policies on industrial relations andregularly reviews labour and employment laws to ensure their continued relevance toboth employers and employees. The department assists employers and employees inboth the unionized and non-unionized sectors to resolve trade or employment/salarydisputes amicably through conciliation, with the view to promoting harmonious labour-management relations. Only employment disputes which cannot be resolved agreeablythrough conciliation may be referred to the Labour Court for adjudication. The successrate at conciliation has consistently been more than 90% in recent years and the LabourCourt has very few cases to handle.

The recommendations of the National Wages Council (NWC) serve as useful referencepoints for negotiating wage settlements and as tripartite wage guidelines in resolvingdisputes brought for arbitration before the Ministry of Labour. The non-adoption of theunanimity principle in the NWC, the non-mandatory aspect of its recommendations andflexibility of implementation which depends on the ability of employers to pay, help toenhance the acceptability of its recommendations. The idea of tripartite consensus hasserved to bind the parties in implementing the recommendations which are transparentand based on a thorough audit of the economy. The rapid expansion of the economyover the past four decades has been reflected in real wage increases. Maintenance ofindustrial harmony seems to have benefited the majority of the population.

The Hong Kong Special Administrative Region’s industrial relations and employmentpolicy aims to develop a well-trained, well-motivated and adaptable workforce. One ofthe most effective employment services operating in Asia is within the Department ofLabour in Hong Kong.3

In 2005, the Department listed an all-time high of 297,186 vacancies in the private sector,a hefty increase of 38 per cent from 215,430 in 2003. The website of the EmploymentServices (Interactive Employment Service) is one of the most popular governmentwebsites in Hong Kong, accounting for about one-third of the page views for allgovernment websites.

The Labour Department operates job centres to help jobseekers find work, and employersrecruit staff. To facilitate jobseekers in their job search, the department launched theInteractive Employment Service, the first employment website with Chinese interfaceproviding a 24-hour online service. Vacancy-search terminals installed at all job centresfacilitate jobseekers to gain access to the huge vacancy data banks. To protect the

Introduction 5

interests of jobseekers, a mechanism is put in place to vet all vacancies received fromemployers who are encouraged to offer market wage rates. To strengthen the promotionof the department’s employment services, a variety of innovative publicity and promotionalactivities are organized i.e., fairs, exhibition services, etc. To help vulnerable groupswhich include: (i) school-leavers aged between 15-19; and (ii) young persons agedbetween 15-24 with educational attainment below degree level entering the employmentmarket, employment programmes seeking to enhance the participants’ employabilityare administered. Financial assistance is also provided for participating in the aboveprogrammes. Proactive employment services have enabled the Labour Department toplay a key role in the labour market and its success is attributable to the efficientfunctioning of job centres.

The Constitution of Vietnam confers on its citizens, the right to work and the right toobtain employment. Vietnam has also joined the WTO recently and in the last five years,the country has seen the creation of more jobs in all sectors, albeit the quality of someof the jobs does not meet the normal standards. Adequate attention will now be paid tosafety measures at workplaces. In November 2006, the Government adopted a newlegislation on dispute settlement and in 2007, with ILO assistance, a new national levelsocial dialogue mechanism has been put in place.

Vietnam is on the move and the labour market is in the process of evolution. TheMinistry of Labour, Invalids and Social Affairs, in coordination with other ministries andindustries is strengthening the system of vocational training which has become moreattractive. State-assisted employment introduction centres, enterprises of employmentservices and job affairs are important tools in offering employment-related services.With job creation at the top of the country’s immediate agenda, the quality of jobs andother attendant features would be corrected in the near future, given the country’sresilience.4

In Sri Lanka, ILO supported process-based change which has enabled the Ministry ofEmployment and Labour (now the Ministry of Labour and Manpower) to reorient its rolefrom the one that was protectionist, reactive, and enforcement-oriented, to one that ismore developmental, proactive and service-oriented in outlook. The change will also behelpful to maintain and increase advocacy of a decent work perspective in labour policyand its implementation in addition to adopting new approaches to its traditional role inlabour protection and industrial relations. The Future Directions Document in this volumeprovides a framework for the revitalization and restructuring of the ministry to become amodern, dynamic and development-oriented institution, with the capacity to lead ratherthan passively respond to the change process, and send a message to all Sri Lankansengaged in the world of work. The effort to initiate and implement the difficult exercise of“implementing change” is a bold one. The Sri Lankan experience provides the basis for“change agenda” and an approach that could serve as the model for the region.


Sri Lanka had adopted several measures suggested in the prescriptive document, tothe extent of available resources. It is actively considering the ratification of ILO ConventionNo. 150 on Labour Administration and has in mind the need to improve the nationalsocial dialogue mechanism.5

Labour administration in Korea6 has contributed to economic development by supplyingquality workforce during the period of rapid industrialization and has made steady effortsto expand workers’ basic rights. Korea is perhaps the first in the region to invest inhuman resources. Job creation is the top priority; public employment services wereexpanded and measures such as those against youth unemployment were pursued.The country is one of the earliest to introduce the Employment Insurance System (EIS)to provide an institutional device for striking a balance between workforce supply anddemand, supporting employment adjustment following corporate restructuring andstrengthening vocational training. Enterprises give employees training opportunities andare reimbursed for their training costs from the government; training participants suchas the unemployed, receive vocational training and training allowances after registeringthemselves as jobseekers with Employment Security Centres. Counselling servicesare also provided. As industrial structure has changed and employment type morediversified with the advent of the knowledge and information society of the 21st century,national competitiveness has come to depend on how well the female workforce isused. Government is focusing on reduction of gender discrimination in employmentand support for expansion of female employment.

The launch of the Tripartite Commission, the first social consultation body, is of greatsignificance to the history of industrial relations in Korea. Through exchange with theILO and many other tripartite bodies in Asia and Europe, the Tripartite Commission inKorea is gradually being recognized as an institution for promoting social and economicpolicy consultation and social dialogue.

The Korean Labour Institute (KLI), a premier research Institute has been an excellentexample of linking research with policy formulation and implementation. KLI played apivotal role in all stages, in the establishment of the EIS. The professional and objectiveapproach of the Institute gave respectability and credibility to government’s policies onlabour and related matters.

The informal economy7 is a potential driver of employment generation and economicgrowth though with a poor quality of employment. This presents an obstacle to theimprovement of the working poor, whereas the original purpose of labour laws was topromote social justice. The challenge in comprehending the informal economy lies inthe plethora of occupations; global competition and innovations in communicationstechnology have enabled it to grow to epic proportions in size and complexity. SMEs areexempt or partially exempt from labour legislation and it is an incentive to remain small

Introduction 7

rather than grow and develop. Labour law can be better enforced by mainstreaming theregularization of the informal economy workers into the activities of all the branches ofthe ministry.

Child or bonded labour forms a significant section of all informal economy workers.Though child labour and bonded labour are outlawed, they are in fact observed in practice,in spite of several mechanisms to detect the same. Labour administration plays a keyrole in promoting and enforcing occupational safety and health legislation and guidelines.The basic role of labour administration is to promote social dialogue institutions andwhere necessary, to initiate the tripartite negotiations partnering with existing unionsand advocacy groups for informal workers.

One of the most important institutions of governance in the labour market is the labourinspection system which contributes to the strengthening of institutions for wagedetermination, particularly minimum wages. Assessments by ILO in a number ofcountries8 inter alia indicated the need for creation of a special unit for labour inspectionat headquarters that will enhance the stature of the inspection system and providemotivation for the inspecting officers.

Reports had also shown a decline in the number of inspections and absence of anydialogue between the ministry and social partners with respect to inspections. A newintegrated labour inspection policy with the involvement of stakeholders will helpimplementation of existing labour laws and promote compliance with labour standards.A register of workplaces and enterprises is an indispensable tool and serves as a basicdocument for extending social protection, inspecting businesses and enforcing labourlaws. Another important aspect is the updating of labour laws/codes so that they representthe enlarged functions of present day labour administration. This document should alsocontain relevant judicial decisions at the appropriate places. This should serve asreference material and be available in all libraries.

Efficiency of the inspection system greatly depends on the person who has to translateit into action; the incumbent should be a good fit for the job and a grouch has no place inthe system. In the present day environment, inspectors face mighty challenges andshould be capable of providing appropriate technical advice to complex situationsaffecting workers and employers. The remuneration of inspectors should be suchthat it not only retains them in the department but also prevents them from lookingelsewhere for other sources of income. There is also a need to reward motivated highperformers.

All in all, labour administration has a pivotal role to play in managing changes in societies.Preparation, coordination, checking and reviewing national labour policy, preparationand implementation of laws and regulations, tasks in relation to national employmentpolicy, conditions of work and working life, terms of employment, services and advice to


employers and workers and their organizations, representing the State concerninginternational labour affairs – these are some of the functions that labour administrationhas to fulfill with a view to promoting good governance in any country.

REFERENCES

1. Ragupathy Thamarajakshi provided inputs to synthesise the country reports.

2. See chapters by Hing Ai Yun, Ong Yen Her and Weng Hong Lau in this volume.

3. See chapter by Kin Woo Tsang in this volume.

4. See chapter by Dao Quang Vinh in this volume.

5. See chapter by Robert Heron.

6. See chapters by Injae Lee in this volume.

7. See “Showcasing tools and experiences in Labour Administration and the Informal Economy” byG. Casale, A. Sivananthiran, José Luis Daza and Cynthia Mar, ILO, Geneva, 2006.

8. See chapter by A. Sivananthiran in this volume.

Good Practices inLabour Administration :The Singapore ExperienceHing Ai Yun

INTRODUCTION

On April 1st 1998 the Ministry of Labour in Singapore was renamed the Ministryof Manpower in an effort to reposition the ministry in order to develop andco-ordinate Singapore’s national manpower strategy to take the country into the newmillennium.

A short browse through the annual reports of the old Ministry of Labour found thattheir main role was primarily for promoting stable and peaceful industrial relations,safeguarding workers’ health and safety and creating a disciplined and productiveworkforce. The emphasis on these functions was particularly relevant to Singapore’seconomic aims in the initial years of its industrial development — the establishmentand maintenance of industrial peace and high productivity which had successfullyattracted foreign industrial investments into Singapore and kept these investmentsprofitable. At that time in the late sixties, Singapore was unique for its heavy relianceon foreign investments to fuel its industrial growth whereas other developingcountries were at that time staunchly nationalistic, operating behind high protectionistwalls

Today, besides trade liberalisation and other forms of openness in countries around theregion, Singapore also faces accelerated expansion of new industrial capacities fromformer socialist regimes stretching from Eastern Europe to India and China. Globalproliferation of information technology together with the increasing mobility of capitaland labour means that Singapore’s future growth could no longer be assured by existinglabour policies. Singapore’s strategy to face this intensified competition is to develop aglobally competitive workforce to support the demands of the “new economy.”

2


The government launched the Manpower 21 in mid 1999 to support Singapore’s goal ofbecoming a knowledge-based economy. It was hoped that the repositioning of theMinistry will lead to a more integrated model of manpower planning and development.The specific goals are to enhance the efficiency of the labour market, encouragelifelong learning among workers and to develop workplace environment that will attract,develop and motivate people to excel in their jobs. These goals will only be possible withthe support of employers and workers

Singapore’s first experience with a prolonged recession in 1997 saw unemploymentand retrenchment hit new heights. Key industries, such as manufacturing, suffered andmany companies had to downsize their workforce in order to survive. Workers who hadmanaged to keep their jobs faced huge wage cuts.

FROM LABOUR RELATIONS TO MANPOWER MANAGEMENT

With the repositioning of the Ministry of Labour (MOL) as the Ministry of Manpower(MOM) in 1998, the government was not merely aiming to reduce labour costs. Itsprimary focus was to transform Singapore into a knowledge-based economy with criticalknowledge-driven industries. The revamped ministry’s mission was to develop aworkforce capable of competing successfully in the global market. This entailed anevolution in the organisation structure of the ministry as can be seen from the twoorganisation charts below.

The organisation of the ministry became more complex as a result of further differentiationof functions such as manpower planning, foreign manpower management andmanpower development, all of which were necessitated by the economic changes thatoccurred in the mid to late 1990s.

Prior to its revamp, the Ministry of Labour was a conventional set-up concernedprimarily with Industrial Relations. Though some focus was on migrant labourwhich was dealt with primarily through the issuing of Work Permits, the revampedMinistry of Manpower became an important instrument pioneering the search anddevelopment of labour resources. Even the Workplace Environment and WelfareDivision were established with an eye to attracting foreign expertise to remain inSingapore. Corporate Support now takes an important role as the changes in labourformation/development needs to be communicated to employers and employeesalike.

MOM now regards itself as the “National Human Resource Department “ charged withthe development of a globally competitive workforce that can project Singapore as atalent capital.

Good Practices in Labour Administration : the Singapore Experience 11O

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Good Practices in Labour Administration : the Singapore Experience 13

This repositioning of the ministry was largely rooted in a different way of viewing theeconomy. The old way of understanding the economy was that the government wouldprovide an efficient infrastructure that would form the framework on which industriescould be built. The building or influx of industries would create jobs which would thencreate wealth through economic production. The new paradigm, however, viewedtalented labour (“knowledge workers”) as the source in the production of wealth basedon a host of new industries. It is the functioning of these knowledge-based industrieswhich would re-create and increase the wealth of the nation.

In the old industrial economy, for instance, labour was seen as a factor of productionand competitive advantage was secured by having more resources, cheaper and moredisciplined labour and better machines. In the knowledge economy, however, theproduction, use and distribution of knowledge has become central to sustaining industrialgrowth where the real value of the company or the country is found not in its fixedassets but its human and intellectual capital. It was with this “paradigm shift” that reflectedthe change in the way the Ministry viewed and developed Singapore’s manpower.

To accomplish this, the Ministry decided to implement integrated manpower planning;the implementation of lifelong learning for lifelong employability; the augmentation ofSingapore’s talent pool through the recruitment of foreign talent; the transformation ofthe work environment to encourage flexible work arrangements and job re-designs; thedevelopment of a vibrant manpower industry and resting on Singapore’s stable andpeaceful tripartite foundations.

The crucial role of manpower planning is to anticipate where the jobs will be and howthe manpower supply can fill these needs. The Ministry’s priority is to maximise localtalent and to attract foreign talent. By 1998, several initiatives for the management oflocal talent had already been in place to upgrade and retrain Singapore’s workforce.The central emphasis here was for unskilled workers to not only equip themselves withindustry relevant skills but to constantly re-train and upgrade themselves to remainemployable for life. The Skills Redevelopment Programme (SRP) is one such initiativeto enhance the employability of the Singapore workforce, in particular the older andless-educated workers. Launched in late-1996 by the National Trades Union Congress(NTUC), the SRP’s objective is to help workers upgrade their skill-level and acquirecertified skills to better ensure their employment prospects.

Working together with the NTUC, the Productivity and Standards Board, the EconomicDevelopment Board (EDP) and tertiary institutions, the Ministry provided a grant ofS$50($US1 equivalent to S$1.7) million with a matching contribution of another S$50million from the Skill Development Fund (SDF) [1] to expand the SRP in order to reachout to more workers. By March 1999, some 196 companies have committed to send atotal of 17,800 workers for training.


From July 1998, a sector-driven approach was adopted to enable the SRP to reach outto all key manufacturing and service sectors of the economy. The SRP programme hasalso been launched in the hotel and catering, marine, telecommunications and diskdrive sectors of the economy. The initiation of the SRP facilitator scheme by the ministryenabled displaced and unemployed workers to benefit from retraining under the SRP.This facilitator scheme allows ethnic self-help groups such as the Chinese DevelopmentAssistance Council (CDAC), MENDAKI and Singapore Indian Development Association(SINDA) or industry associations to serve as “surrogate employers” to sponsor displacedor unemployed workers for training with the government providing financial support.

As a plan to tackle the unemployment situation arising from the regional economiccrisis in the mid and late 1990s, the Ministry launched something called a “4R” strategyin 1998. This involved the renewal of the workforce through training, the redeploymentof displaced workers through employment placing and matching, the realignment ofwork processes and employment practices to preserve viable jobs and the revitalisingof employment creation through seeding new jobs. How this particular strategy manifestsitself over the next few years can be seen from the description of the work of variousdivisions and departments in the Ministry in subsequent sections of this report.

The Ministry feels that despite these measures, there will remain a shortage of talent inspecialised areas and, as a result, Singapore would need to position itself to competefor and manage in the in-flow of foreign talent. The Singapore Talent Recruitment (STAR)committee was formed in November 1998 to oversee Singapore’s long-term effort inattracting international talent. The STAR committee is responsible for the review,evaluation, implementation and co-ordination of policies to make Singapore a hub ofinternational talent, while protecting social cohesion and national resilience. CONTACTSingapore was launched in 1997 by the International Talent Division to offer a full rangeof services to both employers and overseas talent to Singapore and to reach out toSingaporeans studying or working abroad. The Foreign Manpower Employment Divisionwas set up in 1998 to help employers meet their foreign manpower needs as well as tomanage the foreign workforce in Singapore. It was in this same vein that later that year,the Employment Pass department was moved from the Ministry of Home Affairs to theMinistry of Manpower under the Foreign Manpower Division to allow central regulationand management of the employment of foreigners.

At the turn of the millennium, the Manpower 21 Plan was launched to develop Singapore’smanpower as a key competitive advantage in the new global economy. The vision wasfor Singapore to become a talent capital — a centre of ideas, innovation, knowledge andexchange. The plan was to recreate Singapore as a hub of continuous learning forlifelong employability and as a country where the government, employers, unions,community organisations work in unison to achieve the country’s goals. The Manpower21 Plan can be summarised in its six core strategies described in the table below:


Strategy Recommendations/Implementation

Integrated Manpower Planning (i) Enhanced manpower information systemto provide relevant and timely manpowerinformation to policy makers, employers,training providers and individuals.

(ii) National manpower council establishedto oversee Singapore’s nationalmanpower planning, development andaugmentation strategies and targets.

Lifelong learning and lifelong (i) School of Lifelong Learning as a compre-employability hensive system that addresses the

needs of all workforce levels.

(ii) National Skills Recognition System todevelop definitive workplace skillsstandards and accord recognition totraining that meets these standards.

(iii) Employer and individual-based incentivesto stimulate lifelong learning amongstSingaporeans. Examples includereviewing the Skills Development Levy(SDL) and encouraging personalresponsibility for lifelong learning throughincome tax reliefs.

(iv) One-Stop Career Centres as a singlesource of information on labour markettrends, skills demands, employment andtraining related information.

Augmenting Singapore’s talent pool (i) Expanding the infrastructure of ContactSingapore to reach out to internationaltalent.

(ii) The review of Singapore’s foreign workerpolicy guidelines to re-allocate foreignworkers from low to high value-addedsectors.

(iii) Singapore as Talent Capital with aglobally competitive workforce.

Contd.


Transforming the work environment (i) Professionalising domestic-based indus-tries such as cleaning, marine and hotelso more Singaporeans will take on jobsin these sectors.

(ii) To develop world-class Human Resourcepractices to improve worker’s attitudeand technical skills.

Developing a vibrant manpower Setting up world-class R&D institutions inindustry Singapore to produce a dynamic and

responsive manpower industry that cansupport the development and managementof a world-class workforce.

Redefining partnerships To harness the collective wisdom of tripartitepartners in reviewing and charting Singapore’smanpower strategies.

The rest of this report will show how the various departments/divisions in the Ministry aswell as statutory boards work towards the implementation of these strategies. Here wewill only be describing selected divisions/departments which we understand to beperforming key roles in the development and practice of manpower planning inSingapore.

STRATEGIC FUNCTIONS OF MOM

Manpower Planning Division

The formation of the Manpower Planning Division with the re-positioning of theministry in 1998 was significant in that it reflected a changed attitude towards labourby the government. While the research and statistics department had already beenpart of the old Ministry of Labour all along, the incorporation of this department as partof a larger policy planning division reflects the government’s attempt at greatereconomic interventionism. The purpose was to plan and formulate policies inorder to tailor the country’s labour force to suit the ever-changing needs of theeconomy.

Moreover, the onset of continuous churning of the labour market besides cyclicalunemployment makes it imperative that up-to-date information be made available forindividual self-recreation to enable them to re-enter the market. As labour has becomemore obviously the chief factor in wealth creation, labour statistics represent a new andcrucial resource in decision-making for investors/employers and the state. In fact, just


as this new ministry has come to see itself as the “human resource department of thenation”, justifications for intervention can only be accepted with the availability of theminutiae of the attributes of labour.

Manpower Research and Statistics Department

The Manpower Research and Statistics Department (MRSD) is a section within theministry which collects, collates and analyses current labour-market data. This datais then disseminated to various sections of the government as well as the generalpublic (businesses and sometimes employees) in order to facilitate decision-makingprocesses.

They provide an extensive array of statistics and analyses on Singapore’s workforceand the state of the labour market for online viewing, downloading and purchase. Thesestatistics include employment data, unemployment data, job vacancies, labourturnover, hours spent working, retrenchment and re-employment data and earningsand wages. While these statistics are provided periodically with an emphasis on thetimeliness of the data, they are also published at the end of the financial year in the“Singapore Yearbook of Manpower Statistics”.

The statistical information that they provide of the employment scene helps thegovernment in shaping manpower policies and programmes and facilitate decision makingof employers, workers and job seekers.

The work of this department is organised broadly along four key processes. In thefirst stage, they collect information from individuals and establishments throughnational surveys and administrative sources to compile important national statisticson employment creation, unemployment, retrenchment, wages, etc. The departmentthen processes and generates the statistics. After which, they study and analysethe data to make sense of them with the view to spot emerging patterns andtrends. The goal here is to provide independent and rigorous analysis on the stateof the labour market. The last part of their work involves disseminating thesefindings. The published statistics and analyses can be both accessed online andpurchased.

The statistics used by this department closely adheres to international guidelines onconcepts and definitions recommended by the ILO.

Manpower Augmentation

Under the “old” Ministry of Labour, the Work Permits Division represent one of fourmain divisions of the Ministry. Even then, the function of giving out work permits, then,was largely the work of the Home Affairs Ministry via the Immigrations Department.


When the Ministry was re-positioned in 1998, not only did the entire function of awardingand managing work permits shifted to the new Ministry of Manpower, the WorkPermits Division came to be part of a larger Manpower Augmentation Division. Thisorganisational shift reflected a changing mindset on the part of the Singapore Governmentwith regards to the deployment of “foreign labour”. The Government started to view theinflux of highly-skilled foreign white collar workers — or “foreign talent” — as beneficial,even crucial, to the government’s vision of a successful knowledge-based economy.While the old Work Permits Division was created largely to manage the local labourdeficit in low-skilled work such as construction and domestic work, the new ManpowerAugmentation Division also functions to attract highly-skilled foreign professionals toSingapore in order to fuel economic growth which will now be based primarily on newskill sets.

Work Pass Division

This division is committed to develop an efficient, effective and dynamic foreignmanpower admission framework that meets the needs of the Singapore economy.

The Work Pass Division facilitates and regulates the employment of foreign nationals inSingapore. It administers three types of Work Passes namely: Employment Passes(P and Q Passes), S Passes and Work Permits (R Passes).

Employment Pass

Employment Passes are for foreigners who earn a monthly basic salary of more thanSGD$2,500 and possess acceptable degrees, professional qualifications or specialist.There are basically two types of Employment Passes: P and Q Passes.

P Passes are for foreigners who hold acceptable degrees, professional qualificationsor specialist skills and are seeking professional, administrative, executive or managerialjobs. A P1 Pass will be issued if the applicant’s monthly basic salary is more thanSGD$7,000. A P2 Pass will be issued if the applicant’s monthly basic salary is morethan SGD$3,500 and up to SGD$7,000.

A Q1 Pass will be issued for foreigners whose monthly basic salary is more thanSGD$2,500 and who possess acceptable degrees, professional qualifications orspecialist skills.

S Pass

The objective of the S Pass is to increase the flexibility and responsiveness of Singapore’sforeign manpower policy to meet industries’ needs for middle level skilled manpower.The S Pass replaces the current Q2 Pass from July 2004.


Applicants for the new S Pass are assessed on a points system which takes into accountmultiple criteria, including salary, education qualifications, skills, work experience, jobtype. A monthly levy pegged to the skilled levy for Work Permit (R Pass) holdersapplies. There is a cap on the number of S Pass holders in each company based on aquota of 5% of the company’s local and Work Permit workforce. S Pass holders withSGD$2,500 monthly basic salary are given dependant privileges.

Work Permits

Work Permits are for foreign workers who earn a monthly basic salary of not morethan SGD$1,800. The number of foreign workers an employer may engage underWork Permits is dependent on the number of local workers on his payroll. This local toforeign worker ratio varies from industry to industry. The employer also pays aforeign worker levy for each foreign worker he employs on Work Permit. By imposinglevies and limits on the number of foreign workers a company can employ, the Divisionensures that Singapore’s economic objectives are met and that the total workforce,including both local and foreign workers, benefit from Singapore’s growth.

In addition, the Work Pass Division provides online services which allow employers toapply for work permits or employment passes online as well as paying foreign workerlevies and the checking of work permit validity online.

Foreign Manpower Management Division

The Foreign Manpower Management Division (FMMD) was set up to facilitate thewell-being of foreign workers during their working stint in Singapore. FMMD worksclosely with the other departments within the Ministry, in particular ForeignManpower Employment Division (FMED), Occupational Safety and Health Division(OSHD), Labour Relations Division (LRD) and Corporate Communications Department(CCD).

The core functions of FMMD include the management and protection of foreign manpowerusing case management approach, particularly in the areas of illegal employment/deployment, accommodation and working conditions and abandonment and runaways.The FMMD also enforces the professionalism of the employment agency (EA) industrythrough reviewing and amending the Employment Agency Act and EA regulations,reviewing EA licensing rules and conditions and developing and implementingaccreditation for employment agencies.

In addition, the FMMD also manages the temporary job placement scheme as well asconducting audits on employment agencies and employers of employment pass andwork permit workers.


FMMD is structured around 4 departments:

Employment Inspectorate Department

The department seeks to foster effective management of foreign manpower throughpolicing in partnership with other enforcement agencies and business community. Thedepartment focuses on the areas of illegal employment, illegal deployment and otherviolations of MOM’s Foreign Manpower regulations

Policy & Regulations Department

The department focuses solely on drafting and implementing policies for the division, inthe area of management of foreign manpower. The department comprises of PolicyBranch, Research & Statistics Branch, Employment Agency Licensing Branch andInternational Relations Unit.

Well-Being Management Department

The department focuses on the management and protection of foreign manpower,particularly in the areas of accommodation, working conditions, physical well-being andabandonment/runaway. The department is also responsible for educating employers,foreign workers and the public on new and existing FMMD policies.

Corporate Management Department

The department supports the entire division in the areas of office management, logistics,finance, administration, customer relations and customer responsiveness.

International Manpower Division

The International Manpower Division oversees Singapore’s efforts in the attraction ofinternational talent to support our economic growth and the engaging of Singaporeantalent working or studying overseas.

They help employers enhance their competitiveness by extending their reach to theglobal pool of talent. We also provide professional advisory services and facilitatenetworking channels for global talent and overseas Singaporeans who are interested incareer or educational opportunities in Singapore. This is done through an internationalnetwork of Contact Singapore Centres.

Contact Singapore is primarily about attracting “foreign talent” to Singapore and attracting“talented” Singaporeans back home. These “talent” refer to highly skilled professionals,entrepreneurs, and even performance artists. Through providing information on careerand educational opportunities and advice and assistance for foreign professionals with


settling-in Singapore, the Contact Singapore Centres world-wide (Singapore, GreaterChina, India, Australia, Europe and North America) support the transformation ofSingapore into a compelling and dynamic city by attracting (what they term) “highlymotivated individuals and entrepreneurs”. This would then facilitate the mobility of globaltalent and engage such talents in value-creating relationships which would benefit theSingaporean economy.

Workplace Environment and Welfare

Labour relations and industrial safety had been one of the prime concerns of the oldMinistry of Labour. The Workplace Environment and Welfare Division subsumesthese two functions in seeking to consolidate and build on past successes of subduingindustrial conflict and providing safe working environments. With newer departmentssuch as the Quality Workplaces Department, this division seeks to create better workenvironments to attract foreign “talents” to come and work in Singapore.

Labour Relations and Workplace Division

Labour Relations Department

The Labour Relations Department (LRD) promotes and maintains industrial peace andstability in Singapore by providing a legal framework to balance the interests of employersand employees. The Department also formulates policies on industrial relations andreviews labour and employment laws regularly to ensure their continued relevance toboth employers and employees.

The department provides timely information to the public regarding the EmploymentAct and terms and conditions of employment in Singapore. They also investigateclaims and complaints on salary matters and other terms and conditions ofemployment in respect to all employees other than seamen, domestic workers,persons employed in managerial, executive, or confidential positions and employeesof Statutory Boards and the Government who are not covered by the EmploymentAct.

The Department also assists employers and employees in both the unionised and non-unionised sectors to resolve trade or employment/salary disputes amicably throughconciliation, with the view to promote harmonious labour management relations.Employment disputes which cannot be resolved amicably through conciliation may bereferred to the Labour Court for adjudication.

The department additionally conducts fortnightly lectures on the Employment Act. Thelecture is targeted at Human Resource Management practitioners who are new in theHR field and wish to learn more about the Employment Act.


Another important function of this department is the regulation of trade unions. Withinthe department, the Registry of Trade Unions regulate the formation and dissolution oftrade unions, safe custody and lawful utilisation of union funds and free and properelection of union officers. The Registry also provides advisory services to trade unionofficers and members on matters relating to the laws and regulations on tradeunions.

Additionally, the department also investigates into claims of unlawful dismissal onthe grounds of age and further serves as the Secretariat to the National WagesCouncil.

Quality Workplaces Department

The Quality Workplaces Department (QWPD) was established in Feb 2004 to coordinateand align strategies to realise MOM’s vision of “A Great Workplace”. QWPD strives tobe a valued partner in formulating policies and promoting practices to achieve GreatWorkplaces in Singapore, workplaces that enhance the dignity of work, facilitate stronglabour management relations and engage individual workers to contribute to the best oftheir ability.

To promote Quality Workplaces across Singapore, QWPD partners various MOMdepartments, for example, the Labour Relations Department (LRD), Occupational Safetyand Health Division (OSHD) and Foreign Manpower Management Division (FMMD), aswell as external agencies like the Singapore Workforce Development Agencies (WDA),National Trades Union Congress (NTUC) and the Singapore Business Federation (SBF)/Singapore National Employers Federation (SNEF), to put in place policies and structuresto achieve the desired workplace outcomes in safety and health, employment conditionsand practices, workplace relations, learning and development and leadership andmanagerial development.

The scope of work includes:

a) Coordinating and aligning strategies within MOM for the development of qualityworkplaces;

b) Identifying gaps in current policies across all dimensions of quality workplaces,and developing policies to bridge the gaps;

c) Reviewing the appropriate mix of regulatory and promotional tools to achievequality workplaces, and in this light, to update/amend the Employment Act andother labour market legislation as appropriate;

d) Conducting cross-country reviews and comparisons of relevant legislation,policies and programmes, to facilitate the development of quality workplaces;


e) Engaging industry and devising high leverage ways to bring about the desiredchange in the workplace;

f) Implementing multi-pronged and integrated promotional programmes withpartners in and outside of MOM to develop Quality Workplaces in Singapore.

With Great Workplaces as the end goal, QWPD developed a Quality Workplaceframework to aid in the formulation of policies and strategies to develop qualityworkplaces. The framework looks at workplace quality from both the employer’s andemployee’s perspectives, and sets out a range of tools which can help to raise thequality of workplaces in Singapore.

For employers who have a poor quality of workplace practices, QWPD works at helpingthem reach basic standards. For those who are only at a basic level, the effort is focusedon helping them advance to be good. While for those who may already be consideredgood, the challenge is how to support their transition to be great employers that can berole models for other employers in the economy.

QWPD was directly involved in the national effort to put together a holistic package ofpolicies and schemes to support marriage and parenthood. This included developingand publicising the extended maternity leave and childcare leave policies. Morerecently, QWPD contributed to the development of the new Occupational Safety andHealth framework. The new framework revamps Singapore’s approach to occupationalsafety and health, and identifies new principles and targets to achieve. QWPD iscurrently involved in developing some of the policy initiatives arising from the newframework.

Promotion of work-life harmony in companies is another area of focused promotionwork in QWPD. Work-life strategy is an important means for organizations to attractand retain talent in today’s competitive economy. Work-Life Strategy in Singapore ispromoted through:

Developing the business case for work-life. International evidence has been gathered,research on local work-life developed in partnership with the Universities; and marketanalysed to identify existing obstacles to work-life and the more impactful way to bringabout a change in mindset.

Working with CEOs to persuade CEOs. This is done in partnership with the EmployerAlliance, through various promotional programmes targeted at senior decision makersin organizations. Industry sector workgroups have been set up to provide a platform forthem to explore and share practical work-life programmes that are effective for thesector. In addition to developing the first Work-Life Harmony Week (from 19 July 2005),an award system has been introduced to recognize employers with more progressivepractices.


Communicating the message; QWPD partners organizations such as SNEF, SHRI,ASME, the Employer Alliance, STADA, PSD, CSC, WDA and IDA to promote work-lifestrategy through various channels, including the mass media, newspaper articles,interviews, mailers and roadshows.

Developing local capability; QWPD is involved in developing and disseminating bestpractices and tripartite guidelines. Funding assistance is also provided to employers viaa $10 million fund that offers up to $30,000 per employer to encourage them to embarkon work-life programmes — in particular, flexible work arrangements. Training of work-life consultants and HR practitioners is also facilitated to develop the pool of relevantexperts in Singapore. A one-stop web portal has also been developed to provide up todate and relevant information for this purpose.

Occupational Safety and Health Division

The Occupational Safety and Health Division (OSHD) promotes occupational safetyand health at the national level, working in collaboration with employers and employeesto reduce, and if possible, eliminate workplace hazards. They seek to create a safe andhealthy work environment for everyone and to establish Singapore as a countryrenowned for best practices in Occupational Safety and Health. To achieve thispurpose, this department works to create a safe and healthy work environment throughtraining, promotion and enforcement and also to facilitate fair compensation for workinjury.

The Occupational Safety & Health Division (OSHD) is currently being restructured fromAugust 1st, 2005 to build new and expanded capabilities to implement the new OSHframework announced by the Minister in Parliament on March 10, 2005. The newframework is aimed at halving the current occupational fatality rate by 2015. The 2004fatality rate stands at 156 (cases reported for the Workmen’s Compensation Act only)which is an increase of 21 cases from the 2003 figures.

The restructured OSHD will implement the new OSH framework, including newlegislation, policies and programmes. It will adopt a proactive and systemic approach inaccident prevention and involve all stakeholders in risk prevention and mitigation. It willalso work closely with industry to enhance industry safety prevention and managementcapabilities as well as develop a stronger safety culture. It will focus on the prevention ofrisks at source, set outcome goals for employers and help companies improve theirsafety management systems.

To effectively carry out its new functions, OSHD is structured around sixdepartments:


OSH Inspectorate

The department focuses on reducing risks from safety and health hazards throughinspections of workplaces, investigating accidents, taking enforcement action wherenecessary and providing advice and guidance

OSH Specialist Department

The department provides specialist support and guidance in OSH to meet the needs ofour stakeholders, working in collaboration with partners, through programmes andactivities in the areas of OSH standards, research and best practices

OSH Policy & Legislation Department

The department focuses on developing and reviewing policies and legislation infundamental and strategic OSH issues

OSH Information Centre

The department provides an information service to support strategic planning andpolicies as well as facilitates information sharing and international collaboration in OSH.

OSH Industry Capability Building

The department aims to create a strong OSH culture in workplaces through thepromotion of OSH best practices and setting OSH competency standards for theworkforce.

OSH Corporate Services Department

The department assists injured workers and dependants of deceased workers toreceive fair workmen’s compensation for work-related injuries or deaths expeditiously,processes registration of factories and pressure vessels and other equipment andlicensing of competent persons, as well as provides corporate support services to thewhole division.

Occupational Safety and Health Training Centre

The Occupational Safety and Health Training Centre is part of the OSH which providestraining in occupational safety and health to meet industry needs and to promoteoccupational safety and health at work.

OSHTC offers a range of quality courses on occupational safety and health which arespecially designed to meet the needs of different levels of personnel in industry. Our


courses are geared to equip participants with the necessary knowledge and skills forthe prevention of accidents and diseases in the workplace. There is a range of differentcourses for Occupational Safety and Health personnel, managers, supervisors andworkers. These include safety co-ordinators training course, shipyard safety assessorcourse, behaviour-based safety course, safety management course, basic industrialsafety and health course for supervisors and a range of safety orientation courses formanhole, shipyard and construction workers.

OSHTC, together with employers’ organisations, workers’ unions, professionalorganisations and voluntary bodies organises safety promotional activities such as safetycampaigns and safety seminars and workshops to create interest and generate greaterawareness and understanding on occupational safety and health. Awards such as theAnnual Safety Performance Awards gives recognition to factories (at least 50 workers)which have performed well in safety through the implementation of sound safetymanagement systems. Annual Safety Innovation Teams (SIT) convention involvesmanagement and workers coming together to invent solutions to solve health and safetyproblems at work. The newly instituted National Occupational Safety and Health week,in conjunction with ILO’s World Day for Safety and Health at Work on April 28th, aims topromote and create a safety culture to help reduce the number of work-relatedincidents.

OSHTC also publishes a quarterly newsletter “Safety & Health At Work” as well asother publications on topics such as safety pamphlets, guide-books and safety postersfor distribution to industry.

Corporate Support

Corporate Communications Department

The Corporate Communications Department (CCD) plans and manages corporate andmarketing communications programmes to support the Ministry’s efforts in enablinglifelong employability, building a globally competitive workforce and great workplaces forall Singaporeans. CCD integrates a wide range of activities to establish the Ministryas a national leader in enhancing the potential of Singapore’s human capital byengaging its varied audiences via media relations, publications, events, and marketingcommunications.

CCD works with the various Divisions / Departments on relevant policies, programmesand initiatives to suitably advise on a strategic communications plan. This includes thedevelopment of key messages, proposed channels of communications for pre- andpost-policy and media management. CCD supports a proactive approach to mediarelations and will work closely with the press to facilitate prompt responses to itsqueries and access to its spokespersons.


CCD also supports the Ministry’s departments in the strategic planning andcommunication of its product or service from concept refinement to market introduction.In partnership with department CCD Associates, we develop effective and creative waysto promote a department’s ‘products’ such as training programmes or market its servicessuch as dispute conciliation. CCD will help formulate clear and simple messages to becommunicated to key audiences and recommend the appropriate communicationsplatform from a simple press release to initiating a mass awareness campaign; andpropose the appropriate communications vehicle/s such as advertisements or dialoguesessions. In any public communications programme, there must be an outcome. CCDalso helps department’s research or track programme outcomes for better decisionmaking and resource allocation.

CCD, in partnership with the Division / Department, will develop an effective brandcommunications programme to build public awareness with the clear intention to stronglybrand the Ministry, build customer understanding in and preference for its programmes,services and initiatives.

As the Ministry’s manager of corporate identity and brand, CCD also champions thesymbolic articulation of our business through the consistent projection andimplementation of the organisation’s corporate image and visual style across all media.CCD also maintains the corporate website which functions as another platform for thepublic to better appreciate the Ministry and its services.

A vital function of the CCD which sets it apart from its predecessor, the public relationswing in the old Ministry of Labour is that it works to persuade both workers and employersto come to terms with the Ministry’s reforms — most notably wage reforms and newflexible work arrangements. Through its many forms of communication channels(publications, websites, etc.) the CCD tries to convince workers that re-training andlifelong learning are worker’s responsibility and, together with the ministry’s labour andwage reforms will ultimately benefit workers who are well-skilled, diligent and innovative.The CCD also works to disseminate vital information to employers on how to developand implement flexible work and wage regimes which would work in the interest ofthese businesses themselves.

In short, the CCD is the propaganda wing of the Ministry which, through its operations,seeks to gain the public’s trust in the Ministry.

OneCall Centre

The Ministry of Manpower’s OneCall Centre provides one-stop telephone enquiry for allmanpower matters.

Their automated Interactive Voice Response System (IVRS) operates 24 hours a day,seven days a week to provide employers and employees with updated information on


manpower matters such as work permit, employment pass, employment terms andconditions and occupational safety and health training courses.

Through the IVRS, users can also perform transactions such as checking status forWork Permit, Employment Pass or to request for application forms and guidelines viafax.

People Matters Department

The People Matters Department plays a crucial role in the Ministry’s attempts to createa Talent Capital. They innovate programmes and policies to develop a globallycompetitive workforce in a dynamic working environment to support Singapore’s shift toa knowledge-based economy. This department is basically the human resource wing ofthe ministry.

In line with their belief that their pool of manpower officers is a vital resource in an effortto contribute to Singapore’s continued economic prosperity, the department places greatemphasis on training efforts. The Ministry has been recognised in this area with thePeople Developer Award. Training, integral to the career development of our officers,takes the form of either on-the-job or structured training. Structured training includescourses, conferences or learning days.

STATUTORY BOARDS & AGENCIES WORKING WITH THE MINISTRY OFMANPOWER

Workforce Development Agency

A relatively new division within the Ministry, the Singapore Workforce DevelopmentAgency (WDA), established in September 2003, acts as a catalyst and champion ofworkforce development. It aims to enhance the employability and competitiveness ofboth employees and job seekers.

The WDA intends to do this by developing a comprehensive, market-driven andperformance-based adult continuing education and training framework. The agencyalso works with other economic agencies to promote the enhancement of human andintellectual capital in Singapore. In collaboration with employers, workers, labour unions,economic agencies, education institutions, industry associations and training providers,they seek to make workers more employable in and flexible to the changing needs ofthe Singaporean economy.

As the Singapore economy restructures, workers will risk becoming structurallyunemployed, that is where their skills are no longer relevant because old jobs are phasedout. However, the Ministry aims to grow new activities and create new jobs. Workerswill therefore have to adopt new skills and capabilities in order to stay employed.


Hence the WDA attempts to build a pipeline of local workers who can take up new jobscreated by new investments, such as bioscience, and serve the needs of growingindustries, such as the tourism-related industries. They also attempt to re-train workerswhose skills are less in demand and redirect them into other high growth areas wheretalent is needed. One example is the agency’s effort to convert mid-career workers intoprofessional nurses. This can also involve reapplication of existing skills, such as teaching2-D graphic artists digital animation skills.

The WDA further attempts to go beyond incremental skills upgrade to analyse themanpower situation in an industry, identify critical skills shortages, bridge the gap andachieve a quantum leap in industry competitiveness. This includes transforming servicestandards through workforce upgrading. They also aim to equip low-skilled workerswith basic skills to maximise their chances of finding jobs and progress together withSingapore.

To achieve these desired outcomes, the WDA’s secondary objective is to develop aneffective, authoritative and competency-based training infrastructure. The practical skillsand knowledge acquired would help workers across all levels stay relevant in theirchanging workplace. The WDA also provides courses for managers and workers toequip them with new skills allowing them to stay economically relevant. These coursescover both general and industry specific skills.

The two-day Performance Management workshop, which has trainers from the NationalTrades Union Congress (NTUC) and the Singapore National Employers Federation(SNEF), is meant to help human resource officers, union officials and managersunderstand the key steps of effective performance-based management process andlearn how to ensure performance-based management stay relevant and useful in theorganisations to enhance competitiveness. In addition, small and medium sizedenterprises (SMEs) are also eligible to apply for coaching assistance after the workshop,which is provided by the SNEF at a subsidised rate. This consultancy service providesSMEs with personalised attention and hand-holding in setting up and implementing aPerformance Management System in the company, which helps to support aperformance-based wage system. For the whole workshop, the WDA provides up toS$250 of subsidies per participant across the board. This course effectively teachesmanagers and union officials the key steps and methods of understanding, implementingand appraising a flexible and performance-based wage system.

In line with the programmes of the WDA, the Singapore Professionals and Executives’Co-operative (SPEC) has set up a Management Consultancy Interest Group to provideservices such as job redesign, market feasibility studies, business plan development,operational reviews, business re-engineering, strategic planning, branding, seminarsand training workshops. They also provide free consultancy services for companies


who want to implement job re-design. The SPEC Management Consultancy InterestGroup comprises of a pool of trained professionals in the areas of Finance, Businessdevelopment, Sales and marketing, Branding, Human Resource, IT, Engineering andLogistics.

The Maya training program is a joint initiative by The Singapore Workforce DevelopmentAgency (WDA) and The Media Development Authority (MDA). The program will equipdigital media workers with the skills to create cutting-edge animation and special effectsfor the Media Industry. It gives trainees a hands-on experience with the Maya animationsoftware tool, emphasizing practical learning through practice. With this additionalcapability, digital media workers will be able to align their skills with international standardsof digital production. Subsidies for course fees are also given.

The WDA and The Logistic Institute — Asia Pacific (TLIAP), and in consultation with thelogistics industry, have developed the Supply Chain Management (SCM) ExecutiveUpgrading Programme. The programme aims to enhance SCM executives’ ability todevelop optimised end-to-end SCM solutions for their customers, in particular, takinginto account how each stage of the supply chain process can affect global and regionallogistics business.

The programme aims to equip participants with:

� Sound understanding of the concepts, objectives and processes of supply chainmanagement;

� Good grasp of the issues, challenges and opportunities for a modern enterpriseoperating in a global environment;

� Working knowledge of business finance and risk management essential tomanaging cost and service performance of complex supply chains;

� Good understanding of the fundamental principles and methodology indeveloping a best-practice supply chain strategy to support an enterprise’smarketing objectives; and

� An update of the technology that is reshaping the way modern supply chains aredesigned and managed for maximum business performance.

Internationally renowned lecturers, who have a distinguished list of academicachievements and an impressive track record in the logistics industry, will be facilitatingthis programme. The SCM Executive Upgrading Programme also provides participantswith opportunities to work with these lecturers on possible solutions to addresscompany-specific challenges, as well as to network with peers in the logistics industry.The total cost of attending the course is S$5000 with the WDA subsidizing up to S$2000leaving companies to pay the remaining S$3000 for training their managers.


The WDA provides Industry Skill Reports which are a series of reports describingindustry performance, key business challenges, skills profile and skills needs in specificindustries. The reports also contain information on WDA training programmes forworkers in each industry. Currently reports are provided on the electronics, food andbeverage, finance, hotel and retail industries.

Workplace training in the electronics industry was higher compared to other industriesin 2003 due to higher training incidence in large firms as well as for PMETs (Professionals,Managers, Executives and Technicians), production operators and other workers. Theaverage training cost per trainee was lower in the electronics industry than mostindustries. Training duration for electronics workers had improved from 2000 to 2003,attributable to longer training duration of production operators and other workers. Mostelectronics firms sent their workers for training to acquire and update their job specificskills and knowledge. Analysis by types of training showed that employers placedemphasis on software applications, broadbased knowledge/skills and functionalmanagement. The skills in demand include quality management, leadership & generalmanagement and productivity management. Workplace training was the highestduring 2000-2003 compared to other industries due to the higher training incidence inlarge establishments as well as for the PMETs. The average training cost per trainee in2003 was the second highest compared to all industries. However, training durationdecreased in 2003 due to the decline in training days for the PMETs. Finance firmssent employees to acquire/update their knowledge and skills, especially on job specificand IT skills. Technical skills gaps exist in highly specialised products and businessprocesses.

Workplace training in F&B firms remained low in 2003 as compared to other industriesalthough it had shown improvement in medium-sized firms over the past few years.The provision of structured training was higher for sales and services workers as wellas other workers. However, training duration fell in 2003. Training expenditure was thelowest compared to other industries. Most F&B firms sent their employees for trainingto acquire/update their skills and knowledge, especially in the areas of job-specific skills.Analysis by types of training showed that employers placed emphasis on hotel/catering,computer-related, management and supervisory and customer service skills during1999-2003. Skills in demand include generic skills (customer service, qualitymanagement and supervisory & management skills) as well as job-specific skills (foodhygiene & handling and cooking skills).

Workplace training in hotels was higher than all industries during 2000-2003 due to thehigher training incidence in medium and large hotels as well as for sales & services andother workers in 2003. However, training duration declined in 2003 from 2000. Trainingexpenditure was lower than the overall services sector. Most hotels sent their employeesfor training to update their skills and knowledge, especially in the areas of job-specific


skills and business skills. Analysis by types of training showed that employers placedemphasis on hotel/catering, computer-related, management & supervisory and customerservice skills during 1999-2003. The types of skills in demand include customer serviceskills as well as supervisory and management skills.

Finally for the retail industry, workplace skill training remained low as compared to otherservices industries during 2000-2003 due to lower training incidence in smaller retailfirms. Training duration increased over the past few years. However, average trainingcost per trainee was lower than most industries in 2003. Employees were sent fortraining to update their skills especially on job-specific skills. Analysis by training typeshowed that employers placed emphasis on training in computer-related, retail,management and supervisory and customer service skills during 1999-2003. Skills indemand include customer service and management skills. Skills gaps vary byoccupational groups and have an impact on business performance.

In trying to build up and implement a flexible work regime in Singapore, the WDAhas also come up with a practical guide for the implementation of performancemanagement for small and medium sized enterprises.

This guide (reproduced here) involves six practical steps for relatively smaller businessesto link organization and individual performances to wages:

Establish corporate KPIs

The first important step is to establish the key performance indicators (KPIs) of acompany. Establishing KPIs is a performance management tool that helps a companyto track and measure critical factors that contribute to its success. The guide givesexamples of KPIs and provides a case study.

Cascade and align KPIs within all levels in the company

Next, the KPIs should be cascaded to the divisional, departmental, and finally, individuallevels. This ensures that each area of work is aligned towards the business objectivesof the company. The guide illustrates with an example of a retail company cascading itsKPIs to its department, managers and employees.

Regular communication of performance matters

As performance and wage matters can be sensitive topics, regular communication isimportant in fostering employee commitment. This can be done using a variety of bothdirect and indirect communication methods, as listed in the guide.

Proper documentation on performance matters

It is essential to keep simple but proper documentation. This is to help companies trackemployee and departmental performance and allow timely intervention if necessary. An


example of a simple format of documentation which is sufficient for most SMEs isshown in the guide.

Performance review and monitoring

Employee performance can be assessed by measuring what the person does andwhat the person achieves. The guide provides performance review templates, alongwith concise examples of how the templates should be used.

Make performance-based wage decisions

Finally, company and individual performances can be used to calculate wage increasesand bonuses allocated to each employee. The guide illustrates with examples ofperformance-based wage increases based on sample KPI figures and performancestandard levels.

In addition the WDA provides free employment and training assistance in theirDistributed CareerLink Centres. Here workers are provided with assistance on jobmatching that is customized according to workers’ needs, preferences and skills andcareer coaching/couselling to enable them to proceed with the job search moreconfidently. Here the WDA also provides training advice and assistance to help workersupgrade their skills, broaden their job options and maximise their chances at getting ajob. The WDA further manages a job database called “JOBS lite” where hiring employersare welcomed to post job vacancies for job seekers to search and view. Interested jobseekers can contact the employers directly based on the contact details provided. Thisservice is free of charge.

The Skills Development Fund (SDF)

The Skills Development Fund (SDF) was established in October 1979 with theinstitution of the Skills Development Levy (SDL) Act with the primary objective ofencouraging employers to invest in skills upgrading of the workforce. The SDF nowoperates as part of the WDA.

The SDF does this by offering assistance as an incentive to companies to mounttraining programmes for employees.

Incentives are offered on the basis of a cost-sharing principle and the training must berelevant to the economic development of Singapore. The amount of incentives that acompany can obtain is not tied to the levy contribution.

Skills Development Levy (SDL)

Under the Skills Development Levy (SDL) Act (Cap. 306), it is statutory requirement foremployers to make SDL contributions on employees who fall within the salary ceiling for


levy contributions. With effect from September 1, 2005, the salary ceiling for SDLcontributions will be raised from $1,800 to $2,000. The levy rate remains at 1% and aminimum of $2 is payable where remuneration is less than $200.

The SDL is payable for all employees whose gross remuneration is less than or equalto the salary ceiling. The SDL is also payable for employees such as casual, part-time,temporary and foreign workers rendering services wholly or partly in Singapore.

Payments for the SDL should be made by the 14th day of the following month tothe Central Provident Fund (CPF) Board, which is our authorised collection agency,together with other payments. A penalty of 10% per annum will be imposed on theoutstanding amount for late payment. In addition, employers who give false and/ormisleading information relating to the payment of the levy, or who contravene theprovisions of the Act or Regulations shall be liable, if convicted, to a fine or imprisonmentor both.

The SDL collections are credited to the Skills Development Fund (SDF). Under theadministration of the Singapore Workforce Development Agency (WDA), the Fundprovides various incentive schemes to companies to upgrade the skills of theiremployees.

The SDF offers assistance specifically as incentives for companies to undertake workertraining. Assistance is not given as subsidies for training.

SDF assistance is awarded only for employer-based training to ensure that training hasthe accountability of the workplace. The company must identify the training required toupgrade its employees and undertake to fully fund the training programmes.

The general eligibility criteria are listed as follows:

� Companies are registered or incorporated in Singapore.

� Training is fully sponsored by companies.

� Trainees are employees who are either Singapore Citizens or PermanentResidents (PR) of Singapore.

� Trainees have achieved at least 75% attendance and have sat for allexaminations if the course leads to certification.

To be eligible for funding support for ES courses, trainees must meet all of the followingcriteria (in addition to the general criteria listed above):

For ES courses commencing before 15 August 2005:

� Trainees have completed the Modular Appraisal and are recommended for trainingin the specified level of ES module.


� Trainees have attained 100% of the competencies listed in the competencychecklist.

� Trainees have sat for the pre-training and post-training tests.

� Trainees have attained at least 80% score in the post-training test.

For ES courses commencing on or after 15 August 2005:

� If the course is a Workplace Literacy & Numeracy (WPLN) module, the traineesmust have completed the WPLN appraisal, and are recommended for trainingin the particular WPLN module.

To qualify for support, a Training Programme must have the following:

� Specific performance objectives, i.e. the skills, knowledge and attitudes to beattained must be specified;

� Schedule of training activities/lesson plans (An On-the-Job Training [OJT]programme should be supported with an OJT Training Plan. An OJT TrainingPlan should contain information on the main tasks, task elements, key points,task standards, knowledge and skills required, training guidelines and OJT hours.In addition, the attendance of the trainees must be recorded in an OJT Atten-dance Log.);

� Specified duration of training;

� Guided instruction, i.e., conducted by qualified instructors; and

� Test(s) to assess attainment of training objectives.

National Continuing Education and Training Framework (NCETF)

The objective of the National Continuing Education and Training Framework (NCETF) isto build an integrated and coherent CET system which facilitates flexible adult learning,improves access to skills upgrading and provides clear career progression pathwaysfor the workforce. The NCETF embraces the concepts of competency-based training.Recognition of Prior Learning, open entry requirements and adult-centred learningmethodologies, all of which aim to address adult learning barriers. It is anchored on thesystematic mapping of skills and competencies linked to occupational structures. Underthe NCETF, competency standards, assessment strategy and training curriculumincorporating adult learning principles will be established for each key industry. TheNCETF is currently being piloted in the Retail and Training industries.

Retail CET Framework

The Retail Continuing Education and Training (CET) Framework is a national CET frame-work which reflects the occupational skills needs of the retail industry and provide a


qualifications framework to recognise skills training, develop the standards and qualityassurance of the training for the retail sector.

With the Retail CET framework, retail workers can have clearer career progressionpathways, and have clearer information on how to train and what to train, to developtheir own upgrading pathways. They can be assured that these skills are recognized byretail employers and would help enhance their employability across various subsectorsin the retail industry.

The Value of Training under Retail NCETF

The Retail NCETF is a flexible system which awards national qualifications. Theadvantages of training under the framework:

� Trainees may choose to take courses offered by their own company (if theirin-house courses are accredited under NCETF) or an external training provider.

� Trainees are awarded with a Statement of Attainment (SOA) for every modulecompleted. There is no time limit for the collection of sufficient SOAs to attain aqualification.

� The courses are heavily funded by SDF and SRP

� There are no academic requirements for registration

� Trainees have the flexibility of taking modules across different levels

� For trainees who have many years of experience but do not have appropriatequalifications to recognize their competencies in the industry, they can go fortraining, or go through Recognition of Prior Learning (RPL) to acknowledgecompetencies gained through past work experience and previous training formodule exemption. RPL will be ready by end 2005.

Retail Qualifications

A total of 64 competencies have been developed to cater to three levels of occupations:operations, supervisory and managerial.

The 64 competencies are developed into 64 modules and grouped under threequalifications.

A Statement of Attainment (SOA) is awarded to a trainee who has attained thecompetencies by successfully completing all assessments.

Each qualification is made up of a collection and combination of the relevant core andelective modules :


1. Certificate in Retail Operations - Made up of ten Core modules and two Electivemodules.

2. Advanced Certificate in Retail Supervision - Made up of minimum eight Coreand minimum two Elective Modules (2 units can be Diploma units).

3. Diploma in Retail Management - Made up of minimum nine Core and minimumfive Elective modules (two units can be Advanced Certificate units).

The Retail NCETF certificates and diplomas are national certificates to benefit andupgrade workers in the retail industry. It is awarded to individuals who have attained acomplete set of SOAs as required by each different qualification.

Training Providers

Currently, there are six training providers who are working to offer Retail NCETF courses.They are:

� Nanyang Polytechnic

� Ngee Ann Polytechnic

� Singapore Polytechnic

� Temasek Polytechnic

� The Retail Academy of Singapore

� The Singapore Retailers Association Institute of Retailing

Individual retail companies who are accredited as training providers for CET coursesmay also provide Retail NCETF in-house programmes.

Funding Available

Employers who send their employees for the Retail NCETF training will receive coursefee funding from the Skills Development Fund (SDF) and absentee payroll fundingunder the Skills Redevelopment Fund (SRP).

To be eligible for the funding, trainees must meet all these criteria:

� They are Singapore Citizen(s) or Permanent Resident(s) of Singapore

� They have achieved 75% attendance during training

� They have attempted all required assessments

Depending on whether the trainee gets trained by the company or an external trainingprovider, the company will receive different funding rates.


SDF Rates of Funding

Type of Nature of Training Workers below 40 Workers 40 years Programme years old old and above*

Certificate & Publicly Conducted 80% of course fees 90% of course feesAdvanced Certificate Course & assessment fees, & assessment fees,

capped at $11 per hour capped at $16 perhour

In-house Course $11 per hour $11 per hour

Diploma Publicly Conducted 80% of course fees 90% of course feesCourse & assessment fees, & assessment fees,

capped at $16 per hour capped at $18 per hour

In-house Course $16 per hour $16 per hour

SRP Rates

Workers below 40 years old Workers 40 years old and above*

$6 per hour capped at 80% of hourly $6.80 per hour capped at 90% of hourlybasic salary basic salary

* includes those with A-levels and below

Training CET Framework

A set of national trainer competency standards has been developed under theTraining CET Framework. These have been validated as a benchmark and continousimprovement pathway for trainers in Singapore.

The trainer standards have been further developed into National CET Qualifications,one of which is the Advanced Certificate in Training and Assessment. This qualificationis currently being piloted with a selected group of trainers. While not mandatory, thetrainer standards will be promoted as the recognised mark of quality assurance in thetraining industry.

Singapore Employability Skills System

The Singapore Workforce Development Agency (WDA) aims to improve thecompetitiveness of Singapore workers through upgrading workers’ “transferable” skills


under the Singapore Employability Skills System (ESS). The Employability Skills Systemis a key part of WDA’s comprehensive national skills and qualifications framework,which aims to increase local workers’ skills levels. By equipping workers with skillswhich they can bring with them from job to job, the Employability Skills System makesworkers more adaptable and helps them respond more quickly to changes in their workenvironments.

The employability skills are generic and portable skills that can be used in every industry.They enable workers to be more employable and better adapt to new job demands,work challenges and changing work environments.

The WDA has worked with employers and industry associations to identify ten essentialemployability skills:

� Workplace Literacy and Numeracy

� Information and Communication Technologies (ICT)

� Problem Solving and Decision-Making

� Initiative and Enterprise

� Communications and Relationship Management

� Lifelong Learning

� Global Mindset

� Self-Management

� Work-related Life Skills

� Health and Workplace Safety

Based on the ten identified employability skills, WDA has developed 29 trainingmodules. They are:

(i) Eight modules on Workplace Literacy and Numeracy (WPLN).

(ii) Seven modules of Non-Workplace Literacy and Numeracy (Non-WPLN)modules. These modules are offered at either the Operations, Supervisory orManagerial level:

� Basic Information Communication Technologies — Ability to operate commonoffice equipment and apply basic computer knowledge.

� Workplace Information Communication Technologies — Ability to apply commonoffice software in the workplace.

� Personal Effectiveness — Ability to manage time and maintain a balancebetween work life and personal life.


� Initiative and Enterprise — Ability to set goals, develop an action plan; as well asobserve new trends and offer new ideas.

� Communication and Relationship Management — Ability to communicateeffectively with customers and colleagues at the workplace.

� Problem-Solving and Decision-Making — Ability to identify problems, suggestsolutions and take responsibility for decision making.

� Health and Workplace Safety — Ability to maintain a healthy lifestyle and a safeworking environment.

To sign up for Workplace Literacy and Numeracy (WPLN) training, the worker must firstgo through an appraisal process. The worker or the employer can make an appointmentwith the Centre for Employability Skills (CES) for an appraisal. The employer can alsoappoint a training provider to arrange for the WPLN appraisals on the company’sbehalf.

Companies that are interested to conduct Employability Skills appraisals at theirwork premises must have a minimum of 25 employees to be appraised, as well asappropriate rooms for the conduct of the appraisals.

A Statement of Attainment (SOA) will be awarded to a trainee who has completed anyEmployability Skills training module and meets these requirements:

SOA for Workplace Literacy and Numeracy Module

� Attain at least 75% attendance during the training course

� Successfully complete at specific competency level standardised pre- and post-training assessments.

SOA for non-Workplace Literacy and Numeracy Modules

� Attain at least 75% attendance during the training course.

� Complete the pre- and post-training assessments.

� Attain a score of at least 80% for the post-training assessment.

� Achieve 100% of the competencies listed in the competency checklist.

A Career Readiness Certificate (CRC) will be awarded to individuals who have attainedthe full range of the Statements of Attainment (SOAs) awarded for all the EmployabilitySkills training modules at the various occupational levels. This certificate is the keyEmployability Skills based qualification in WDA’s national skills and qualificationsframework. It is designed specifically to benefit and upgrade workers who currently donot have academic credentials.


The certificate will be awarded to individuals who have attained SOAs in the seven Non-Workplace Literacy and Numeracy (Non-WPLN) Modules as well as the requiredWorkplace Literacy and Numeracy standard at the various occupational levels.

Employers who send their workers for Employability Skills training will receive coursefee funding support from the Skills Development Fund (SDF) and absentee payrollfunding under the Skills Redevelopment Programme (SRP).

To be eligible for funding, trainees must meet these criteria:

� They are Singapore Citizen(s) or Permanent Resident(s) of Singapore.

� They have taken the appraisal test at the Centre for Employability Skills.

� They have achieved at least 75% attendance during the training course.

� They have attempted all required assessments.

Course Funding Rates

1. Employability Skills Modules at 80%of course fees capped at $16 perOperations Level. hour, whichever is lower

2. Employability Skills Modules at orSupervisory Level.

3. Employability Skills Modules at 90% of course fees capped at $16 perManagerial Level. hour, whichever is lower *

(*Rates apply to workers aged 40 years old and above, with ‘A’ level qualifications or below.)

SRP Absentee Payroll Rates

Workers below 40 years old Workers 40 years old and above

$6 per hour capped at 80% of hourly $6.80 per hour capped at 90% of hourlybasic salary basic salary

For any training conducted after working hours, the employer is required to top up thebalance 10% or 20% (up to $1.50 per hour) and disburse the total absentee payroll tothe employees.

Lifelong Learning Endowment Fund (LLF)

The Lifelong Learning Endowment Fund (LLF) was established on 12 March 2001. Itsobjective is to enhance the employment and employability of Singaporeans through


initiatives that promote and facilitate the acquisition of skills. Being an endowmentfund, LLF will provide a steady stream of funding for lifelong learning initiatives. LLF isgoverned by the Lifelong Learning Endowment Fund Act.

The objects for which the income of LLF may be applied are set out in Section Five ofthe Lifelong Learning Endowment Act. Besides employer-based training, LLF can beused to support individual-based or community-based training. It is meant to complementand supplement existing funds such as the Skills Development Fund (SDF) andManpower Development Assistance Scheme (MDAS), and provide longer term supportin place of funds that could be closed in the future. LLF would focus on initiatives relatedto employment and employability. It will not be used for supporting other training initiativessuch as the conduct of personal enrichment courses. Programmes will be developedin partnership with industry/trade or employer associations, community organisations,self-help groups etc and priority will be given to programmes targeted at those whoface greater challenges coping with the structural changes in the economy and labourmarket.

Through these efforts, the WDA envisions an economy where manpower will beSingapore’s number one advantage.

Employer Feedback on Training, 2004

A substantial percentage (75-86%) of employers surveyed in 2004 felt that training hasa positive impact on worker productivity, the quality of products and customer satisfaction.About half the companies said that worker and manager training had increased salesand profitability. However, less than half of the companies surveyed felt that trainingactually made a difference in innovation and staff retention. Interestingly, the findingsalso suggested an inverse correlation between staff turnover and incidence of trainingprovisions – companies which have an above-average rate of training provision usuallyhave below-average resignation rates.

About two-thirds of firms interviewed provided structured training for their employees.This was a marked increase from 2002 where only half of all firms sampled providedtraining, largely due to heightened cost pressures following the 2001 economicdownturn. Larger companies were generally more committed to providing structuredtraining as compared to smaller ones – almost all (98%) of large companies (500workers and above) provided training while only half of the smaller companies (25-49employees) did so.

The 2004 survey also showed that more qualified workers were more likely to receivetraining – 60% for professionals and managers, 56% for clerical, sales and servicesstaff and 48% for production, cleaning and related workers. Firms that provided trainingaveraged a cost of S$511 per employee or 1.3% of total payroll. After deducting the cost


recovered from the Skills Development Fund (SDF), the average net training cost wasS$474 per employee which constituted 1.2% of total payroll.

Central Provident Fund Board

The CPF Board provides for almost all Singaporeans a social security savings plan bywhich Singaporeans can plan and save up for retirement. An individual’s CPF funds orCPF account is rather similar to superannuation funds in western countries which havereplaced pension funds as the source of income for retired workers. Every month, theworker contributes a percentage of his wages to his CPF account while the employercontributes another percentage of those wages on their part. The percentage ofcontributions varies on the age and wage-level of the worker. The table shows thepercentage of contribution as of November 2005.

This CPF scheme is meant to ensure that workers have sufficient funds uponretirement, provided with a house/property which is fully paid-up and sufficient savingsto meet medical needs during old age. The funds from the CPF account can only bewithdrawn when the worker reaches the age of 55. However, CPF funds can be used tomeet medical expenses and for the purchase of property and to pay for children’seducation.

These measures are taken by the CPF Board and the Singapore State in order to ensurethat workers can provide for themselves in old-age. This has a particularly moral-ideological stance here in Singapore, as the state deflects the moral onus for providingfor no-longer-productive workers from government institutions to the workers themselves.Unlike superannuation funds in Australia, for instance, it is the state (through the CPFBoard) which effectively controls these funds, which are used by Government LinkedCompanies (GLC) as capital for profit-making ventures. The minimum guaranteed rateof interest for CPF accounts currently stand at 2.5% per annum.

National Wages Council

The NWC is a statutory board which provides both across-the-board as well as industryspecific guidelines on wages and wage structures. Between 1993 and 2005, the NWCguidelines have been rooted in the understanding that built-in wage increases shouldalways lag behind productivity growth and that total wage increase should always reflectthe performance of the economy. Since 1993 (but even more so, over the last fewyears), the NWC has always been a strong proponent of building up of the MonthlyVariable Component in wages as well as the promotion of a flexible and performance-based wage scheme. The NWC also advocates skill development among workers buthardly hesitate to recommend wage freezes in times of economic uncertainty. Whilealso attempting to reduce non-wage costs among businesses in Singapore by

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recommending the government moderate costs of rentals, telecommunications, utilitiesand government fees, the guidelines of the NWC ensure that economic fluctuations arefelt more acutely by workers, rather than the business enterprises.

Tripartism in Singapore

Tripartite taskforces, made up of the National Trades Union Congress (NTUC), theSingapore National Employers Federation and the Ministry of Manpower, are usuallyconvened to discuss, tackle and submit recommendations for certain labour andmanpower issues as and when they arise. In times of stable industrial relations inSingapore, tripartite taskforces have recently convened mostly to deal with the issue ofwage restructuring.

The Tripartite Taskforce on Wage Restructuring was formed in July 2003 with its findingsand recommendations submitted to the ministry in January 2004. This taskforce wasformed to find ways for economic restructuring for Singapore to regain its competitiveedge in the global economy and, in the report, recommended a flexible wage systemwhich would see wages rise in sync with company profits in times of prosperity.

The process of arriving at a consensus with regards to wage reform is a good exampleof how tripartism works in Singapore

Wage Reform

From the mid and late 1990s, the need for a flexible wage system as part of wagereform was felt more acutely than before. Globalisation and technological advancementmeant that businesses operate in more volatile environments with shorter businessand product cycles. The rise of emerging economies such as India, China andThailand has toughened cost competition in attracting business investments. TheSeptember 11 incident, the Bali bomb blast, the SARS outbreak and the wars in Iraqand Afghanistan have added to economic uncertainty. Hence, companies need, morethan before, a sense of economic security from governments that their interests areassured.

Wages, as a key component of business costs, need to be flexible and competitiveenough for companies to absorb the shock of sudden downturns. The ministry throughthe recommendation of the Tripartite Taskforce on wage restructuring feels that ahighly responsive and flexible wage system will not only enable businesses to makeadjustments quickly to absorb these shocks and downturns but also to eventuallypreserve jobs for workers. The ministry cannot rely on making further CPF cuts toreduce wage cost given that there is little room to maneuver on this front. CPF cutswould further eat into mortgages and medical and retirement needs of workers.


The government has made it known that wage restructuring are “not about cutting wages”but rather implementing a system to increase the performance-based component oftotal wages. Also, the government recognizes that low wages are not the basis ofsustainable competitiveness of Singapore’s workforce and that the prime emphasisshould be on innovation and quality.

The recommendations of the Tripartite Taskforce on wage restructuring in January 2004can be summarized in the following table:

Recommendation Objectives

Broad guidelines of the variablecomponent in wages:Rank and file employees – 70% basicwage, 20% annual variable component(AVC), 10% monthly variable component(MVC).

Middle Management – 60% basic, 40%variable (both MVC and AVC)

Top Management – 50% basic, 50%variable (both AVC and MVC)

To build up the annual variable componentand draw up clear and robust keyperformance indicators (KPI) to link thecomponent to company and individualperformance.

To examine if Annual Wage Supplement(AWS) is in practice variable and decide ifAWS should be treated as part of basicwages or part of AVC.

To build up AVC from future wageincreases if companies and employeesconsider AWS as separate from AVC.

Executives and managers or employeesnot covered by the employment act orcollective agreements should have AWStreated as part of AVC.

A sizeable variable component will allowemployers to make adjustment to wagecost in difficult times in order to survive andretain jobs.

To use AVC as a tool to reward employeesfor their contributions and motivate themto give their best. Employees’ wages will risein sync with increased company profits intimes of economic prosperity.

To build up AVC

Contd.


Where more than one month of AWS ispaid, to convert the excess of one monthinto variable component.

To build up a MVC component partly fromfuture wage increases and party frombasic wages.

To draw up clear and appropriate criteriashowing how cuts or restorations of MVCcould be triggered. These could includethe use to KPIs. These criteria shouldbe agreed between employers andemployees/unions.

To rationalise allowances and convertthose that no longer serve any purposeinto variable component, whereappropriate.

To facilitate constructive wagenegotiations, companies are encouragedto share regularly relevant information oncompany performance and businessprospects with employees and unions.

To adopt practices such as effective andtransparent appraisal system, stronginformation communication channelsbetween companies and employees/union, and staff training and development.

To consider the implementation ofadditional options to adjust wage cost,which include:

shorter workweeks

temporary lay-off

taking paid or no-pay leave

flexible work schedules

To move away from the seniority-basedwage system and bring the average salarymaximum-minimum ratio down to 1.5 timesor less as soon as possible, the followingoptions are suggested:

To build up AVC

To build up MVC

To implement MVC

To build up AVC or MVC.

To facilitate the process of wagerestructuring.

To support wage restructuring.

Additional tools to help employers copewith sudden and drastic deterioration ofeconomic and business conditions.

To address the shortcoming of theseniority-based wage system and toensure that wages reflect the value of thejob.

Contd.


a. Raise the salary minimum and lower orhold the salary maximum constant.

b. Reduce the maximum points of salaryranges. Companies can consider thefollowing measures for employeeswhose salaries exceed the new salarymaximum:

� giving a once-off lump sum paymentfor employees who are at the newsalary maximum point in lieu of built-inwage increment.

� allowing retention of salary points on apersonal-to-holder basis.

� rewarding the employees throughproductivity or performance-relatedbonuses.

� buy out excess salaries for employeeswho are currently paid beyond the newsalary maximum.

c. Truncate long salary ranges intoshorter ranges.

To avoid locking in pre-determined annualincrements in their Collective Agreements.Companies should conduct annual wagereviews based on company’s performance,productivity, economic and marketconditions and guided by the NationalWages Council recommendations.

To give wage increases only if they aresustainable. Service increments should besmall, with the amount of the incrementdependent on how long the employeeshould take to reach the top of the salaryscale.

Companies facing wage pressures fromglobal competition may want to review theirwage levels, in consultation with unions.

To link wage increases to company’sperformance and market conditions.

To ensure that wages in Singapore remaincompetitive.

To ensure wages remain competitive.


These recommendations in January 2004 were soon followed, six months later, by theTripartite Taskforce’s guidelines on flexible work schedules. Till then, Section 41A of theEmployment Act made it mandatory for employers to pay at least 1.5 times the basichourly wage for overtime work and twice the daily pay for working on agreed rest daysor public holidays. Using the justification that during unfavourable and volatile economicconditions, companies face the risk of a high wage burden, the government has agreedto allow the Commissioner of Labour to exempt affected companies from these legalprovisions.

However, to ensure that this exemption is not abused by employers to further exploittheir workers, the following qualifying conditions of application have been put in place:

A survey carried out on Wage Restructuring found about 63 percent of firms haveimplemented some form of wage flexibility(Wage Restructuring Outcome 2004). Thisthorough overhaul of existing wage structures could only have been carried out smoothlybecause of a firm foundation of tripartism. The Tripartite Taskforce on Wage Restructuringincluded 100 representatives from MOM, Singapore National EmployersFederation(SNEF) and National Trades Union Congress. The main Taskforce comprisedthree members from the SNEF, four from MOM and three from the NTUC. Five resourcepersons from the private sector were also included

Rationale for Implementing Flexible Work Schedule

There must be a compelling need for the company to operate flexibly to cope withuneven and fluctuating business cycles to optimise its manpower resources for thebenefit of the company and its employees. The company concerned must be able tosupport its proposal by providing information relating to its businesses, products orservices that are seasonal or fluctuating in nature and hence require flexible work scheduleto better meet its demands.

Income Stability

Companies should ensure that the incomes of their employees are stable in that theywill continue to receive their monthly basic salary during the lull periods when they workless than the contractual hours.

Occupational Safety and Health

Companies applying for the exemption should have a good track record in respect ofsafety and health. They should ensure that the safety and health of the employees is notcompromised and that the employees would not be subjected to hazardous workenvironment and conditions as a result of implementing the flexible work scheduleschemes. Regular inspections may be carried out by Ministry of Manpower (MOM) to


verify the level of compliance of safety and health legislations and other measures takento bring about a safe and healthy environment. In line with this objective, companies arerequired to observe the maximum 12 hours daily working limit and monthly 72 hoursovertime limit, except in special circumstances where the Commissioner is satisfiedthat these limits may be exceeded.

Gain Sharing or Incentives for Employees

The company should put in place a profit sharing or incentive scheme to share gainsderived from the efficient use of manpower and productivity improvement as a result ofimplementing the flexible work schedule with their employees. Such incentive paymentscould be made to employees who participate in the scheme on a monthly, quarterly orless frequent interval basis.

Consent from Unions and Affected Employees

Under the tripartite guidelines, companies should first seek the union’s consent or in thecase of non-unionised companies, the consent from the majority (i.e. 50% + 1) of theemployees affected by the proposed scheme. The scheme should be clearly explainedand communicated to the affected employees. After an exemption has been granted,MOM may, at any time deem fit, interview employees to get feedback on how the flexiblework schedules have worked.

Regular Review and Renewal of Exemptions

Exemption should only be granted for a specific duration of not more than two years inthe first instance and on the condition that the company concerned will carry out regularreviews on a half or yearly basis to ensure that the scheme can continue to achieve itsobjective. The company needs to seek renewal upon the expiry of the exemption butthe subsequent period of exemption could be longer if the scheme has worked well.Companies that fail to comply with the stipulated conditions may have their exemptionsrevoked.

The Ong Teng Cheong Institute of Labour Studies

The institute was founded as the Singapore Institute of Labour Studies in 1990 by theNational Trades Union Congress (NTUC). The Institute was renamed the Ong TengCheong Institute of Labour Studies in late March 2002 to honour the memory of Mr OngTeng Cheong, former President of the Republic of Singapore (1993 to 1999) andSecretary General of the NTUC (1983 to 1993). The institute which provides coursesfor union officials as well as human resource and industrial relations courses aims tostrengthen leadership in the labour movement and advance the practice of good industrialrelations in Singapore.


Evaluation

These recent years have been crucial in the development trajectory of Singapore’seconomy. The Asian financial crisis, followed closely by the SARS epidemic andattacks by terrorists has led to a serious and harsh awakening for firms operating in theregion.

While new capital intensive investments have continued to flow into Singapore,Singapore’s share of foreign investments heading towards Asia has been on decline.China, India and Eastern Europe have become the hotspots for investments flowingtowards East. Fresh investments coming into Singapore are more likely to bring jobswith different skill-sets.

An aftermath of the Asian financial crisis and September 11 attack is the need for firmsto re-position themselves for new rounds of competition. Some of these firms wereinvolved in mergers and acquisitions exercises. Others that could no longer operate asthey were used to, had to shift to lower-cost production sites such as China and Indiawhere they can also access these huge mass markets.

A result of all these capital movements is that the Singapore economy had to re-engineeritself for the shift out of labour intensive production into a production regime characterizedby capital intensity requiring high/specialist –skills.

The renaming of the Ministry of Labour to the Ministry of Manpower(MOM) reflects therealization that labour matters are no longer concerned narrowly with conventional issuessuch as industrial relations. The brief of this revamped Ministry is now extended tocover a wider scope of enterprise that incorporates the development of labour as precioushuman resource capable of prodigious productivity and efficiency if properly nurturedand managed. It is commonly agreed that the quality of labour can give firms thatcompetitive edge

Hence, the re-named Ministry of Manpower(previously Ministry of Labour until 1998)now encompasses a whole lot of new functions based on the broader perspective thatviews labour in a more wholistic manner. By contrast, manpower planning and develop-ment now take up nearly three- fifths of the functions of the newly revamped MOM

As firms and economies are confronted with ever shorter production cycles, labour isforced to face the prospect of being continually on the re-make or face effacement froma market continuously on the move. Additionally, when firms face ever more competitiveglobal conditions, their room for manoeuvre has dramatically reduced. Only the leanestand most efficient can survive.

States under such conditions tends to be pushed into getting more involved in labourformation and re-formation. Instead of taking the path of retreat, states like Singapore


has to revamp to up efficiency all-round because of an intensively competitive globalenvironment.

The Singapore state, exemplified by the Ministry of Manpower, has indeed beenexemplary in establishing efficient systems that are user friendly and transparent. Forinstance, very elaborate and detailed procedures have been put in place to ensure thatthe importation of foreign workers can be easily and systematically implementedfollowing set rules and procedures openly publicised and accessible in their easilynegotiable websites. See the pile of forms contained in the Appendix

Nonetheless, because increasing uncertainties and unpredictability of global productionsystems can escalate the temptation for states to try pre-empt risks by seekingsolutions even before the problem has clearly developed; there is real danger thatbureaucratising labour issues may result in too much state meddling which can alsobring unforeseen consequences. Over-anxious state bureaucrats in panic can by itselfaggravate an already bad situation as shown by the government’s response to theproblem of high fertility in the 1960s and now, the problem of an irreversible decline inbirth rates and an ageing population.

Drastic measures taken by the Singapore state to “save jobs” for older workers bycutting their CPF; and the across- the- board cut of CPF for all workers as an aftermathof the Asian financial/SARS/Terrorism crises could have given employers the signalthat labour standards can be arbitrarily abandoned and open to re-definition duringperiods of economic crises. The government has quite aptly addressed the problemsby increasing incidence of employer abuse.

It is not surprising that, as noted by Permanent Secretary Yong of the Ministry ofManpower that “the recession has shifted the balance of power between employersand employees somewhat towards the side of employers. We have seen employerstake advantage of this, with undesirable practices like discrimination, not followingcontract terms, being slow in paying salaries or housing foreign workers in unaccept-able living conditions or just being downright abusive”(2005). It is rare for Singapore’sleading bureaucrats to address employers in so frank a manner. The mis-behaviour ofsome employers during the recession must have been quite serious for it to deservepublic chastisement. Such acts, if not publicly addressed may endanger the long heldtradition of amicable tripartite relations.

It is admirable that MOM has set itself the onerous and perhaps quite impossible task ofre-making the nation’s workforce. MOM has also made it their goal to usher in a moresophisticated HR system to operate at the level of the firm.

There is definitely a deficit in the management systems of firms as regularly shown upin surveys carried out by international management consultants. However,


management’s problem has more to do with respect for labour as a key source ofprofits. The disregard for labour development as reported by management consultantsreflect directly on basic assumptions about human rights held by the government. Thereluctance to encourage and nurture open debates is thus a constraining factor in thedevelopment of management-labour relations. Unless and until politics is liberalised, itwould be an up-hill battle to maximise the flowering of labour potential at the level of theenterprise.

In fact, the push and shove strategies of MOM which tend to uniformise firm responseto crisis may even add to the rigidity of the system.

By the time the taskforce set up to solve a specific problem or come up with adesignated solution, the problem might have already moved on or the desirable solutionrecommended might not appear so desirable any more. So rapid is the rate of businesstransformation that no state bureaucracy can hope to follow or catch up with it on time.

As Singapore shifts the foundations of its growth towards that of a more knowledge-based economy, it has to face the wide implications this entails for labour formation.Unsurprisingly, the new type of labour possessing skill-sets that could satisfy theimmediate demand of incoming investors cannot be immediately or easily sourcedlocally.

The short –term strategy has been to source from global markets for labour withdifferent cutting edge skills. As Singaporeans had moved up the skill ladder, anelaborate system of importation of low-skilled foreign labour was also established toregulate (and perhaps gaining also from) the employment of unskilled foreign labour.

The system has worked remarkably well and foreign labour has even acted as a bufferfor retrenchment during crises. For many employers today, foreign labour has becomea handy and convenient solution to many of their labour needs. As a result of longpractice, they may even be using them when Singaporean labour has become easilyavailable.

During the recent recession, older Singaporeans retrenched have found it difficult to getback into the job market because of their age. The government had to take the initiativeto show that jobs can be redesigned to upgrade their professionalism so retrenchedwhite collar workers can access them. When there is an easier and cheaper solution,companies will always lean towards the easier path. Once the deployment of foreignlabour has become a “taken-for-granted” strategy, to ask companies to revert taking themore inconvenient path of seeking the longer term solution of training up Singaporeansmay be too difficult a task.

The widespread use of foreign labour does pose several problems. The Ministry hasbeen troubled by reports of their abuse and has rightly addressed these reports as and


when they emerge. Besides, the delicate balance employers are caught in will alwaysstay with us, as long as we continue to use a substantial number of foreign workers.

The government should stay alert to whether employers are making the effort to trainour graduate workers or taking the easier route of quick importation of relatively cheaperprofessional workers from the region. Without doubt, Singapore has benefitedtremendously from its open policy of importing skilled workers who, working side-by-side with the locals, have passed on to them crucial skills needed to draw in freshinvestments. Fine examples come from the training and exposure multinationals haveimparted to Singapore’s professional workforce. Due to this crucial process of skillstransfer, our financial service sector could mount the new products or implementtechnologically sophisticated processes previously unheard of in local markets.

The proposed strategy of redesigning jobs to upgrade their level of professionalismmay be too troublesome but for the most committed of employers. Therefore, we see itfirst experimented upon in town councils.

However, this process cannot be used to produce the number of jobs required to sub-stantially solve the problem of unemployment of the less educated older locals.

Because the many adhoc schemes thought up require time to come to fruition, we stillrequire systematic support for our retrenched workers to see them through the waitingperiod so their families will not be unduly destabilised. The specter of retrenchment, ifnot properly handled can impact further on the already declining trend of fertility growth.

As for the long and medium term, Singapore is trying out a number of ways to createthat new labour that is required for its capital intensive knowledge economy to work.

The first strategy has been to retrain workers just retrenched from restructured firms orfrom firms that have relocated to low cost sites. The irony is that it is the older, moreestablished firms with stable workforce that tends to be subject of restructuring. Theirlabour force are characterised by matured workers with lower levels of education(averaging below secondary level). Thus they have a weak foundation for skill upgrading.Singapore’s past inattention to the quality of mass labour compared to countries likeKorea could partially explain this phenomenon.

Singapore’s attempt to make life-long learning a lifestyle could be emulated as it stepsup efforts to expand short term courses and modules with Polytechnic institutes anduniversities. Private initiatives are also encouraged

Singapore’s dedication to the training of workers should be a model for emulation. Theestablishment of the SDF now stands the country in good stead as both workers andemployers have become accustomed to the training culture despite the existence ofsome laggards.


After so many years of the existence of the SDF, it becomes logical to extend thetraining culture to the concept of life-long learning and worker employability. Theconcept of continuous training is now easily acceptable, especially amongst the youngergeneration of workers.

The Work Development Agency has worked hard to come up with a broad concept ofmanpower needs. They have also made sectoral studies to pre-empt these needseven before they have become clear trends; they have even gone about setting updelivery systems to ensure that workers could easily get onto the train of modulardevelopment.

Adult education is in the process of being revamped based on the National SkillsFramework that the WDA are in the process of developing. In addition, they are planningto establish a comprehensive National Skills Recognition System.

Besides, IT has been deployed to allow easy accessibility of information for jobplacements(Career Link Network). Interested parties can ask for job counselling inpreparation for getting their next job.

If you fall into the category of vulnerable worker(lowly paid and matured), you can go forthe People for Jobs Traineeship Programme and the Place and Train Programmes. Forworkers with higher levels of education, PMETs (Professional/Managerial/

Entrepreneurial/Technical), they can access the Executive Development Courses forlocal executives in the hotel industry or the Work Study Program for Diploma whileworking.

In response to the need to align the economy to one based more on knowledge,management styles would have to transform so as to bring out the best from a morequalified and internationally mobile labour force.

For some time now, management in Singapore has received less than luminousratings by international consultant firms. It’s about time that government attention hasnow focussed on the leadership attributes of the managerial class. The reasoning isthat incompetent management will not bring out the best from the workforce.

Grant Thornton International Business Owners Survey polled 150 of Singapore’smedium sized firms(less than 200 employees)[March 22,2005 Straits Times] and foundthat they fell well short of the global average when it came to staff retention strategiessuch as rewards systems and coaching.

Singapore firms tended to depend on the lure of a good corporate reputation to ensurethat their staff will stay on with them. This factor took precedence over more employee-centred choices such as “developing competitive reward systems and benefit


packages” which were rated as very important by only 25 percent(compared to 67percent of the global average).

“Coaching and training and mentoring top performers for leadership positions” wasseen as very important by just 34 percent of the local companies. The global averagefor this strategy for staff retention was 69 percent.

Managers in Singapore have to be socialised on the handling of our younger moremobile educated workers whose market is the world. The government has madecountless pronouncements(Ministry of Manpower, Lee B Y, 1999) that HR managershave to “create a favourable workplace environment … a better educated workforcewould be more attracted by jobs which could better match their personal life interests,or give them greater satisfaction”(note: the Ministry recently set up a HR PromotionSection).

According to the WDA Chairperson Yong(2005), “the government has committedhundreds of millions of dollars to this, literally. But there is no point having well-trainedworkers without competent and progressive leaders and managers…the effectivenessof our corporate leaders and managers is the multiplier of value…one of the pressinggaps in our eco-system that the WDA has identified and seeks to bridge, is thedevelopment of competent leaders and managers…a skilled worker under a weaksupervisor is not going to achieve his best. At the micro-level of job placements andskills upgrading that we undertake or fund, we see this so often”. Yong has rightly drawnattention to management as a weak link in our production system.

However, it must be pointed out that firms are often microcosms of the society they areembedded in. The authoritarian politics of Singapore society may now pose a hindranceto the democratisation of management so necessary for the flowering of aninternationally mobile workforce.

Singapore’s determined stand not to be a welfare state appeared to be under-minedrecently by the sudden and large numbers of workers retrenched for no reason than thechurning of the regional and the global economy. All the measures and diligent work putin by MOM can only contribute a limited extent to alleviating the problems of suddenunemployment.

What has aggravated the problem is that, as a result of government policy to have ahouse owning population, workers have become highly leveraged. When hit byretrenchment, they have little cash to fall back on. Years of sustained growth have givento workers a sense of satisfaction and security. For many, unemployment is unheard of,a disease only the lazy foreigners catch. Encouraged by state policies of consumption,workers have overextended themselves, for instance, by purchasing cars and housingassets which may have now devalued as a result of the crises. Those under the


protection of trade unions that have signed CAs supportive of retrenchment benefits willhave some time for job search. But for the majority who are not unionized, sudden lossof employment has brought unimagined difficulties.

Adhoc solutions of handouts at community centres and charitable organizations are notsufficient that it can prevent instability for children and families. Imagine having to trudgeto various agencies to get a variety of aids to support your daily needs, and even thenonly for three to six months

For a developed country that takes pride in coming up with systematic and efficientsolutions to social problems, the way the government has gone about dealing withfamily difficulties of the unemployed has drawn criticism even from its own MPs.

As capitalism goes into regular cycles of churning of its labour force, societies have tocome up with systemic solutions to eliminate insecurities that can pose a threat tofamily and social security. It is about time that Singapore comes up with a system ofunemployment insurance that can automatically kick in once a person is retrenched.This will mitigate the dependence of individuals on the mercy of the state/voluntaryagencies and remove stigmatisation of retrenchment and restore the dignity of workersaffected.

Moreover, as shown by the recent fracas with finances of several NGOs, it will alsoremove the problems of unaccountability of NGOs who have responsibility for discharg-ing large funds collected from the public but little accountability

Tripartism

The principle of tripartite cohesion has proved to be one of the key contributions toSingapore’s economic success. In fact, close tripartite relationship is seen by itsleaders as the competitive edge for Singapore.

Every emerging issue of interest to labour relations has called forth a tripartite committeeto seek solutions from the three parties concerned. For instance, the National TripartiteAdvisory Panel was formed in May 2004 to facilitate the development of family-friendlyworkplaces. A Tripartite Committee on the Employability of Older Workers wasestablished in March 2005 to help older Singaporeans work longer. Uptil now, thesecommittees have worked well.

However, during the more prolonged recession end of the 1990s, tripartism saw variouschallenges as workers were called upon to take across the board pay cuts. The TripartiteTaskforce on Wage Restructuring was set up in July 2003, working with five workinggroups. It was reported that as of 30 June 2004, 63.2 percent of all firms(employingmore than 25 workers) have adopted some form of wage flexibility recommendation


For the unionized sector, the proportion was 91.4 percent(Wage Restructuring Outcome2004) compared to 48.3 percent for the non-unionized sector.

For tripartism to work, the interests of all parties must be seen to have been catered to.It is a challenge on the part of the government to ensure the balancing of interestswithout which parties will seek their solution outside of the established system.

Accompanying recent measures to reform the wage system(flexible wages andreduced ratio of wage scales), the government had to reiterate calls for management tolead by example to ensure that the burden of the changes should not be overly borne bythe lower levels of workers.

NOTES

The Skills Development Fund (SDF) was established in 1979 to support employer-based training. It hasbecome an effective national tool nurturing a training culture amongst the working population. In 1998,the SDF supported over 530,000 training places compared to just 11,000 in 1980. The SDF is financedby collections from Skills Development Levy which is pegged at 1 percent of wages of workers earning$1,000 or less a month. Over the years, training grant commitments from the SDF have grown in stepwith the pace of training activities, and have outstripped SDF collections. In 1998, the SDF committedmore than $88 million in training grants but collected only $20 million.

REFERENCES

Publications

Ministry of Labour Singapore, 1983, Annual Report, Singapore: The Ministry of Manpower.

Ministry of Manpower Singapore, 1999, Annual Report, Singapore: The Ministry of Manpower.



Singapore Manpower 21 Committee, 1999, Manpower 21: A Vision of a Talent Capital, Singapore: TheMinistry of Manpower.

Ministry of Manpower Research and Statistics Department, 2005, Singapore Manpower Yearbook ofStatistics, Singapore: The Ministry of Manpower Research and Statistics Department.

Ministry of Manpower Research and Statistics Department, 2004, Report on Labour Force,. Singapore:The Ministry of Manpower Research and Statistics Department.

Ministry of Manpower Singapore Occupational Safety Department, 2003, Annual Report. Singapore:OSD.

Tripartite Taskforce for Wage Restructuring. 2004, Report on Wage Restructuring. Singapore.

Tripartite Taskforce for Wage Restructuring. 2004, An Employees’ Guide to Wage Restructuring. Singapore.

Tripartite Taskforce for Wage Restructuring. 2004, A Reference Handbook for CEOs on Wage Restruc-turing. Singapore.


Wage Restructuring Outcome 2004 Ministry of Manpower, Manpower Research and Statistics Depart-ment, Singapore

Speeches

Lee B Y, 1999 Speech at Conference on Strategies for Managing HR in the Knowledge-Based Economy,Marriott Hotel Singapore 19th Sept. Straits Times Singapore Press Holdings

Yong Ying-I 2005 Speech at Hewitt’s Best Employers in Asia Awards, Singapore

Electronic Sources

Ministry of Manpower. Retrieved in November, 2005.

http://www.mom.gov.sg/

Workforce Development Agency. Retrieved in November, 2005.

http://app.wda.gov.sg/

Skill Development Fund. Retrieved in November, 2005.

http://www.sdf.gov.sg/

Central Provident Fund Board. Retrieved in November, 2005.

http://www.cpf.gov.sg/cpf_info/home.asp

Contact Singapore. Retrieved in November, 2005.

http://www.contactsingapore.org.sg/


APPENDIX

APPLICATION FORMS FROM MINISTRY OF MANPOWER

TABLE OF CONTENTS

1. Application for a Dependent’s Pass.

2. Application for Renewal of Dependent’s Pass.

3. Application for a Letter of Consent to Work in Singapore.

4. Employment Pass (EP) Online Registration Form.

5. Application for an Employment Pass/S Pass.

6. Request to Change Pass Type/Appeal for Employment Pass or S Pass.

7. Application for Renewal of Employment Pass/S Pass.

8. Application for Visit Pass/Visa.

9. Application for Training Visit Pass.

10. Application for an Employment Pass (ENTREPASS Scheme).

11. Health Declaration Form.

12. Medical Report of Employment/S Pass Holder.

13. Declaration and Consent by Applicant and Local Sponsor.

14. Declaration and Consent by S Pass Applicant and Employer.

15. Return of Result of Secret Ballot.

16. Notice of Formation of New Branches.

17. Application Form for Union Administrator.

18. Annual Returns for the Year Ending…

19. Notice of Change in Officers or of the Title of any Officer.

20. Claim for Recognition.

21. Return of Results of Secret Ballot for Election of Officers of a Trade Union.

22. Notice of Dissolution of Branch.

23. Application of a Non-Citizen for Approval to Act as an Officer of a Trade Union/Branch.

24. Form of Account Kept by the Treasurer.

25. Notice of Change of Name of Trade Union.

26. Notice of Dissolution of Trade Union.

27. Recognition of Trade Union of Employees.


28. Application to Withdraw or Cancel Certificate of Registration.

29. Notice of Change in Branch Name.

30. Application by a Singaporean Citizen under the Age of 21 Years for Approval to Act as an Officer ofa Trade Union/Branch.

31. Notice of Amalgamation of Trade Unions.

32. Notice of Change of Office of Trade Union.

33. Application for the Registration of New Rules or Alteration of Rules of a Trade Union.

34. Return of Result of Secret Ballot.

35. Application for Registration of a Trade Union.

36. Notice of Accident.

37. Notification of Work Carried out on board a Ship in a Harbour.

38. Factories Act – Summary Report Form.

39. Notice of Patients Suffering from Industrial Diseases.

40. Notice of Accidents/Dangerous Occurrence.

41. Register of Persons Employed in Work Involving Exposure to….

42. Notice of Patient Suffering from Industrial Diseases.

43. Report of Examinations.

44. Notification of Process Involving Asbestos.

45. Report of Accident by Injured Workman.

46. Report of Retrenchment Exercise.

47. Employment Assistance.

48. Notice of Young Persons Employed in an Industrial Undertaking.

49. Guidelines and Application for Exemption on Paying Overtime.

50. Feedback on Employment Agency.

51. Information on Suspected Workpass Infringements.

52. Information on Unacceptable Housing Conditions of Foreign Workers.

53. Information on Well-Being of Foreign Domestic Worker.

54. Application for Workmen’s Compensation Claim.

55. Certificate of Fitness for Electrical Installation.

The Role of Labour Administrationin The Globalized Economy:Singapore’s PerspectiveOng Yen Her

OVERVIEW OF SINGAPORE’S ECONOMIC & SOCIAL LANDSCAPE

Economic Performance

Singapore has achieved steady economic growth for more than three decades,progressing from an entrepot to a knowledge-based economy. The structure of theeconomy has evolved over the years, shifting from labour intensive manufacturing tohigher value-added technology-intensive production as well as services such as finance,medical, transportation & logistics and education. Gradually, Singapore is becoming aknowledge-based economy. In this process of transformation, Singapore has beenable to ride on successive waves of development to remain relevant in the changingglobal environment. The workforce has also been able to move up the technologicalladder to achieve higher productivity and enhanced earning capacities.

While Singapore was adversely affected in the past decade by the Asian FinancialCrisis, the dotcom bubble burst and then the SARS (Serve Acute RespiratorySyndrome), the economy weathered it well and was able to bounce back. In 2004, theeconomy grew strongly by 8.4% followed by 6.4% in the following year. As a result,employment rose by a record high of 81,500 in the first six months of 2006. This figureis about two-thirds more than the 49,500 in the same period of 2005. In addition,unemployment fell significantly to 2.8% in June 2006.

Social Progress

In tandem with steady economic growth and improving income over the years, Singaporehas been be able to achieve significant social progress. Apart from low unemployment

3


-4

-2

0

2

4

6

8

10

12

14

16

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Gro

wth

Rat

e

0

1

2

3

4

5

Une

mpl

oym

ent

Rat

e

Growth Rate

Unemployment Rate

Table 1: Singapore’s Economic Growth & Unemployment Rate

Source: Singapore Department of Statistics, 2005

Table 2: Evolution of the Singapore Labour Force, 1994 – 2005

Educational Attainment of the Labour Force

1994, 2000 and 2005

1994 2000 2005

9.8%

18.0%

30.3%

15.5%

26.4%

22.0%

28.4%

23.3%

10.6%

15.8%

22.0%

28.4%

23.3%

10.6%

15.8%

Primary & Below Lower Secondary Secondary Upper Secondary/Diploma Degree

The Role of Labour Administration in the Globalized Economy : Singapore’s Perspective 65

and improved amenities and infrastructure, more than 90% of Singaporeans arehome-owners. With better quality education and training opportunities, the profile of theworkforce has also improved tremendously over the years. Besides, upgrading theskills of workers in employment, the share of better-educated new entrants into thelabour market has also increased, particularly at the tertiary level which has more thandoubled since a decade ago.

While Singapore has been going steady over the years, as an open economy, thecountry is facing challenges arising from globalization, technological advancementand changes in the labour market and demographics.

KEY CHALLENGES IN THE SINGAPORE LABOUR MARKET

The landscape in which the labour market operates in Singapore has been undergoingmajor change over the last decade. Like many countries, these changes are driven bythe interplay of driving forces such as globalization, technological advancement andchanges in the labour market and demographics. While these transformations havebrought about displacement of some workers and unsettling change, it has also creatednew opportunities for companies, workers and the economy as a whole. Economiesaround the world are repositioning themselves to respond to the new competition. Hence,it is imperative for Singapore to prepare its workforce so that it is able to remain relevantand take advantage of new opportunities.

Globalization & Technological Advancements

In the past five years alone, Singapore has been affected by the threat of terrorism in theregion, SARS, rising oil prices and the emergence of China and India in competition fordirect investment. The business climate is volatile and Singapore’s labour force needsto be able to adapt to challenges and external shocks. As emerging economies likeChina and India join the global labour market, Singapore’s workforce can no longercompete on cost alone. To stay ahead, the government has to remake the economy,support economic restructuring, grow new industries like biomedical sciences andcreative industries, as well as build up R&D capabilities. In this regard, we need to equipSingaporeans with the right skills for these new industries. Singapore also needs toaugment the local workforce with skilled foreign manpower.

At the same time, the increased application of technological innovation has led to theelimination of some low-skilled work. For example, the rise of new business modelssuch as e-commerce has eliminated the middle man and resulted in structural unem-ployment especially amongst the less skilled and lower educated.

For Singapore to succeed in such an environment, it is necessary to upgrade itsworkforce to respond swiftly to these new challenges and opportunities. Harnessing


globalization and technology has been key to Singapore’s development. Its fundamentalapproach is to maximize the opportunities and mitigate the impact of the effects ofglobalization and rapid technological change.

Changes in the Labour Market & Demographics

Like many other countries, Singapore’s labour force is rapidly aging. The percentage ofpeople aged above 65 has more than doubled since the 1970s. Currently, more than8% of our population is in this age group. In ten years’ time, nearly one in every threeworkers will be above the age of 50.

Older workers typically suffer from lower re-employment rates compared to youngerpersons due to lower educational attainment and skills obsolescence. In 2004, 45% ofthose over 50 found re-employment within six months of retrenchment, as compared to74% of workers aged below 30. With limited manpower resources, Singapore’s man-power strategies will have to maximize the potential and contribution of its older work-ers.

INITIATIVES TO MEET KEY MANPOWER CHALLENGES

In the light of the challenges posed by globalization, technological advancements andlabour market & demographic change, the Singapore Ministry of Manpower (MOM), hasadopted new initiatives to keep the Singapore workforce globally competitive. The roleof MOM is encapsulated in its mission to build a globally competitive workforce andgreat workplaces, for a cohesive society and a secure economic future for allSingaporeans. Its shared vision for Singapore is to have A Great Workforce and AGreat Workplace. This paper sets out the various initiatives that MOM has embarkedon to deal with the above-mentioned challenges.

Enhancing Labour Market Flexibility

Changes in Labour Law to Remain Relevant

Labour legislation needs to be regularly reviewed to ensure that they continue to meetthe needs of employers, employees and the economy in a rapidly changing businessenvironment.

With increasing global competition, companies often need to restructure their operationsto keep trim and nimble, or forge strategic alliances with other companies to remaincompetitive and seize new business opportunities. Restructuring may just be confinedto changes within the company. But it may also involve another company of a differentlegal entity in the form of a merger, takeover, sale of part of its business operation orsetting up a subsidiary.


To facilitate company restructuring while at the same time safeguard the interest ofthe employees and employers, if the employment contracts signed between theemployees and the original employer were transferred together with the business, suchcontracts will continue to be valid and recognized after the transfer.

The amended provision of the law spells out the rights and obligations of the employersand unions/employees in a company restructuring exercise and also provides amechanism for dispute settlement. Prior to the review, the Employment Act was silenton the rights and obligations of the employers and employees in such a situation. In theabsence of a clear legal framework, disputes often arose and this hindered companyrestructuring.

An important principle of the amended law is to preserve the continuity of the period ofemployment of the transferred employees. The law also requires the transfer or toinform and consult the unions/employees on any employment and industrial relationsmatters which could affect the employees. If there is disagreement, the dispute couldbe referred for conciliation by the Ministry, failing which it would be adjudicated by theCommissioner for Labour.

The Employment Act was also reviewed and amended to allow the Commissioner forLabour to exempt companies, whose nature of operations and business patterns justifythe exemption from the statutory provisions on higher rates of pay for overtime, rest dayand public holiday work. Instead of paying workers based on how much time they spendin the company regardless of work availability, companies are allowed to deviate fromthe statutory ‘time-based’ payment method and reward workers for actual work doneand productivity achieved.

The government recognized that some companies faced uneven demands due to theirnature of operations or seasonal business cycles, which required them to deviate fromthese legal provisions to optimise their manpower resources. A flexible work schedule,accompanied by appropriate reward/payment systems, enabled the companies to moreefficiently deploy their manpower to cope with the fluctuating demands during the peakand lull periods. By doing so, companies would also enhance their productivity andworkers would be able to share part of the productivity gains. In situations wheredemand fell, the need to retrench workers could also be avoided or minimized.

Unions and workers cited some concerns associated with flexible work schedulessuch as the loss in overtime income and possible abuse by employers to avoid payingthe differential rates for overtime, rest day and public holiday work. To ensure thatthe implementation of flexible work schemes was not abused and benefited bothemployers and employees, a Tripartite Workgroup was set up to formulate a set ofguidelines on flexible work schedule schemes for implementation.


Implementation of the Flexible and Performance-based Wage System

In the past decades of steady economic growth, companies could reward workers withregular and high built-in wage increases based on annual wage guidelines issues bythe Tripartite National Wage Council (NWC)1 .

To survive through difficult times and meet the keen competition, companies must beable to respond quickly to more volatile business environments to remain costcompetitive. Hence, there is a need for companies to move away from the seniority-based wage system which rewarded workers more on the basis of seniority in service.Instead, companies should put in place a flexible and performance-based wage systemwhich could adjust wage cost quickly and flexibly based on changing business conditionsand reward workers linked to company and individual performance.

To achieve the above objective, a Tripartite Taskforce comprising the three socialpartners2 was formed. The Taskforce formulated a generic wage model incorporatingvariable wage components as well as reviewed the wage systems in various sectors-banking, insurance, food manufacturing, hotel, chemicals, electronics and land transport-to recommend ways to enhance the variability of wages.

The three key recommendations of the Taskforce were as follows: - (i) enlarging theAnnual Variable Component (AVC) and formulating key performance indicators to linkthe AVC payment closely to company and/or an individual performance; (ii) building upthe Monthly Variable Component (MVC) to form up to 10% of monthly basic salary toenable companies to make quick adjustments to their wage cost in times of severebusiness downturns; and (iii) switching from a seniority-based wage system to aperformance-based wage system as well as to narrow the salary maximum-minimumratio to 1.5 times or less to better reflect the values of the job. A summary of the Taskforce’srecommendations is enclosed as Annex A.

Table 3: Recommended Ratio of Basic Wage to Variable Components

20 40 60 80 100 120

50 50

60 40

1070 20

Senior Mgt

Mid Mgt & Execs

Rank & File Basic

VariableMVC AVC

AVC + MVC

AVC + MVC


To assist the Small and Medium Enterprises (SMEs), special funding assistance wasmade available for them to hire an external consultant for wage restructuring efforts.The funding supported 50% of the consultant’s fees or $8,500, whichever was lower.Alternatively, SMEs could tap on experienced advisors from the Tripartite reStructuringWages Action Team (SWAT), which was set up by the Tripartite Taskforce to helpcompanies tackle implementation challenges.

Through the concerted efforts of the tripartite partners and the strong participation ofvarious industry sectors, the implementation of the flexible and performance-basedwage system has been gaining ground. As of June 2005, 83% employees in Singaporeworked in companies which had adopted at least one of the three key wage reformrecommendations made by the Tripartite Taskforce. For larger companies (employingat least 200 workers), 63% had implemented at least two key recommendations. AsSMEs are lagging behind the larger companies, the Tripartite partners will focusits efforts to encourage and promote the flexible wage structure among thesecompanies.

With a flexible and performance based wage system put in place, Singapore companieswill be able to respond nimbly to changing business conditions. In good times, they canreward workers with higher bonuses based on company and individual performance. Intimes of business downturn, they can reduce wage costs to stay viable and preservejobs for workers.

Augmentation of the Foreign Manpower

Singapore has always leveraged on foreign manpower at all levels to enhance itseconomic growth. The employment of foreign manpower is an important strategyadopted by Singapore to enable it to grow beyond what its indigenous resources canproduce. As Singapore faces new challenges, there is a need to ensure that itsmanpower augmentation strategies still remain effective.

To better meet industry needs, a new ‘S’ pass type to admit middle-level skilledmanpower was launched in 2004. The new pass type would enable Singapore to bettertap the global labour market and augment the local workforce at this level.

To facilitate more efficient and seamless processing of work passes, MOM hasleveraged on technology to introduce online services for a full range of work permitservices of issuance, renewal and cancellation of work passes. Customers can nowaccess these services from the comfort of their homes and offices. At the end of 2005,more than 90% of work passes’ applications and related services were transactedonline.


Enhancing Employability Through Skills Upgradingand Workforce Development

Singapore recognizes that the concept of a lifetime job and skill is no longer tenablein an economy experiencing globalization and rapid technological change. Workersat all levels are expected to change not just skills but possibly careers over theirworking lifetimes. Workers will have to make greater efforts to ensure theiremployability, which is the ability to find a job, maintain a job and change a job shouldthe need arise.

The Singapore Workforce Development Agency (WDA)3 , established in 2004, championsnational efforts to build a skilled workforce, with which businesses and industries canmaintain their competitive edge in the new economy. Skilled workers can in turn getbetter jobs, leading to a better quality of life. Working with industry, unions, employers,economic agencies, professional associations and training organizations, WDA aimsto raise industry competitiveness and enhance workforce employability by supportingindustry growth, raising workforce skills standards, and enhancing employability ofworkers.

To help workers upgrade their skills, WDA launched a national skills and qualificationsframework in October 2005. Called the Singapore Workforce Skills Qualifications(WSQ) system, it spells out the training and certification pathways for workers toenhance their skills and capabilities, and how companies and industries can upgradetheir workers’ skills standards. Taking a sectoral approach, workers can acquireindustry and occupational skills required to perform their jobs.

To help build our manpower capabilities, WDA has also introduced industry-specific initiatives like the Place and Train (PnT) programmes that plug manpowerand skills gaps. PnT programmes have been established in wide-ranging industriessuch as food and beverage, aerospace, textile and chemical processing. Theseprogrammes help to train and create a pipeline of local workers which employers cantap on.

The Skills Development Fund (SDF), a funding support set up in 2004 forms an integralpart in imparting Singaporean workers with a lifelong learning culture. To date, the SMEfigure for SDF-supported training places totals more than 100,000. To enhanceSME employees’ access to training, the SDF introduced the SME Upgrading forPerformance (SUPER) scheme in November 2003 to incentivise skills training amongSME employees. To date, the SUPER scheme has supported more than 25,000training places.

Besides helping in-employment workers, WDA also created access to employmentopportunities for job seekers through the Distributed CareerLink Network (DCN), which


was formed together with 13 partners in Singapore such as the National Trades UnionCongress (NTUC), the Singapore National Employers Federation (SNEF), CommunityDevelopment Councils (CDCs) and self-help groups.

Harmonious Industrial Relations and Tripartite Partnership

A harmonious industrial relations climate is a key component in bringing about a favourableinvestment environment for economic growth, which in turn creates more and betterpaying jobs for the workers.

To achieve this objective, Singapore has since its independence adopted a tripartiteapproach among employers, unions/workers and government to foster labourmanagement co-operation and partnership to bring about a harmonious industrialrelations climate. Under this co-operative framework, employers, unions and workersare encouraged to work as a team to prevent disputes from escalating into a majorconfrontation, which would affect the competitiveness of companies and the long termwell-being of the workers.

At the national level, tripartite cooperation has been long established as a competitiveadvantage in ensuring industrial harmony and partnership in both good times and duringcrises. Strong partnership and understanding effected through the tripartite NWC andvarious tripartite committees and forums to deal with key employment and industrialrelations issues have ensured that in good times, workers are fairly rewarded in linewith economic growth and performances of companies and individuals. In times ofcrisis, the social partners have also been able to discuss and agree on measures tohelp employers contain and reduce cost to remain viable and thereby minimize joblosses.

The partnership approach in fostering harmonious industrial relations has worked wellin Singapore. Apart from a two-day strike in 1986, Singapore has been strike free since1978. Labour management cooperation and tripartite partnership continue to beSingapore’s fundamental strategy to strengthen harmonious industrial relations, whichhas been its competitive advantage.

In line with the objective of strengthening labour-management relations and tripartitepartnership, a Code of Industrial Relations Practice was issued for implementation.Its objectives were to: i) develop a motivated and productive workforce to achievebusiness excellence, ii) realise employees’ full potential to enable them to earn higherincomes and live a better life and iii) contribute towards a harmonious workplaceenvironment, strengthen tripartite collaboration and enhance Singapore’s overallcompetitiveness for economic growth.


Table 4: Number of Strikes & Man days lost in Singapore

Source: Singapore Ministry of Manpower, Manpower Research and Statistics Department, 2005.

Safe and Healthy Workplaces

Over the past few decades, Singapore has achieved significant improvements inWorkplace Safety and Health (WSH). Nevertheless, the current workplace fatality rateat 4.9 per 100,000 employees is still below the 2002 European Union’s average rate of2.5.

To propel Singapore as the work destination among the world’s top 10 safest placesto work, MOM put in place a new Occupational Safety and Health (OSH) frameworkin 2005 to make significant improvements in the standards of workplace safety andhealth. While the ultimate goal is for zero fatalities, MOM will first strive to reduce theoccupational fatality rate at workplaces to half by 2015 or sooner.

The Workplace Safety & Health Advisory Committee (WSHAC) made up of industryrepresentatives was formed to promote self-regulation and instill ownership in safetyoutcomes by industries. Comprising industry leaders, the committee advises MOM onthe setting of OSH standards and regulations, promotion of OSH awareness and en-gagement of industry to raise the level of OSH, and training of key stakeholders to raisecompetency and capabilities in OSH.

0

50

100

150

200

250

300

1946

19491952

1955

19581961

19641967

197019

731976

1979

19821985

19881991

199419

972000

200320

05

No. of Strikes/ Disputes

No. of Strikes No. of man days lost

No. of Man Days Lost

1,000,000

0,000

500,000

250,000

125.000

375,000

625,000

750,000

875,000845.637946,354

410.889388,219

0

50

100

150

200

250

300

1946

19491952

1955

19581961

19641967

197019

731976

1979

19821985

19881991

199419

972000

200320

05

No. of Strikes/ Disputes

No. of Strikes No. of man days lost

No. of Man Days Lost

1,000,000

0,000

500,000

250,000

125.000

375,000

625,000

750,000

875,000845.637946,354

410.889388,219


Table 5: Industrial Accident Frequency Rate from 1981-2004

Source : Singapore Ministry of Manpower, Manpower Research and Statistics Department, 2005.

Key principles of the new OSH framework are: (i) reduce risks at source by requiring allstakeholders to minimise or eliminate risks they create; (ii) require industry to takegreater ownership of safety outcomes; and (iii) prevent accidents by imposing heavierpenalties for poor safety management.

To help companies defray the cost of conducting proper risk assessments, MOM hasset aside a $5 million Risk Management Assistance Fund, which would be used toco-fund the cost of engaging consultants to assist in identifying and addressing risks atthe workplace. Under this fund, employers who qualify will receive up to 70% co-fundingwhen they engage safety consultants to conduct risk assessments, subject to a cap of$7,500.

To support the new WSH framework, the Workplace Safety and Health Act (WSHA)was enacted on March 1st, 2006. The WSHA replaces the Factories Act and was devel-oped based on feedback received through extensive consultation with the industry andunions. While the old Factories Act focuses our efforts on addressing WSH issues infactories, such an approach is no longer relevant in today’s context. WSH is not just aconcern in factories. Every worker deserves to be protected against safety and healthrisks. Most developed countries had recognized this and had long extended the cover-age of WSH legislations to all workplaces. To be aligned with international standardsand enhance the quality of our workplaces, the coverage of the new WSHA will, overtime, be expanded to include all workplaces. The new Act also marks a shift from aprescriptive legislative approach to a performance-based liability regime.

Fre

quen

cy R

ate

2

3

4

5

6

7

19811982

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004


To further strengthen the new WSH framework, two key subsidiary legislations, theWSH (Risk Management) Regulations and the WSH (Incident Reporting) Regulations,were introduced together with the WSHA. The former legislates the concept of riskmanagement by requiring all employers to conduct proper risk assessments andimplement control measures to eliminate or reduce risks at the workplace. The latterrequires all workplaces (beyond those covered under the Factories Act) to report work-related accidents, dangerous occurrences or occupational diseases. This will facilitatethe collection and analysis of accident statistics for all workplaces, and identify criticalareas for the expansion of the Act in future.

Promoting Responsible and Progressive Employment Practices

Tripartite Alliance for Fair Employment Practices

The Tripartite Committee on the Employability of Older Workers recommended thesetting up of the Tripartite Alliance for Fair Employment Practices (TAFEP) to positivelyshape mindsets among employers, employees and the general public towards fair andresponsible employment practices for all workers.

Its main objectives are to: (i) formulate guidelines for fair employment practicestowards workers of all ages, genders, races and religion; (ii) initiate a fair employmentmovement through national and sectoral programmes to facilitate broad and effectiveadoption of fair employment practices; and (iii) partner relevant agencies to developindustry capability and training programmes for managers, supervisors, and union leaderson fair employment practices.

TAFEP will be promoting fair employment practices through promotional initiatives suchas workshops, seminars, training programmes and promotional materials. Informationon progressive employment practices will also be shared. At the launch of themovement for fair employment practices this month, a total of 173 companies havepledged their commitment towards adopting fair employment practices at theirworkplace. To support the efforts of TAFEP, MOM investigates all complaints ofdiscriminatory employment practices and takes appropriate action against errantemployers.

Work-Life Harmony Initiatives

To attract, develop and retain talent in today’s competitive work environment, companiesare encouraged to adopt work-life harmony initiatives to help their employees’ balancetheir work and personal needs. This provides an effective way to achieve win-winoutcomes that benefit both employees and companies. Benefits of Work-Life strategiesinclude increased productivity due to a more motivated and engaged workforce, andreduced staff turnover and absenteeism.


The Tripartite Committee on Work-Life Strategy was formed in 2004 to drive andfacilitate implementation of work-life strategies through nation-wide programmes,activities and promotion of best practices. It is chaired by MOM and its membersinclude Ministry of Community Development, Youth & Sports (MCYS), SNEF,NTUC, Association of Small and Medium Enterprises (ASME) and the EmployerAlliance.

Some companies, particularly SMEs may hold the view that offering work-life optionsadd to business cost. To demonstrate that the implementation of work-life programmesmay not be costly, the Tripartite Committee suggested that companies start simple byintroducing practices which are low-cost and have high impact in terms of helpingtheir employees balance work and family responsibilities. A case in point is flexi time –an arrangement welcomed especially by employees with school going children andalso applicable to singles who prefer a certain degree of flexibility in their workinghours for personal reasons. A study conducted by the Work-Life committee revealedthat organisations gained a return of $1.68 for every dollar spent on Work-LifeProgrammes.

To facilitate the development and implementation of Work-Life Strategy at the work-place, MOM started a $10 million Work-Life Works (WoW) Fund to co-finance up to70% of the costs incurred when implementing work-life strategies, subject to a cap of$30,000 per organisation. All private-sector organisations, including non-profitorganisations, regardless of size and industry, can apply for the grant.

MOM also administers the biennial Work-Life Excellence (WLE) Award as part ofthe effort to promote work-life Harmony. The assessment criteria for the awardgoes beyond programmes and policies, to focus on workplace culture, as well asbusiness outcomes and achievements. In July 2006, seventy companies which havesuccessfully implemented effective work-life strategies were awarded the Work-LifeExcellence Award and Work-Life Achiever Award. The WLE Award emphasizes thebenefits of integrating Work-Life with business strategy so that companies can enhancetheir productivity through better performing workers assisted by effective work-lifeinitiatives. A key criterion for the WLE Award is whether companies “walk the talk”and implement relevant programmes that meet both business goals and employeeneeds.

Through the various work-life initiatives, the Tripartite Committee hopes to encouragemore companies to implement work-life programmes in the years to come. This isalso part of the national effort to bring about the adoption of good employmentpractices to create great workplaces which will benefit both the employers andworkers.


Enhancing Income Security & Lifelong Employability for Singaporeans

Enhanced Retirement Adequacy

To ensure that Singaporeans have enough savings to meet their retirement, housingand healthcare needs, in 1955, the Government set up the Central Provident Fund(CPF)4.

Prior to 1955, civil service and large companies in Singapore had pension plans.However, the majority of workers in Singapore had no such security. Once they retired,they were dependant entirely on their own savings and support from their children. Thiswas a long-term problem which had potentially negative consequences for Singaporeans.

Over the last 50 years, the CPF system has evolved from a simple compulsory savingsplan into a comprehensive social savings scheme. The system ensures that everyworker in Singapore accumulates savings from their monthly income during employmentand such savings could be used for purchasing a home, and meet healthcare and oldage needs particularly after their retirement. As Singaporeans have enjoyed strongemployment prospects due to steady economic growth over the years, they have beenable to accumulate savings to purchase and own homes based on their earningcapacities and at the same time save for retirement and medical needs. This has resultedin more than 90% of Singaporeans owning homes.

To date, CPF has more than 80,000 employers paying CPF for approximately 1.3million workers. The CPF Board continues to look into ways to enhance Singaporeans’income security so that the objective of meeting the three basic needs i.e. housing,healthcare and old age needs, can be better achieved.

Addressing Older Workers’ Needs

The employability of older workers is on the national agenda as the Singapore labourforce is rapidly ageing. In ten years, nearly one in every three workers will be abovethe age of 50. MOM seeks to ensure that Singaporean workers can enjoy lifelongemployability.

The Tripartite Committee on Employability of Older Workers was set up in March 2005to study how the employability and cost competitiveness of older workers could beenhanced. It was asked to recommend practical and cost-effective measures foremployers, employees and the Government to ensure that Singapore’s older workforcecontinued to be a value proposition for companies and a competitive asset for Singapore.

To enable and motivate employers to recruit and retain older workers, the committeeintroduced the ADVANTAGE Scheme which comprises various initiatives such as job


redesign, automation and wage restructuring, as well as incentives to employ,re-employ, retain and train older workers. Companies that implement changes in theseareas under the ADVANTAGE Scheme can enjoy a comprehensive incentive packageup to $300,000.

Other than cost considerations, the committee recognized that mindset change towardsolder workers by employers, co-workers and the public is essential in enhancing theemployability and employment opportunities of older workers. To positively shape theperception towards employing and retaining older workers, public education programmeswere introduced. The Singapore Workforce Development Agency, for instance, hasprofiled employers who valued older workers for their maturity, stability, experience andreliability in “The Winning Edge”, a TV programme aired over a local news channel inAugust last year. It is also planning more outreach activities to employers, workers andthe public to change perceptions about mature workers, encourage these workers towork longer as well as promote age-friendly HR practices.

Through these initiatives, the Tripartite Committee on Employability of Older Workersaims at significantly raising the participation rate of older workers and encouraging moreolder workers to work beyond the age of 62, as long as they are able to contribute totheir companies.

Helping Low Wage Workers through Workfare

The changing economic landscape and globalization poses great challenges to lowwage workers who tend to be less educated and unskilled. This group will find it hard tocope financially if they do not upgrade their skills to enhance their employability andearning capacities.

The government introduced the concept of Workfare to holistically help lower incomeSingaporeans adjust to these challenges. Workfare is based on the idea that promotingthe work ethic and self-reliance is the best way to help people.

A $1 billion Workfare package was set up to help low-wage workers learn new skills,find meaningful jobs and remain relevant in a rapidly changing work environment. Withbetter wages, workers can better support themselves and their families, own homes,provide for their children’s education and put aside enough money for future needs.

The Workfare package covers six key areas: (i) Rewarding work through cash incentivesfor those who work and housing grants for first time buyers; (ii) Social Support to EnableWork such as child-care subsidies and employment facilitation; (iii) Higher Skills forBetter Jobs through more accessible and relevant skills upgrading; (iv) Expanding JobOpportunities and recreation of existing jobs through automation, enhancement of jobimage, re-scoping of job responsibilities and skills standards; (v) Creating Hope for the


Future through affordable pre-school and school education, engaging and supportingout-of-school youths to gain employable skills and supporting children from vulnerablefamilies; (vi) Sharing in the Nation’s Progress by sharing the Government’s budgetsurplus with all Singaporeans, with more benefits for lower-income families.

Conclusion

In conclusion, the Singapore Ministry of Manpower has been working closely with variouspartners to meet the challenges posed by globalization, technological advancementand changes in the labour market and demographics. By adopting this partnershipapproach, MOM aims to develop a national workforce that is globally competitive tomeet the changing needs of industries, bring about great workplaces for optimalperformance by upgrading OSH and employment standards and practices, as well asto enhance the employability and income security of Singaporeans.


ANNEXE A

SUMMARY OF THE RECOMMENDATIONS BY THE TRIPARTITE TASKFORCEON WAGE RESTRUCTURING

Background

1. In May 2003, the National Wages Council (NWC) recommended to theGovernment that it considered forming a taskforce to address concerns aboutthe wage competitiveness of our workforce. The Tripartite Taskforce on WageRestructuring was formed in July 2003, bringing together over 100representatives from the Ministry of Manpower (MOM), Singapore NationalEmployers Federation (SNEF) and National Trades Union Congress (NTUC).The Taskforce organised its work through five working groups. The Wage ModelsWorking Group developed a generic wage model which the other four workinggroups adapted for four industries — electronics, hotel, chemicals and landtransport.

2 A series of dialogues at the national and industry level were held to explain therecommendations. These sessions also provided a better understanding ofcompanies’ concerns and needs so that the Taskforce could take these intoaccount and address them before finalising its detailed recommendations. TheTaskforce’s recommendations will be released at the National TripartiteConference on Wage Restructuring on January 30, 2004.

Rationale

3. Singapore is undergoing rapid economic restructuring to regain itscompetitiveness and better position itself to sustain its competitiveness goingahead. One of the components of this economic restructuring is the building ofstronger internal corporate systems. A flexible wage system is a critical part ofthis. The external shocks of the last few years and intensified global competitionhave highlighted the need for Singapore to move away from a wage system thatis rigid and seniority-based, to one that is flexible and competitive. In this way,Singapore companies can better sustain themselves to ride out volatile businesscycles and shocks by having wage costs that can respond quickly to businessconditions without having to resort to retrenchments in a downturn or rushing tohire in an upturn. The wage structure should also better reflect the market valuefor the job.

4. It was clear from the Taskforce’s many dialogue sessions that all parties generallybelieve in the value of a flexible wage system and the importance of wagerestructuring. However, implementation is very challenging because there aremany technical details to be worked through together by CEOs, HR managers


and employees or their union representatives. Because of this, implementationis often regarded as sensitive and difficult to do. The contribution of the Taskforcehas been to provide a convening platform for these parties to come together toengage one another in open and sincere dialogue, and provide guidance andsupport to develop wage models that specific industry groups agree are realisticto implement. And as these parties have built stronger relationships of trustfounded on the recognition that “we are all in this together”, they have showntheir commitment to flexible and competitive wages by beginning theimplementation process. This in turn has demonstrated to the managementand employees of other companies that flexible and competitive wages is anachievable goal.

Recommended Wage Model

5. The Taskforce has surfaced a total of 14 key recommendations in its genericmodel, known as the Competitive Base Wage System (CBWS). The CBWSaims to achieve wage flexibility and competitiveness, which will benefitstakeholders in the following ways. The employee receives the best possiblecompensation and incentive for his value-added contributions, and will enjoybetter job security. The employer will have a flexible and responsive wage systemthat can help companies to compete more effectively, so as to earn a sustainablecompetitive return on his capital, while supporting profit growth and rewardingemployees.

MAIN FEATURES OF THE COMPETITIVE BASE WAGE SYSTEM

Wage Components

6. The restructured wage system should comprise a basic wage and a variablecomponent sizeable enough for companies to make quick wage adjustmentsaccording to changes in business conditions. Increasing the variable componentwould allow employers more room to cut wages and save jobs in bad times,while giving employees greater upside in good times. By not retrenching trainedstaff, employers will be able to increase output quickly in an upturn, withouthaving to recruit people afresh and train them from scratch.

7. While recognising that different industries and companies have different needsfor flexibility, the Taskforce proposes the following broad guidelines for variablecomponents in the wage structure:

(i) 70% basic wage, 30% variable for rank-and-file employees

� (The 30% variable component should comprise 20% AVC and 10% MVC, asrecommended by the NWC guidelines).


(ii) 60% basic wage, 40% variable for middle management;

� (The 40% variable component should comprise both AVC and MVC)

(iii) 50% basic wage, 50% variable for senior management.


Variable Component

8. The variable component of the wage structure comprises the Annual VariableComponent (AVC) and the Monthly Variable Component (MVC). The AVC typicallycomprises the Annual Wage Supplement (AWS) and a year-end bonus. As theperformance of executives and senior management are more closely linked tothe performance of their companies, the proportion of variable components intheir wages should be higher than that of the rank-and-file employees.

9. The Taskforce found that there was no difficulty with implementing the AVC. TheTaskforce developed detailed recommendations for two components where therewere issues, namely the AWS and the MVC. These are outlined below:

Annual Wage Supplement (AWS)

The Taskforce recognises that some firms regard the AWS, commonly known as the13th month payment, as part of fixed basic wages, while others regard it as a variablecomponent. Some companies do not pay the AWS at all. The Taskforce accepts thatthe practice varies widely, that it is “sticky”, and that it is not possible to recommend asingle position for all companies to take. Thus, the Taskforce recommends thatcompanies decide how much flexibility they require in their wage structures and decideaccordingly if the AWS should be variable or not. Where the AWS is regarded as deferredbasic wages i.e. it is not variable, the Taskforce recommends that companies endeavourto build up the AVC from future wage increases, excluding the AWS, to 20% of wages.Where more than one month of AWS is paid, the company should convert the excess ofone month into variable components. In the case of executives and managers, oremployees who are not covered by the Employment Act or Collective Agreements,where the AWS is contractually fixed for payment at the end of the year, these contractsshould be changed at the appropriate time so that the AWS is subsequently treated aspart of AVC.

Monthly Variable Component (MVC)

The MVC was introduced for companies to adjust monthly wages in response to changesin the business environment without having to wait till the end of the year to adjust theAVC. However, the implementation of the MVC has been slower than expected due toamong other things, concerns by employers and employees over the rate and level of


restoration. The more straightforward of the concerns was how to build up the quantumof the MVC. The Taskforce recommends that companies should be given greater flexibilityin building up and implementing the MVC, by building up the MVC partly from futurewage increases and partly from basic wages.

The more complex issues were the reluctance of some companies to introduce thiscomponent, and deep concerns about how it could be triggered in practice. One keyconcern was the impact on employees’ morale and how employees could be made tounderstand the need for this initiative in the absence of an imminent downturn or crisis.The Taskforce addressed these concerns in detail in the chapter on MVC.

Key Performance Indicators (KPIs)

10. The determination of the quantum of AVC payable, and the triggering of changesin the AVC and the MVC, should be linked to company and economic performancethrough clearly defined and robust Key Performance Indicators. KPIs shouldbe relevant to the company, quantifiable and transparent, challenging yet realistic,responsive and timely, allow for upside and downside, and allow for employeesto influence corporate outcomes. Clear targets and automatic trigger points areessential for the implementation of KPIs so that these can motivate employeesto perform.

11. While management should determine the actual KPIs to be used, the quantumof rewards linked to KPIs should be agreed through negotiation with employees.KPIs for AVC differ from those of MVC in that they are indexed to performance inthe medium to long term. These KPIs could be financial indicators, operationalindicators or organisational factors that contribute to the success of the company.KPIs for the MVC should reflect the financial health of the company in the shortterm and be timely, e.g Revenue. MVC KPIs should also reflect companyperformance rather than individual performance.

Moving towards a salary maximum-minimum ratio of 1.5

12. The Taskforce proposes that companies move towards a narrower salary rangewith an average maximum-minimum ratio of 1.5 or less, as soon as possible, toaddress the issue of seniority-based wages. Companies can do so through avariety of methods. These include raising the salary minimum and/or loweringor holding the salary maximum constant; reducing the maximum points of salaryranges for employees at the salary maximum and truncating long salary rangesinto shorter ranges. Companies have to decide the appropriate salary max-minratios for different jobs. There can be variations between ratios for different jobs,but ratios should not deviate too far from the industry norm and the market valueof the job.


Annual wage reviews

13. Companies should conduct annual wage reviews and avoid locking in annualincrements for three years in Collective Agreements (CAs). To ensure that ourworkers are not priced out of the market, wage increases should only be given ifthey are sustainable in the long run. While a small service increment (fixedwage increases that are paid to employees every year for being with thecompany) can be paid to reward company loyalty and job experience, this shouldbe paid only to employees who are not at the maximum point of the scale. Theoverall wage increase including the service increment should not exceed theproductivity gains in the company. To motivate employees including those whoare at the salary maximum, companies are encouraged to pay employees theirshare of productivity and performance gains through one-off lump sum paymentsor variable bonuses. Annual wage reviews should continue to be guided by therecommendations of the NWC each year.

Flexible Wage System: An Integral Part of A Holistic Human Capital ManagementSystem

14. The Taskforce recognises that wage restructuring cannot exist in isolation, buthas to be managed as part of a company’s broader Human Capital Management(HCM) approach. Wage restructuring can only be successful if supported byother aspects of HCM practices. For example, communication is critical to allayemployee concerns over how remuneration is linked to company and individualperformance. A robust performance management system that supports fair andobjective evaluation is also necessary. As salary ranges narrow, employeesshould have the opportunities to rise to higher job grades, supported by trainingprogrammes and career development frameworks.

Implementation Strategies and Measuring Outcomes

15. The Taskforce’s implementation strategy for its recommendations is based onthree thrusts. The first thrust is to achieve a catalytic effect through a “first wave”of successful examples of wage restructuring, to encourage companiesconsidering wage restructuring to follow their footsteps. A tripartite reStructuringWages AcTion (SWAT) team, comprising five experienced HR experts andconciliators each from NTUC, SNEF and MOM, has been set up to work withselected companies to help them understand the principles of wage restructuringand the key features of the CBWS. This would help such companies kick-startthe implementation process.

16. The second thrust is to help interested companies build up Human Resource(HR) capabilities to implement flexible wages, by providing training to HRconsultants in the short term who would in turn work with these companies on


implementation, and to build up over the medium term the capacity of the HRindustry to implement wage restructuring.

17. The third thrust is to market the national wage restructuring effort through smallerplatforms such as industry association gatherings. As the sectoral working groupstailoring the recommendations to the needs of the specific sector proved crucialto helping their industry peers move forward, more sectoral work groups in otherindustries will also be formed. Peer group sharing on how to address practicalchallenges appears to be valued greatly by participants, and important forgenerating confidence and buy-in.

18. To measure the effectiveness of the efforts to promote and drive theimplementation of a flexible and competitive wage system, the top-line indicatorwould be the proportion of employees covered by flexible wage systems. Aconcrete goal for unionised companies would be for flexible wages to be builtinto concluded CAs. Below this top-line, outcomes will be measured by foursets of indicators. First, the Taskforce will try to measure the level of awarenessand commitment of companies and employers to wage restructuring. Second,wage model indicators will be used to determine the level of flexibility andresponsiveness of wages to changing business conditions. Third, similarindicators can be used to measure how competitive the restructured wagesystem is relative to the former system as well as to wage systems in competitorcountries. Finally, it would be useful to gauge the presence of HR andcommunication practices in companies that support wage restructuring andcorporate competitiveness.

CONCLUSION

19. The generic wage model recommended by the Tripartite Taskforce is only aguide; with different businesses and cost structures. Each company and sectorhas to develop its own wage model suited to its needs. Successful implementationwill require company management and employees or their union representativesto engage one another with an open mind, and have a willingness to work andlearn together. They must have a shared desire to develop a wage structure thatwill sustain corporate competitiveness and provide better job security as well asstability and predictability in wages for employees. The Taskforce will help withresources and technical support, and provide convening platforms that generateopportunities for discussion and learning. Together, companies in Singapore willbecome even more competitive as we face the economic challenges ahead.


REFERENCES

1. The CPF is a Statutory Board under MOM.

2. A statutory board formed under the Ministry of Manpower.

3. The National Wage Council (NWC) comprising key leaders from the employers, trade unions aswell as the Government, was established in February 1972 as an advisory body to the Governmenton wage and wage-related issues.

4. Singapore Business Federation, Singapore National Employers’ Federation, and the NationalTrades Union Congress & Government representatives.

Wage Restructuring and TheImplementation of The Flexibleand Performance-based WageSystem in SingaporeWeng Hong Lau

BACKGROUND

In May 2003, the Singapore’s National Wages Council (NWC) – a tripartite bodycomprising representatives from employers, unions and government, recommendedto the Government that it consider forming a taskforce to address concerns about thewage competitiveness of our workforce. The Tripartite Taskforce on Wage Restructuringwas formed in July 2003, bringing together over 100 representatives from the Ministry ofManpower (MOM), Singapore National Employers Federation (SNEF) and NationalTrades Union Congress (NTUC). The Taskforce organised its work through five workinggroups. The Wage Models Working Group developed a generic wage model which theother four working groups adapted for four industries — electronics, hotel, chemicalsand land transport. The Taskforce’s recommendations were released at the NationalTripartite Conference on Wage Restructuring on January 30, 2004.

RECOMMENDED FLEXIBLE AND PERFORMANCE — BASED WAGE SYSTEM

The Taskforce has surfaced a total of 14 key recommendations in its wage system,known as the Flexible and Performance-based Wage System. The wage system aimsto achieve wage flexibility and competitiveness, which will benefit stakeholders in thefollowing ways. The employee receives the best possible compensation and incentivefor his value-added contributions, and will enjoy better job security. The employer willhave a flexible and responsive wage system that can help companies to compete moreeffectively, so as to earn a sustainable competitive return on his capital, while supportingprofit growth and rewarding employees.

4


KEY FEATURES OF THE FLEXIBLE AND PERFORMANCE —BASED WAGE SYSTEM

Wage Components – Basic Wage and Variable Components

The restructured wage system should comprise a basic (fixed) wage and a variablecomponent sizeable enough for companies to make quick wage adjustments accordingto changes in business conditions. Increasing the variable component would allowemployers more room to cut wages and save jobs in bad times, while giving employeesgreater upside in good times. By not retrenching trained staff, employers will be able toincrease output quickly in an upturn, without having to recruit people afresh and trainthem from scratch.

While recognising that different industries and companies have different needs forflexibility, the Taskforce proposes the following broad guidelines for variable componentsin the wage structure :-

a) 70% basic wage, 30% variable for rank-and-file employees

� (The 30% variable component should comprise 20% AVC and 10% MVC, asrecommended by the National Wages Council Guidelines).

b) 60% basic wage, 40% variable for middle management


c) 50% basic wage, 50% variable for senior management


Variable Component : Annual Wage Supplement (AWS) and Performance Bonuses

The variable component of the wage structure comprises the Annual Variable Component(AVC) and the Monthly Variable Component (MVC). The AVC typically comprises theAnnual Wage Supplement (AWS) and a year-end bonus. As the performance ofexecutives and senior management are more closely linked to the performance of theircompanies, the proportion of variable components in their wages should be higher thanthat of the rank-and-file employees.

The Taskforce found that there was no difficulty with implementing the AVC. The Taskforcedeveloped detailed recommendations for two components where there were issues,namely the AWS and the MVC. These are outlined below:

Annual Wage Supplement (AWS)

The Taskforce recognises that some firms regard the AWS, commonly known as the

Wage Restructuring and The Implementation of The Flexible and Performance-based Wage System 89

13th month payment, as part of fixed basic wages, while others regard it as a variablecomponent. Some companies do not pay the AWS at all. The AWS is usually paid at theend of the year and workers especially the lower wage workers who do not have muchpersonal savings, will look forward to it for year-end financial commitments such aschildren school fees, festive celebration etc. The Taskforce accepts that the practicevaries widely, that it is “sticky”, and that it is not possible to recommend a single positionfor all companies to take. Thus, the Taskforce recommends that companies decidehow much flexibility they require in their wage structures and decide accordingly if theAWS should be variable or not. Where the AWS is regarded as deferred basic wagesi.e., it is not variable, the Taskforce recommends that companies endeavour to build upthe AVC from future wage increases, excluding the AWS, to 20% of wages. Wheremore than one month of AWS is paid, the company should convert the excess of onemonth into variable components. In the case of executives and managers, where theAWS is contractually fixed for payment at the end of the year, these contracts should bechanged at the appropriate time so that the AWS is subsequently treated as part of AVC.


In 1999, the MVC was first recommended by the NWC for companies to adjust monthlywages in response to changes in the business environment without having to wait tillthe end of the year to adjust the AVC. However, the implementation of the MVC has beenslower than expected among other things mainly due to concerns by employers andemployees over the rate and level of restoration. Employers feared that the implemen-tation is tedious, complicated and time consuming. It may also discourage potential jobseekers from joining them. Another concern commonly shared among employees –introduction of MVC represents a wage cut. The more straightforward of the concernswas how to build up the quantum of the MVC. The Taskforce recommends that compa-nies should be given greater flexibility in building up and implementing the MVC, bybuilding up the MVC partly from future wage increases and partly from basic wages.

The more complex issues were the reluctance of some companies to introduce thiscomponent, and deep concerns about how it could be triggered in practice. One keyconcern was the impact on employees’ morale and how employees could be made tounderstand the need for this initiative in the absence of an imminent downturn or crisis.

What is Monthly Variable Component (MVC) and why do we need to build up MVC ?

MVC is a “standby” component to be used by employers to bring down wage costs insudden and severe business downturns to survive and save jobs. With the reduction ofCPF contribution rate, there is little room to adjust wage cost through CPF cut in thefuture. Employers therefore should get ready MVC as an “emergency lever” to be usedin bad times. MVC is part of monthly basic salary and should be included in computing


overtime payment and CPF contribution. For MVC to be an effective mechanism forwage adjustment, it is recommended that MVC should form 10% of monthly basic salary.The percentage of MVC should be the same for all levels of employees. In offeringsalary to new employees, employers should incorporate the same percentage of MVCas in the case of existing employees.

How will the introduction of MVC affect my employees ?

10% MVC - $100

Normal times:

There will be no change in employee’stake home pay. As shown in theexample in the left, employee takeshome $1,000, including $900monthly fixed component and $100MVC.

MVC cut - $50 Remaining MVC - $50

Severe business downturn:

Employer can bring down wage costby cutting MVC in full or partiallydepending on the severity of thebusiness downturn.

Example: if employer cut MVC by5%, employee will take home $950,inclusive of $900 monthly fixedcomponent and $50 MVC. $950 willbe used for computing CPFcontribution and overtime payment.

Employers can build up MVC from:

1) wage increase; or

2) wage increase and existing monthly basic salary

Monthly fixedComponent - $900

Monthly fixedComponent - $900


Example 1: building up MVC gradually from wage increase

A company set aside the full amount of wage increase to build MVC

Year Basic Wage New MVC MVCsalary Increase salary (Amount)

Y1 $1000 3.5% $1035 3% $1035 x 3% =$31

Y2 $1035 3.5% $1071 6% $1071 x 6% =$64

Y3 $1071 4.5% $1119 10% $1119 x 10%=$112

Example 2: building up MVC from wage increase and existing monthly basic salary

Set aside the wage increase and reclassify a portion of existing basic wage to build up10% MVC.

Basic Wage New Reclassify from MVC Amount of MVCSalary increase Salary existing Salary

$1000 3% $1030 7% (to reach 10% $1030 x 10% = $10310% MVC)

Initiating the Use of MVC

Employers should identify parameters or performance indicators, which are relevant totheir business operations, to trigger MVC cut/restoration. Alternatively, they can definecertain situations or scenarios to initiate the MVC cut.

Two broad parameters that can be considered as triggering indicators for an MVC cut:

a) the company is suffering from extremely poor business performance and costcutting measures are needed; and

b) the job security of employees is threatened.

The indicators, parameters or circumstances leading to MVC cut or restoration shouldbe communicated to and understood by all employees.

Key Performance Indicators (KPIs)

The determination of the quantum of AVC payable, and the triggering of changes in theAVC and the MVC, should be linked to company and economic performance throughclearly defined and robust Key Performance Indicators. KPIs should be relevant to the


company, quantifiable and transparent, challenging yet realistic, responsive and timely,allow for upside and downside, and allow for employees to influence corporate outcomes.Clear targets and automatic trigger points are essential for the implementation of KPIsso that these can motivate employees to perform.

While management should determine the actual KPIs to be used, the quantum ofrewards linked to KPIs should be agreed through negotiation with employees. KPIs forAVC differ from those of MVC in that they are indexed to performance in the medium tolong term. These KPIs could be financial indicators, operational indicators ororganisational factors that contribute to the success of the company. KPIs for the MVCshould reflect the financial health of the company in the short term and be timely, e.gRevenue. MVC KPIs should also reflect company performance rather than individualperformance.

Moving towards a salary maximum-minimum ratio of 1.5

The Taskforce proposes that companies move towards a narrower salary range withan average maximum-minimum ratio of 1.5 or less, as soon as possible, to address theissue of seniority-based wages. Companies can do so through a variety of methods.These include raising the salary minimum and/or lowering or holding the salarymaximum constant; reducing the maximum points of salary ranges for employees atthe salary maximum and truncating long salary ranges into shorter ranges. Companieshave to decide the appropriate salary max-min ratios for different jobs. There can bevariations between ratios for different jobs, but ratios should not deviate too far from theindustry norm and the market value of the job.

Annual wage reviews

Companies should conduct annual wage reviews and avoid locking in annualincrements for three years in Collective Agreements (CAs). To ensure that ourworkers are not priced out of the market, wage increases should only be given ifthey are sustainable in the long run. While a small service increment (fixed wageincreases that are paid to employees every year for being with the company) can bepaid to reward loyalty towards the company and job experience, this should be paidonly to employees who are not at the maximum point of the scale. The overallwage increase including the service increment should not exceed the productivitygains in the company. To motivate employees including those who are at the salarymaximum, companies are encouraged to pay employees their share of productivity andperformance gains through one-off lump sum payments or variable bonuses. Annualwage reviews should continue to be guided by the recommendations of the NWC eachyear.


FLEXIBLE AND PERFORMANCE-BASED WAGE SYSTEM: AN INTEGRAL PARTOF A HOLISTIC HUMAN CAPITAL MANAGEMENT SYSTEM

The Taskforce recognises that wage restructuring cannot exist in isolation, but has tobe managed as part of the company’s broader Human Capital Management (HCM)approach. Wage restructuring can only be successful if supported by other aspects ofHCM practices. For example, communication is critical to allay employee concernsover how remuneration is linked to company and individual performance. A robustperformance management system that supports fair and objective evaluation is alsonecessary. As salary ranges narrow, employees should have the opportunities to rise tohigher job grades, supported by training programmes and career developmentframeworks.

IMPLEMENTATION STRATEGIES AND MEASURING OUTCOMES

The Taskforce’s implementation strategy for its recommendations is based on threethrusts. The first thrust is to achieve a catalytic effect through a “first wave” of success-ful examples of wage restructuring, to encourage companies considering wage re-structuring to follow their footsteps. A tripartite reStructuring Wages AcTion (SWAT)team, comprising five experienced HR experts and conciliators each from NTUC, SNEFand MOM, have been set up to work with the selected companies to help them under-stand the principles of wage restructuring and the key features of the CBWS. Thiswould help such companies kick start the implementation process.

The second thrust is to help interested companies build up Human Resource (HR)capabilities to implement flexible wages, by providing training to HR consultants in theshort term who would in turn work with these companies on implementation, and tobuildup over the medium term the capacity of the HR industry to implement wagerestructuring.

The third thrust is to market the national wage restructuring effort through smallerplatforms such as industry association gatherings. As the sectoral working groupstailoring the recommendations to the needs of the specific sector proved crucial tohelping their industry peers move forward, more sectoral work groups in other industrieswill also be formed. Peer group sharing on how to address practical challenges appearsto be valued greatly by participants, and important for generating confidence and buy in.

To measure the effectiveness of the efforts to promote and drive the implementation ofa flexible and competitive wage system, the top-line indicator would be the proportion ofemployees covered by flexible wage systems. A concrete goal for unionised companieswould be for flexible wages to be built into concluded collective agreements. Below thistop-line, outcomes will be measured by four sets of indicators. First, the Taskforce willtry to measure the level of awareness and commitment of companies and employers to


wage restructuring. Second, wage model indicators will be used to determine the levelof flexibility and responsiveness of wages to changing business conditions. Third, similarindicators can be used to measure how competitive the restructured wage system isrelative to the former system as well as to wage systems in competitor countries. Finally,it would be useful to gauge the presence of HR and communication practices incompanies that support wage restructuring and corporate competitiveness.

CONCLUSION

The flexible and performance-based wage system wage model recommended by theTripartite Taskforce is only a guide; with different businesses and cost structures.Each company and sector has to develop its own wage model suited to its needs.Successful implementation will require company management and employees or theirunion representatives to engage one another with an open mind, and have a willingnessto work and learn together. They must have a shared desire to develop a wage structurethat will sustain corporate competitiveness and provide better job security as well asstability and predictability in wages for employees. The Taskforce will help with resourcesand technical support, and provide convening platforms that generate opportunities fordiscussion and learning.

The Taskforce has recommended the implementation of following three key wagerecommendations to move towards the flexible and performance-based wagesystem: -

Annual variable component

Linking the payment of annual variable component (AVC) closely to performance.Employers should identify key performance indicators (KPIs) which can reflectcompany’s or individual employee’s performance. The payment of AVC should be basedon the achievement of KPIs.


Companies should build up the monthly variable component up to 10% of employees’basic wages so that as business conditions changes, they are able to responsequickly and nimbly in the event of sudden business downturn and / or facing a financialcrisis.

Narrowing salary maximum-minimum ratio

Moving away from the seniority-based wage system and narrowing the salarymaximum-minimum ratio to an average of 1.5 to better reflect the value of the jobs.This will help companies enhance their wage competitiveness.


As in December 2005, the Wage Survey Report 2005 conducted by the ManpowerResearch Statistic Department, Ministry of Manpower showed that nearly 90% of theworkforce in large companies (employing more than 200 workers) have at least one keywage recommendation incorporated into their wage system. Overall 81% of the workforcein the private sector is employed in establishments that have at least one key wagerecommendations.

Public Employment Service ofthe Hong Kong SpecialAdministrative Region of thePeople’s Republic of ChinaKin-Woo Tsang

EMPLOYMENT SITUATION OF THE HONG KONG SPECIAL ADMINISTRATIVEREGION (HKSAR)

In the face of Hong Kong’s gradual but steady economic restructuring to a knowledge-based economy and relocation of the vast majority of its manufacturing and some‘white-collar’ jobs to lower cost regions since the 1980’s, the HKSAR has been facingtremendous and sustained pressure on the employment front. In the aftermath of theSevere Acute Respiratory Syndrome (SARS), the unemployment rate of the HKSARsoared to an all-time high of 8.6% (with some 309 100 unemployed) in the summer of2003.

With the robust recovery of the Hong Kong economy and given the government’smeasures to promote employment, the employment situation has steadily improvedsince the fourth quarter of 2003. The latest employment and unemployment figures ofthe HKSAR from May to July 2006 are set out below:

Total employment : 3 452 500 (all-time high figure: an increase of over230 000 since 2003)

Unemployment rate : 4.9%

Unemployed persons : 187 000

Underemployment rate : 2.6%

Underemployed persons : 93 000

5


Structural unemployment has posed a long-term challenge to the HKSAR Government.Its impact is particularly serious on youths and the middle-aged with low education, lowskill and limited work experience. They are finding it increasingly difficult to securesuitable employment in the knowledge-based economy. It is pertinent to note that of the179,000 unemployed in the second quarter of 2006, 88 000 are aged 40 or above;39,000 aged 15 to 24; and 34,800 with educational attainment below primary level.

Figure 1: Unemployment Rates of the HKSAR Since 2001

EMPLOYMENT POLICY OF THE HKSAR

The HKSAR has applied International Labour Conventions No. 2 on Unemployment, No.122 on Employment Policy, and No. 142 on Human Resources Development withoutmodification.

To promote full, productive and freely chosen employment has all along been a majorpolicy of the HKSAR Government. We strive to improve the local economic and socialconditions on a continuous basis, so as to induce investment and foster growth ofcommerce and industry, thereby creating more job opportunities.

5.55.7

7.47.7

7.0

6.1

4.54.5

5.2

6.27.2

7.5

8.68.3

5.0

4.9

6.66.8 6.8

5.25.3

7.4 7.3

0.0

2.0

4.0

6.0

8.0

10.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

5/06

-7/0

6

2001 2002 2003 2004 2005 2006

Employment Service of the Hong Kong Special Administrative Region of the People’s Republic of China 99

Our employment policy aims to develop a well-trained, well-motivated and adaptableworkforce. Investing in human resources, Hong Kong’s most valuable asset, is one ofthe top priorities of the Government. Through upgrading the knowledge and skills levelof the workforce, people can contribute to productive and decent work. We also seekto provide workers with opportunities to utilise their skills and potential, and help theunemployed re-enter the employment market as soon as possible and minimize theduration of unemployment.

Common Functions of the Public Employment Service (PES)

As set out in ILO’s publication ‘The Public Employment Service in a Changing LabourMarket’, common functions associated with the PES include:

� Job-brokering (i.e. the process of arranging for job-seekers to obtain jobs andemployers to fill vacancies);

� Providing labour market information;

� Administering labour market adjustment programmes; and

� Administering unemployment benefits.

Essentially, the PES works to improve labour market transparency and offer specialhelp to those who might otherwise be disadvantaged in the labour market. It is recognisedas an important gateway to help channel the unemployed into the employment marketand other support programmes.

PES in the HKSAR

The Labour Department (LD) administers the PES of the HKSAR and is involved in thefirst three common functions of the PES as mentioned in the above paragraph. TheEducation and Manpower Bureau spearheads vocational training/employees retraining,the Social Welfare Department administers social security benefits, and the Censusand Statistics Department compiles labour statistics. The LD maintains close liaisonwith these government bodies to ensure effective and quality delivery of PES.

While the LD is the principal PES agency in the HKSAR, social partners also play anactive role in augmenting its service delivery. For instance, non-governmentorganisations (NGOs) are often commissioned to run training/retraining courses forjob-seekers and provide placement assistance to specific target groups, such as youths,ethnic minorities and people with disabilities.

LD’s Current Set-up for Delivering the PES

Within the LD, the PES is delivered through the following five divisions:


� Employment Services Division currently operating ten Job Centresthroughout the HKSAR;

� Employment Information and Promotion Division comprising a Job VacancyProcessing Centre, a Telephone Employment Service Centre, an EmploymentInformation and Promotion Programme Office, and a Central Recruitment Unit;

� Youth Employment Division running two employment and training programmesfor youths;

� Careers and Employment Agencies Division providing careers guidanceto secondary students and regulating the operations of private employmentagencies; and

� Selective Placement Division providing placement assistance to people withdisabilities.

The Assistant Commissioner for Labour (Employment Services) oversees the workof the above five divisions and assists the Permanent Secretary for EconomicDevelopment and Labour (Labour) in formulating policies on employment. Officers ofthe Labour Officer Grade (who are veteran labour administrators devoting their life-longcareers to labour administration work), underpinned by supporting staff, administer anddeliver the PES to the public.

The Committee on Employment Services of the Labour Advisory Board advises thePermanent Secretary for Economic Development and Labour (Labour) on mattersrelating to employment services of the LD. Each year, we submit to the Committeereports on the performance of the PES and collect members’ views on how the PEScan be further improved. The terms of reference and composition of this Committeeare attached as Appendix.

In 2006-07, the total financial provision for delivering LD’s PES amounts to some HK$369million (US$47.3 million). Our PES is provided to employers and job-seekers free ofcharge.

Reform of the LD’s Employment Services

To rise to the challenge of unemployment, the LD has since 1997 revamped its PESand introduced various measures to enhance its service capacity, efficiency, clientfocus and competitiveness. We also launched a number of employment programmesto help the more vulnerable groups (including youths, the middle-aged, job-seekers withspecial difficulties in finding jobs, and people with disabilities) enter the employmentmarket.

Major improvement measures and new initiatives launched for enhancing our PES forthe able-bodied job-seekers include:


� Embarking on computerisation of all Job Centres including the establishment ofa holistic computer network (1997);

� Launching the Employment Information and Promotion Programme to strengthenrapport with employers and actively canvass vacancies (1998);

� Establishing the Telephone Employment Service Centre (1998);

� Reprovisioning and integrating Job Centres with the Labour Relations DivisionOffices to provide one-stop services to job-seekers (1998);

� Launching the Interactive Employment Service (IES) Website (1999);

� Launching the Youth Pre-employment Training Programme (1999);

� Setting up hyperlinks from the IES to other employment websites and allowingprivate employment agencies to post their job vacancies on the IES (2000)

� Launching the Youth Work Experience and Training Scheme (2002);

� Launching the Employment Programme for the Middle-aged (2003);

� Launching the Special Incentive Allowance Scheme for Local Domestic Helpers(2003);

� Launching a one-year pilot Youth Self-employment Support Scheme (2004);

� Launching the Work Trial Scheme (2005);

� Improving the Youth Pre-employment Training Programme to enhance itsvocational training value (2005);

� Relaxing the scheme rules for the Special Incentive Allowance Scheme forLocal Domestic Helpers (2005); and

� Setting up two new Job Centres in remote areas of the HKSAR (2006).

The years of launching these measures are shown in brackets.

The following paragraphs elaborate further on the PES of the LD for the able-bodiedjob-seekers.

Job Centres

The LD currently operates ten Job Centres throughout the territory to help job-seekersfind work and employers recruit staff. To strengthen employment support to peopleliving in remote areas, two more Job Centres will be set up in late September 2006.

Each Job Centre has the size of about 400 square metres and is staffed by aroundtwenty officers, depending on the clientele size of the geographical districts served. AllJob Centres are fully computerised, and are networked to a central database of vacanciesand job registrants. Apart from providing the following comprehensive range of


employment services, Job Centres also administer the employment programmes asdetailed at paragraphs 82 to 87 below.

Job-search and Referral Service

A job-seeker can simply walk in and browse vacancy information at any Job Centres.He can view the job cards on display and make use of user-friendly Vacancy SearchTerminals as well as computers with Internet access for conducting simple job matching.In addition, facilities including telephones, fax machines, and computers with a resume-building software are provided for this completion of the whole job-hunting process atone stop. Registration is not required if the job-seeker applies directly for jobs throughthe contact means provided by the employers.

Job-seekers requiring more in depth assistance and referral service can apply forregistration through the Internet, or at any one of the Job Centres. Each registration isvalid for three months and can be renewed upon expiry. Once registered, job-seekersreceive referral and placement assistance from the placement officers.

Each placement officer of the Job Centre is provided with a computer terminal connectedon-line to the central job database, facilitating oneself to provide career counselling, jobmatching and referral services expeditiously. Placement officers help job-seekersformulate their career choices and build up understanding between employers andjob-seekers before a job interview actually takes place.

Placement officers are mainly civil servants. With the upsurge in service demand,temporary staff is employed on contract terms to cope with the additional workload.Special on-the-job training programmes are given to equip them with the requiredplacement and counselling skills.

Each Job Centre is also equipped with a resource corner providing job-seekers(including ethnic minorities and new arrivals) with useful reference materials ondifferent trades and industries, prospectuses on vocational training and retrainingcourses as well as books on job-hunting skills.

Regular employment briefings tailor-made for the needs of ethnic minorities andnew arrivals are organised to facilitate their understanding of the local job marketand socialisation into a new job. These briefings cover the latest labour marketinformation, guidance on job-search skills and adjustment, and building of positive workhabits.

In 2005, around 208578 job-seekers were registered and 113090 placements weremade. For the first eight months of 2006, 160 919 job-seekers were registered and79,754 were placed into employment.


Figure 2: Number of Registrants (2002 – August 2006)

62 46766 100

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Figure 3: Number of Placements (2002 - Aug 2006)

208 895233 070 223 229

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Figure 2: Number of Registrants (2002 - August 2006)

Figure 3: Number of Placements (2002 – August 2006)

Job Matching Programme (JMP)

Registered job-seekers facing greater problems in job search can join the JMP. EachJMP participant is assigned to a dedicated placement officer. Personalised counsellingand job-matching services are provided to equip participants with the necessary


job-search and interviewing skills. Placement officers help the participants evaluatetheir academic qualifications, job skills, work experience and job preferences, with aview to facilitating them to look for suitable jobs actively. If retraining is required,job-seekers are referred to attend retraining courses run by the Employee RetrainingBoard.

In 2005, the JMP recorded 12 370 registrants and 6 891 placements. In the firsteight months of 2006, 8 568 registrants joined the JMP and 4 304 were placed intoemployment.

District-based Job Fairs

Since November 2003, more focused recruitment activities have been organised atJob Centres to enable job-seekers to attend on-the-spot job interviews and assistemployers to recruit staff. District-based job fairs for two to four employers in the districteach time are held regularly at the major Job Centres to help employers recruit localresidents. Job-seekers can attend on the spot interviews on-the-spot, thus saving timefor cross-district travelling. These job fairs are well received by employers andjob-seekers. In 2005, 46 district-based job fairs were held, attracting more than 17 000participants. In the first eight months of 2006, the 51 district-based job fairs drew over14 000 participants.

Interactive Employment Service (iES) (http://www.jobs.gov.hk)

To facilitate job-seekers in their job search , the LD launched the iES in March 1999. Itwas the first employment website with Chinese interface providing 24-hour onlineemployment service to both job-seekers and employers. Equipped with a powerful anduser-friendly search engine, the iES plays an important role in disseminating up-to-datevacancy and job market information to the community.

The iES also carries 16 dedicated webpages on employment of topical interests. Amongthem are the Summer Job Vacancies webpage which helps students searchtemporary jobs and the Employment in the Mainland and Macau webpages whichprovide information on the “dos and don’ts” for employment in Mainland China and theMacau SAR. The latter, providing information on relevant labour laws, employmentprotection and taxation of the two places, are hyperlinked to their respective officiallabour bureaux websites to facilitate job-seekers obtain employment marketinformation across the border.

Without any registration requirement, all job-seekers are free to access the latestvacancy information and search for suitable jobs according to their specified criteria onthe iES. Since the bulk of vacancies are provided with the contact means of employers,they can complete the whole job-search process at ease.


Job-seekers can choose to register as iES members. If so, they will receive value-added service including regular e-mails on summary information of job openings matchingtheir selection criteria.

Profiles of registered job-seekers (including their academic qualifications, workingexperience, job skills, job preferences and expected salaries) are maintained on theweb, while personal data like names, ID card numbers, addresses and telephonenumbers are kept confidential.

To employers, they can submit job vacancies and shortlist job applicants through theiES. Upon receipt of the shortlisted results, Job Centres will refer the identifiedjob-seekers to employers for completion of the subsequent recruitment process.

For five consecutive years, the iES has been the most popular government website ofthe HKSAR, accounting for about one-third of the page views of all government websites.In 2005, its page views exceeded 869.7 million, with an average of 2.4 million per day;while for the first eight months of 2006, the total page views reached 664 million,averaging 2.7 million per day.

The success of the iES was further recognised in 2005, when it was awarded theChampionship of the Civil Service Outstanding Service Award Scheme 2005 – TeamAward (E-Service). This is an award scheme organised by the Civil Service Bureauof the HKSAR Government to recognise quality services provided by governmentdepartments.

Vacancy Search Terminals (VSTs)

The VSTs are installed at all Job Centres to facilitate job-seekers to gain access toour huge vacancy data bank. User-friendly search engines and printing facilities areprovided to help job-seekers choose vacancies according to their selection criteriaand print the searched information for making job applications. In addition to theirinstallation at Job Centres, we have set up VSTs at the Social Security Field Units ofthe Social Welfare Department and the Public Enquiry Service Centres of theHome Affairs Department to enable more job-seekers to gain access to our jobdatabase.

Telephone Employment Service (TES)

The Telephone Employment Service Centre (TESC) was established in 1998 to meetthe rising demand for public employment assistance. Job-seekers who have registeredwith the LD can obtain job referrals over the telephone without having to visit a JobCentre. This service is particularly welcome by job-seekers living far away from JobCentres or who cannot avail themselves of visiting a Job Centre.


Through a placement officer of the TES, a job-seeker can request job-matching serviceor arrangement of job interviews for vacancies selected from the iES or Job Centres.The receiving placement officer can simultaneously engage a caller and a prospectiveemployer in a tripartite telephone conference, providing a mobile job interview to bothparties.

The TES is supported by three technical systems:

(i) Interactive Voice Response System automatically receiving incoming calls,broadcasting pre-recorded information and sending out information to callers byfax;

(ii) Automatic Call Distribution System lining up incoming calls and directing themto placement officers on a first-come-first-served basis; and

(iii) Report Manager showing the number of outstanding calls and monitoring thecall performance of placement officers.

The TESC is currently staffed by 20 placement officers. In 2005, it handled 183 141calls seeking employment assistance and arranged 170 511 job referrals. In the firsteight months of 2006, 124 795 calls and 102 353 job referrals were handled. Onaverage, the TES processed 710 calls and 580 referrals daily.

Figure 4: Number of Calls Handled by TES (2002 – August 2006)

219 769

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Figure 4: Number of Calls Handled by TES (2002 – Aug 2006)


Job Vacancy Processing Centre (JVPC)

A quick and effective flow of vacancy information shortens job-seekers’ duration ofunemployment and helps cut frictional unemployment. The LD seeks to put in place afree, convenient and effective platform for dissemination of vacancy information.

Employers in the HKSAR are not required by law to report job vacancies to theGovernment. The JVPC was set up in December 1998 to centrally receive and processvacancy information from the private sector on a voluntary basis. Recruiting employersinform JVPC of their job vacancies by fax or on the Internet. Vacancy information isvetted and entered into a central job bank and made available to the public through ourJob Centres and the iES within 24 hours. A job vacancy remains valid for one month oruntil it is filled.

In addition to the traditional mode of receiving job referrals through the PES offices,employers are given an option of opening up their vacancy orders and receiving directapplications from job-seekers. Well received by job-seekers, direct application reducesadministrative and social costs and speeds up the recruitment process. At present,about 80% of employers opt for placing open job orders with the JVPC.

To protect the interests of job-seekers, a mechanism is put in place to vet all vacanciesreceived from employers. Job vacancies without employment relationship or involving

194 954

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Figure 5: Number of Referrals Arranged by TES (2002 – August 2006)


illegal practices and discriminatory terms will be refused. In addition, employers failingto produce a valid Business Registration Certificate or having adverse records with theLD are barred from placing job vacancies.

While the wage levels in HKSAR are basically determined by the free play of marketforces, the JVPC encourages employers to offer market wage rates and would notaccept vacancies which offer wages obviously out of line with market rates.

In 2005, the JVPC received 425 952 vacancies. In the first eight months of 2006, 327794vacancies were received, representing an increase of 19.8% over the correspondingperiod in 2005. On average, some 1,850 vacancies were received every workingday.

Figure 6: Number of Vacancies Received by JVPC (2002 – August 2006)

Employment Information and Promotion Programme (EIPP)

The EIPP was launched in August 1998 to strengthen the promotion of the LD’semployment services and centralize the collection of vacancy information. Under theEIPP, a great variety of innovative publicity and promotional activities are held to reachout to employers and job-seekers.

Exhibitions are regularly staged throughout the territory to promote our employmentservices while briefing sessions and recruitment seminars are conducted todisseminate the latest labour market information to the public. What is more, to helpjob-seekers find jobs and employers recruit staff, large-scale job fairs are organised at


prominent locations of the territory. Job-seekers can apply for jobs and attend jobinterviews on the spot. A considerate number of job offers were made after interviewsat each job fair.

Large-scale job fairs, which are organised free of charge for both job-seekers andemployers, have proved to be a very effective and popular means of recruitment. Onthe one hand, job-seekers can get first-hand information on various industries andoccupations, and apply for a number of jobs at one go. On the other hand, employerscan reach out to a large number of job applicants with relatively minimal input of manpowerand resources, such as stationing a small recruiting team at their booths to accept jobapplications and interview job applicants.

Each job fair is usually open to more than ten employers and visited by thousandsof job-seekers. Thematic job fairs such as “Job Fair for Tertiary Education Graduates”and jobs fairs in remote areas of the HKSAR (which have been experiencing relativelyhigher unemployment rates) are also organized to cater to the needs of differenttarget groups. In 2005, 12 large-scale job fairs attracted 76 700 visitors. Prominentlystaged was a mega job fair at the Hong Kong Convention and Exhibition Centre inMarch 2005. It was the largest job fair ever organised, with 125 employer companiesoffering some 9 400 vacancies and over 35,000 persons visited the fair. In the firsteight months of 2006, ten large-scale job fairs, attended by 50 500 job-seekers, wereheld.

The EIPP also publishes reference materials on recruitment and job applications foremployers and job-seekers, such as:

� Pamphlets, booklets and resource kits on job-hunting and interviewingtechniques.

� Resource kits on good recruitment practice to promote the employmentservices of the LD and advise employers on the latest labour marketinformation.

� Leaflets to advise job-seekers, in particular fresh school leavers and studentslooking for summer jobs, to beware of employment traps.

Central Recruitment Unit (CRU)

The CRU coordinates and assists more than 60 government departments and policybureaux of the HKSAR in recruiting temporary and contract staff. Vacancy ordersreceived are promulgated at Job Centres and on the iES for job-seekers toapply. Recruiting departments/bureaux may choose to receive applications from appli-cants directly or allot interview quotas to the applicants on a ‘first-come-first-served’basis.


Cooperation with Private Employment Agencies (EAs)

The HKSAR government fully recognises the constructive role of EAs in delivering jobplacement service. At the end of August 2006, 1624 EAs were in operation in the HKSAR.Among them, 624 were dealing with the placement of office jobs, 974 were engaged inthe placement of foreign domestic helpers and 44 were engaged in the placement ofimported workers.

To maximise the utilisation of vacancy information possessed by both the PES andEAs, the latter may lodge job vacancies of their serving employers with the LD providedthe EAs agree to adhere to a Code of Practice issued by our Department. This Codeincludes, among others, waiver of fees from job-seekers and compliance with theprovisions of the Personal Data (Privacy) Ordinance. For the first eight months of 2006,vacancies from EAs accounted for 6.5% of the total number of vacancies received bythe JVPC.

In addition, a ‘portal’ is developed on the iES through which job-seekers can gainaccess to job vacancy information on the main private employment websites. Thisagain serves to enhance labour market transparency.

Employment Programmes for Different Target Groups

To help vulnerable groups enter the employment market, the LD currently administersthe following five employment programmes for the able bodied job-seekers:

� Youth Pre-employment Training Programme;

� Youth Work Experience and Training Scheme;

� Employment Programme for the Middle-aged;

� Work Trial Scheme; and

� Special Incentive Allowance Scheme for Local Domestic Helpers.

These programmes seek to enhance participants’ employability, provide activeplacement assistance and career counselling, and reduce the mismatch between thesupply and demand of labour. Recognising subsidised employment is an importantActive Labour Market Policy, financial subsidies are paid to employers participating inthe above programmes together with other support services where appropriate. Detailsof these programmes are elaborated below.

Youth Pre-employment Training Programme (YPTP)

The YPTP was launched in September 1999 to provide school leavers aged 15 to 19with a wide range of employment-related training so that they are better equipped for


employment. At present, recurrent annual funding of HK$90 million (US$11.5 million) isprovided for running the YPTP and 12,000 training places are offered each year. Overthe past seven years, the YPTP has provided training to 73,000 young persons.According to survey findings, discounting those who pursued further studies oncompletion of the YPTP, about 70% found jobs.

Four Modules of Training Courses

The LD commissions NGOs to provide vocational training and career counselling toyouths. The YPTP offers four modular training courses as follows:

Module A : Leadership, discipline and team building

This module, which comprises training of about 80 hours, includes training onconfidence, leadership, team building and organisational skills.

Module B : Job search and interpersonal skills

This is a compulsory training module. During the 48-hour training period, traineeswill learn communication and interpersonal skills, job search and interview skillsas well as self-understanding and self-development skills.

Module C : Elementary/intermediate computer application

This part of the training ranges from 48 to 80 hours. The commonly used softwaresare taught at the elementary level, while advanced courses on softwareapplication and programming will be offered at the intermediate level. Around 350module C training courses were provided for the programme year of 2005/06.

Module D : Job-specific skills

A wide variety of job-specific skill training courses are provided under module Dtraining, with a training duration ranging from 100 to 180 hours. At present, morethan 300 courses in 18 categories of module D training are provided.

To facilitate sustainable development and encourage life-long learning, almost400 training courses under Modules C and D of the YPTP are linked toelementary professional examinations in different trades. Examination fees canbe reimbursed from the YPTP.

Workplace Attachment

After completing the modular training, trainees can undergo one-month workplaceattachment training at hosting organizations including government departments, socialservice institutions, public organizations and private companies for a basic understanding


of the world of work. During the attachment period, trainees will be granted a trainingallowance of HK$2,000 (US$256) under the Programme. Career counselling and supportservices by social workers will be rendered to trainees throughout the training periodlasting about six to nine months.

Special Tailor-made Training Courses

Special tailor-made training courses can be developed to meet the skill requirements ofindividual employers. Whereas training will be provided free of charge by the YPTP,employers have to undertake to employ trainees in on-the-job training for a period of6-12 months under the Youth Work Experience and Training Scheme.

Youth Work Experience and Training Scheme (YWETS)

The YWETS was launched in July 2002 to enhance the employability of young peopleaged between 15 to 24 with educational attainment below degree level by providingthem with real work experience in on-the-job training for a period of 6 to 12 months. Totalfunding of HK$700 million (US$90 million) has been earmarked for running the YWETS.

Under YWETS, trainees are placed in training vacancies and provided with on-the-jobtraining under the guidance of mentors appointed by employers. Additional support suchas counselling service is available from case managers who are registered socialworkers. Trainees are encouraged to attend suitable vocational courses and can applyfor reimbursement of the related training course and examination fees from YWETS,subject to a maximum of HK$4,000 (US$513).

Participating employers receive a monthly training subsidy of HK$2,000 (US$256) foreach trainee engaged during the employment and training period up to one year, as wellas full-package support services.

Internet Services for the Trainees

The Youth Employment System (YES) (www.yes.labour.gov.hk) has been developed toprovide Internet services for trainees under the YPTP and YWETS. The websiteprovides a user-friendly search engine enabling trainees to gain access to and applyfor training vacancies. It also disseminates updated market information to trainees,establishes hyperlinks through which trainees can easily access other employmentand education websites, and provides a chat room for them to share their experienceand to communicate with the two programme offices.

Placements

Placement officers of the YWETS Office work together with trainees in findingemployment. They assist them in identifying suitable vacancies and conduct job


matching according to their job preferences. Trainees may also choose suitabletraining vacancies on their own and register by calling a designated telephone hotline.

The original target of the YWETS is to place 20 000 young people into employment byJuly 2006. This was achieved in early April 2005, 16 months ahead of schedule. At theend of August 2006, a cumulative total of 29 273 trainees have been placed in trainingvacancies. They were mainly engaged in clerical (23%), sales (14%), and informationtechnology (10%) posts. In addition, another 15 174 have found employment in theopen employment market with the advice and assistance of their case managers.

Training Vacancies and Tailor-made Projects

As at the end of August 2006, the YWETS received a cumulative total of some 70 000vacancies from about 12 000 employers. Of these, 12% were from the wholesale andretail trade, 10% from catering trade and 10% from education services.

The YWETS offers a variety of tailor-made employment projects to cater for trainees’needs and interest. Over 40 projects offering about 2 500 vacancies have beenorganized, covering industries such as wholesale and retail, aviation, tourism, informationtechnology, film and entertainment, education, social services, and catering. A thematicjob fair on such special tailor-made projects was held on March 11, 2006. This kind ofproject is popular amongst larger establishments and enables trainees to find jobs andattain sustainable career development.

The YWETS Campus Series — the “I.T. Seeds” Project, is a tailor-made projectcombining classroom and on-the-job training for a period of 12 months. Trainees assistin the development and application of information technology in learning, while someare being trained in school administration work. Participating schools have to releasetrainees to attend a “Certificate Programme in I.T. Teaching and Administrative Support”on one working day every week. Over the years, the “I.T. Seeds” Project has providedyouths in the HKSAR with more than 4,000 training vacancies.

Special Programme for Vulnerable Youths : Action S4

The LD partnered with the social service sector, and with assistance from the HongKong Council of Social Service, launched the Action S4 project in 2003. It is a specialproject targeting at the more vulnerable YWETS trainees. It aims to strengthen throughwork vulnerable trainees’ personal attributes, namely, the ‘4S’: Self-respect, Self-confidence, Self-reflection and Self-enhancement.

Under Action S4, the LD is the employer of the trainees and the participating NGOsundertake day-to-day supervision and provide on-the-job training. Through placing thevulnerable trainees under caring NGOs for on-the-job training, it is hoped that Action S4


will help improve their vulnerability and enhance their employability. Over 1 000 YWETStrainees have participated in the Action S4 project for improving their soft skills andestablish self-value.

One-stop Service under the YPTP and the YWETS

Through a “revolving door” mechanism introduced in 2005, trainees may now movebetween the two schemes at different stages during the programme year on therecommendation of their case managers in order to make the best use of the trainingavailable from both schemes. Trainees also receive case management service fromthe same NGO/case manager when he moves between programmes.

Evaluation of the YPTP and the YWETS

The LD has commissioned the Centre for Social Policy Studies of the Hong KongPolytechnic University (“HKPU”) to evaluate the effectiveness of the YPTP and theYWETS.

For the YPTP, the review of the 2003-04 Programme concluded that it had positivefunctions and was of value to society. Trainees, training bodies, host organizations andemployers considered the YPTP highly effective in enhancing the employability of youngpeople.

For the YWETS, the LD has commissioned the HKPU to undertake a comprehensivereview of the Scheme and conduct an 18-month longitudinal study (“Panel Study onYWETS trainees”) on more than 800 trainees to trace the changes in their employabilityand the long-term effects of the Scheme on them.

The Panel Study on YWETS trainees

The study revealed that after joining the Scheme for one year, the trainees hadmade significant improvement in various aspects, such as preparation for work andemployability. Over 70% of trainees were found to have secured employment whereasaround 10% of them pursued further study. Only 16.5% of trainees were still seekingjobs.

The “Comprehensive Review”

The study affirms the effectiveness of the YWETS and recommends the Governmentto continue implementing the Scheme. The study group points out that the YWETS isa good mix of “Active Labour Market Policies” in line with the standards promulgatedby the ILO, International Labour Organisation. It also affirms that the YWETS haseffectively assisted disadvantaged youths in seeking jobs, especially on enhancing


trainees’ human capital, self-efficacy and strengthening their resources of the socialnetwork. Besides, the YWETS has effectively assisted youths with relatively lowereducation level and working experience in equipping themselves for enhancingemployability.

Employment Programme for the Middle-aged

With effect from July 1999, the LD has adopted a series of pro-active measures toassist older workers to find jobs. These measures include the provision of priorityservices to job-seekers aged 50 and above and personalized services through the JMP.In addition, the LD launched a Re-employment Pilot Programme for the Middle-aged inFebruary 2001 and the Employment Programme for the Middle-aged (EPM) in May2003.

The EPM, with a total funding of HK$60 million (US$7.7 million), aims at assisting theunemployed aged 40 or above to secure employment through the provision of a trainingallowance to encourage employers to hire them. Employers who engage thesejob-seekers in full-time permanent jobs and offer them on-the-job training will be paid bythe LD a training allowance of HK$1,500 (US$192) per month, for up to three monthsper trainee.

As at the end of August 2006, the programme has achieved 24,848 placements, mainlyengaged as security guards, cleaners and labourers.

Work Trial Scheme

In June 2005, the LD launched the Work Trial Scheme (WTS), with a total funding ofHK$9 million (US$1.2 million), to enhance the employability of job-seekers who havespecial difficulties in finding jobs. They include those who have registered with the LDfor a prolonged period but remain unemployed and those who have failed repeatedly injob interviews.

Scheme participants are arranged to work in real jobs offered by participatingorganizations for a trial period of one month. During the work trial period, there willbe no employment relationship between the participants and the participatingorganisations. The latter are encouraged to offer employment to scheme participantsafter satisfactory completion of the work trial.

The LD will pay each scheme participant an allowance of HK$4,500 (US$577) uponcompletion of the one-month work trial. As a token of commitment, participatingorganisations are required to contribute HK$500 (US$64) for each scheme participantengaged, bringing the total amount of allowance to HK$5,000 (US$641) for each schemeparticipant. As at end-August 2006, 856 job-seekers have been placed into work trials.


Special Incentive Allowance Scheme for Local Domestic Helpers (LDHs)

The HKSAR launched this Scheme in June 2003 to promote the LDH service and addressthe mismatch in supply and demand arising from geographical locations and workinghours. Qualified LDHs (i.e. those having completed the LDH training offered byEmployees Retaining Board (ERB); possessed a competency card; and taken up a jobthrough the referral of ERB) who are willing to work across districts or during “unsocialhours” (outside 9 am to 5 pm on Monday to Friday) are eligible for a daily allowance ofHK$50 (US$6.4) for 144 days within one year, with an overall cap of HK$7,200 (US$923).A total of HK$60 million (US$7.7 million) has been set aside for the Scheme. The Schemehas been well received by LDH retrainees and LDH employers.

With effect from December 1, 2005, we have extended the claim period from one yearto two years, whilst the ceilings of 144 days and HK$7,200 (US$923) remain unchanged.All expired cases could also be re-activated for one more year if their ceiling of HK$7,200(US$923) has yet to be reached. The definition of “unsocial hours” has also beenextended to cover weekends, i.e. all days of Saturday and Sunday. Such relaxationsgive eligible LDHs more flexibility to make claims and help promote the development ofthe LDH market.

Employees Retraining

To enhance the employability of the low-skilled, low-education and middle-aged workers,the HKSAR Government set up the Employees Retraining Board (ERB) in 1992 toprovide retraining courses and services to all eligible workers aged 30 or above with nomore than junior secondary education level. The ERB offers full-time placement-tiedcourses to help the unemployed acquire new skills (e.g. security and propertymanagement, personal care and domestic work) as well as part-time retraining courseson basic generic skills (e.g. computer and vocational languages). Currently, the ERBoffers over 110,000 retraining places annually through its training bodies.

Apart from referring eligible job-seekers to attend the ERB’s retraining courses, the LDand the ERB have been working closely in identifying market needs. Information aboutthe vacancies received by the LD is disseminated to the ERB to facilitate it in identifyingcategories of long-term job vacancies and mapping out appropriate training programmesfor local workers.

Conclusions

The PES of the HKSAR, underpinned by the support services of NGOs, features thefollowing six elements of a good Active Labour Market Policy:

(i) Establishment of social partnership;


(ii) Subsidised work placement;

(iii) Vocational training;

(iv) Job-search assistance;

(v) Promotion of entrepreneurship/self-employment; and

(vi) Introduction of measures for disadvantaged youths.

The PES in HKSAR operates in a rapidly changing labour market. We echo ILO’s viewthat the PES must be ready to constantly change and adapt its services in the light ofchanges in its external environment while striking a balance between change andstability. The LD will continue to devote sufficient resources to continually upgrade itsPES to meet the needs of job-seeking public and employers.

In the face of a relatively high unemployment situation, the HKSAR Government willcontinue to invest in our human capital and adopt a proactive, innovative, flexible andcost-effective approach to further strengthen our PES, with a view to enhancing labourmarket transparency and assisting job-seekers in finding jobs.

Labour Administration andPromotion of Decent Workin VietnamDao Quang Vinh

CURRENT SITUATION OF LABOUR AND EMPLOYMENT IN VIETNAM

By 2005, the population at working age of Vietnam was 51.8 million people, increasedby 5.7 millions to the year of 2001, and by 1.43 millions of people on average every year.At the same period of time, the number of workers grew up to 4.9 millions, i.e. from 3.85million in 2001 to 4.34 million in 2005. The number of new jobs was increased byapproximately 1.2 millions on an average every year. The rate of unemployment tendedto decline continuously, from 6.3 percent in 2001 to 5.3 percent in 2005. (Figure 1)

Figure 1. Tendency of change of population at working age, the number of workersand rate of unemployment between 2001-2005

6

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5

5.2

5.4

5.6

5.8

6

6.2

6.4

Population at working age (1000 people)

Number of workers (1000 people) Rate of unemployment in urban area (%)


In the last few years, due to and stable economic growth, the number of work createdevery year has also been increased quickly. Since 2001, the increasing rate ofemployment has been higher than that of labour force. The increasing number of workerhas exceeded the increasing number of labour force1 . That is the main reason for thedecrease of the unemployment rate in the urban area. The data of the annual labour andemployment survey shows that in this period of time, job insufficiency and working timeuse in rural area has improved.

Noticeably, in the period of 2001 – 2005, there were some years in which the labour inagricultural, forestry, fishery industry was absolutely declined (not only in terms of densitybut also in the total number of workers). The amount of new jobs has grown much morein services due to the manifest vision of the phenomenon popular in many developingcountries during the time of industrialization nowadays. Although the labour structurehas been transferred more rapidly than in the past years, the agriculture sector is infactcreating many jobs (Figure 2).

Figure 2. Employment structure in the period of 2001-2005 (%)

The result of annual enterprise survey conducted by GSO shows that the number oflabour working in enterprises with business license (exclude cooperatives in agricul-tural-forestry industry and individual household business) grew from 3,536,998 peopleby the end of 2000 to 5,175,092 people by the end of 2004, i.e. grew by 409,523 peopleon an average every year, out of which, about 143,300 people (35 percent) were inSMEs.

Labour Administration and Promotion of Decent Work in Vietnam 121

In the non-agricultural sector, approximately 90 percent of workers are working in SMEsand individual household business. The rise of labour in the industry is mainly due to therapid growth of the number of small enterprises registered in accordance with theenterprise law, and the employment in handicraft industry, construction of householdeconomic sector, trade villages, and informal sector. For services, the increasednumber of employment seems to be due to the self-employed and casual workers,those who left the agriculture but could not find a job in formal sector. Meanwhile, thenumber of employment in formal sector has seen a significant rise.

It has been seen that uptil now, the number of workers are continuously gathered inagricultural sector. In the rural areas, the workers still have to share work and put upwith the pressure of employment insufficiency. The rural-urban migration flow gets longerand longer resulting in certain social consequences.

Especially, the employment issue has become urgent in regions wherein the processof transformation from farming land into land for infrastructure and industrial zone andurbanized area building. The transformation of land use has made great influences onboth the living and employment status of the inhabitants, whose lands have beenrevoked. The main difficulties faced by the inhabitants are issues such as vocationaltraining, job seeking, job self-generating, and job changing for old aged labour (over 35years old).

EMPLOYMENT AND LABOUR POLICY

Employment and labour policy contains a system of certain policies relevant to eachother in influencing the formation, development and use of labour force. These policiesare the main tools of the labour administration as a whole. The report discussed belowfocuses on two main policy groups as human resource development policy andemployment policy:

Human Resource Development Policy

The policy stresses on the fact that all the people have the right to get a job and theresponsibility to generate a job requires the workers to be equipped sufficiently andproperly to participate in the labour market in an active and efficient way. It meansthat all the people have to take great effort to improve their knowledge and technicalqualifications. Thus, the educational and training system has to be enhanced andrenovated regularly to meet the demand of the attenders and requirements of the labourmarket. The human resource development policy needs to focus on training to satisfycertain requirement of skills, high qualification in different industries and fields. Nowadays,it is essential to have a foundation in order to change from “permanent work” to “possibilityto have permanent work”.


The basic educational development policy

The basic education development policy has the meaning of building up a primarybackground and a necessary premise for training and developing the human resource,hence, actively contributing to the job generation. Therefore, along with the renovationof the content and requirement of employment policy, the education development policyneeds to be changed relevantly. The status of popular education development (rate ofliteracy, level of educational universalization- compulsory years of education, rate ofchildren enrollment in every school level, etc.) is considered to be an advantage ordisadvantage for the investment, business and job creation. The basic educationdevelopment policy, of which the focus is the educational universalization and illiteracymitigation, has upgraded the target from primary educational universalization in 2000 tosecondary educational universalization in 2010. In places with favourable conditions,there would be high educational universalization. With such a target, the educationalattainment of the population and labour force changes towards gradually minimize therate of illiteracy, rapidly decrease the rate of primary school graduates and increase therate of secondary school and high school graduates.

Table 1. Structure of labour force broken down by educational attainment (%)

Educational attainment 1996 2000 2004

Total 100.00 100.00 100.00

Illiteral 5.72 3.97 4.24

Not completed primary school 20.72 16.49 15.48

Primary school graduate 27.70 29.29 31.51

Secondary school graduate 32.08 33.01 30.40

High school graduate 13.78 17.24 18.37

Source: Annual Labour – Employment survey

By 2004, in the total labour force, the number of secondary school and above graduateswas quite large and have grown up remarkably (more than 20 millions of people, amongwhich the rate of high school graduates was … millions), increased by nearly 3 millionsto 2000 and occupied 50.2 percent out of the total labour force. This is a key premise forthe vocational training and job generation for the workers.

Vocational Training Development Policy

The common direction is to encourage rapidly increasing the scope of training fromshort-term and long-term vocational training and technical intermediate level to college


education, and university and post graduate education. In the last five years, the scopeof at all training levels has been significantly raised (Table 1).

Table 2. Scope of Education Broken down by Educational Levels inthe Period of 2001 – 2005 (Thousands of People)

2001 2002 2003 2004 2005

I. Scope of selection*

1. For vocational training 887.3 1.005.0 1.074.1 1.153.0 1.181.0

2. For technical schools 148 166 194 250 267

3. For universities and colleges 250 282 300 320 346

4. For post graduate education 5.9 8.8 11.5 14.5 15.6

II. Scope of students **

1. Technical schools 271.2 389.3 360.4 465.3 …

2. Universities, colleges 974.1 1.020.7 1.131.0 1.319.8 …

Source: Ministry of Planning and Investment (*), Statistic Yearbook (**)

Quickly widening the scope of education at all levels contributed greatly to the increaseof the rate of trained labour out of the total labour force from 16.8 per cent in 2001 to 25per cent in 2005.

In addition to the rapid increase in quantity, in order to meet the demand for employmentand for socio-economic development, the educational structure (according toeducational levels and professions) has been renovated towards more quicklyincreasing the scope of vocational training and step by step adjusting to the scope oftraining in technological, technical and agricultural professions.

The changes with great advantage in vocational training are noticeable:

In terms of size and structure of vocational training

There are more and more people attending vocational training. In the period of 2001 –2005, there were 5,326,400 people attending vocational training, among which 881,700people attended long-term training and 4,444,700 were in short-term training. Theannual growth rate was 6.5 per cent with the rate of long-term training was 15 per centper annum. As a result, by 2005, the percentage of labour completed vocational trainingreached approximately 19 per cent.


In 2002, the Government promulgated the Decision No. 48/2002/Q§-TTg to approvethe schedule of building a network of vocational schools until 2010. Hence, the Ministryof Labour, Invalids and Social affairs (MOLISA) has coordinated with variousministries, industries and localities to strengthen the system of vocational training, toestablish more vocational units, especially ones attached to the inhabitants, to trainwith profession suitable to the training demand at localities; to develop privatevocational training units, vocational training in enterprises, to tutor and transfer thetrade in trade villages. In the period of 2001-2005, MOLISA and its partners establisheda network for various training programmes mentioned below:-

� Newly established 99 vocational training schools, of which 20 schools are underthe ministries and industries, 10 are under Co-operations, 40 local public schoolsand 29 non-public schools. Solved the situation of localities without vocationalschools.

� Strengthened and invested to enhance the capacity of vocational training schools.In 2005, 47 vocational training schools were particularly invested to becomehigh-quality vocational training schools until 2010.

� Developed the network of vocational training centres: newly established 255vocational training centers. Up to now, the number of vocational training centresin the nationwide is 400;

� Developed vocational training classes in colleges-technical schools, enterprises,private production and trading units and trade villages. At present, there aremore than 200 Colleges and Technical schools participating in vocationaltraining along with hundreds of other vocational training units.

The network of vocational training units has been remarkably developed andstep by step met the demand of the labour market for skilled labour, especiallyhigh technically skilled labour for key economic industries. Simultaneously,the extension of the scope of short-term vocational training for the workers,particularly agricultural and rural workers, minority people, and dischargedsoldiers has played an important role in transforming the labour structure andimplementing social equity in vocational training.

As a result, by the end of 2005, the system of vocational training units in thenationwide has been extended, including:

� 236 vocational training schools (increased by nearly 2 times to 1998), of which:196 public schools (52 were under the Ministry, industry; 98 under localities; 46under corporations and enterprises), 40 non-public schools (1 foreign-investedschools).


� 404 vocational training centres (consisting of 249 public vocational trainingcentres, 155 non-public ones), of which 165 centres are managed by thedistrict/town authorities.

� Over 800 service centers for employment introduction, continuation trainingcentres, general technical training-career guidance centres and manyvocational training classes in enterprises, trade villages, and so on participatedin short-term vocational training;

� Besides, over 200 Colleges, Technical schools participated in vocationaltraining.

Therefore, until now, all the localities have vocational training schools; system ofvocational training schools in military and several economic industries as shipbuilding,ceramics, cement has been strongly extended; the number of non-public vocationaltraining units has raised significantly (occupy over 40 per cent); the network of district-level vocational training centres gradually meets the demand of rural labour, whichcontributes to the labour structure transformation, job creation and hunger eliminationand poverty reduction.

However, the network of vocational training units also shows disadvantages asfollows: several vocational schools were established but run slowly; though the qualityhas been improved but not met the requirements; only one third of the districts havethe vocational training centres; the system of vocational school of corporations is facingthe difficulties because at the beginning of 2006, the State will not support theadministration expenses for vocational training and the corporations have to manage itthemselves.

The occupational structure in the past five years has also been changed according tothe demand of labour market. Some new occupations have been implemented.Nevertheless, in comparison with the requirement of job generation and labour structuretransformation, the occupational structure stays complicated. Vocational training unitsfocuses mainly in industrial sector, transportation, construction; meanwhile, theoccupations in agriculture, forestry and fishery such as produce, forest, aquatic andsea product maintenance and manufacturing are in need of rural labour but the numberof vocational units participating in training remains small. Several occupations vital forthe economy, whose training expense is high, have not been invested properly, thusthey cannot attract the vocational students.

In terms of enhancing quality and efficiency

The quality of vocational training in the last few years has been actively improved inorder to involve more efficiently in the job generation. However, in general, the quality ofvocational training stays low and cannot satisfy the higher and higher demand of thelabour market.


Development of Labour Market

It is said that the labour market in Vietnam is nowadays in the process of establishment,hence there are many shortcomings (e.g. undeveloped, partitioned by regions andterritories, lack of legal framework, etc.).

The number of people directly participated in the labour market (wage workers) by July1, 2004 was 11.10 millions, occupied 25.6 per cent out of the total employed labour.This number was 3.1 times bigger than that of 2000 (on 1 July 2000, the number ofpeople participating in the labour market was 3.63 millions), i.e. increased by 726.1thousands of people per year on average, or the average growth rate is 8.24 percent peryear.

The employment policy evokes the development of the labour market in non-agriculturalsector (industry-construction and services) but in the agricultural-forestry-fisherysector, the impacts remains limited. While the model of small-scale householdeconomy still rules in rural areas, the situation of self-employment in agricultural-forestry-fishery is very popular. In the total number of employed labour, the rate of hiredlabour in agriculture-forestry-fishery only accounts for approximately 6 percent, 22percent in non-agriculture, the last 72 percent is the self-employed, of which the self-employed in agriculture-forestry-fishery hold 53 percent.

The development level of the labour market, broken down by the rate of wage workers,is different among regions and localities. In 2004, the rate of labour market participationin urban area was 49.4 percent while that in rural area was only 18.2 percent (Table 3).

Table 3. Percentage of Employed Labour at 15 and above Participating in LabourMarket (wage workers) (%)

Region Total Out of whichUrban Rural

Nationwide 25.57 49.37 18.21

Out of which:

1. Northeast 14.67 49.68 7.74

2. Northwest 9.75 53.34 3.80

3. Red river Delta 26.18 58.12 18.74

4. Northern Central 15.01 43.96 10.93

5. Coastlines of Southern Central 27.53 46.90 20.41

6. Highlands 16.36 35.99 9.46

7. Southeast 44.23 52.84 34.62

8. Mekong Delta 28.07 40.91 25.15


Red river Delta, Coastline of Southern Central, Southeast and Mekong Delta havethe rate of labour market participation higher than the medium rate of other regionsnationwide. In general, there is no big gap among the regions in terms of the rate oflabour market participation in urban areas while there is one in rural areas.

In order to speed up the development of the labour market, the Government hasrecently carried out a great deal of measures to enhance the institutions, promulgatetools and strengthen the activities of the labour market:

— Employment services:

By 2005, there were 177 employment introduction centres and over 3000 enterprisesperforming in the field of employment consultancy and introduction. The number andtypes of such services run by Centres and enterprises are diversified. However,the quality of employment services is still low and inefficient due to the lack ofinformation on labour market, and lack of tight combination with enterprises and trainingunits.

— Job affairs

Together with the activities of Employment introduction centres and enterprises ofemployment services, a kind of tool of the labour market, which is effectively organizedand run, is Job affairs. Since 2000, there have been over 100 Job affairs organizedin many localities in the nationwide. Beside the general Job affairs, a number ofprofessional Job affairs and the ones for particular groups of people have also beenorganized. In such affairs, ten thousands of people have been offered advice andjobs.

— Establishing employment information center

The employment information centres, websites for worker and work seeking, vacancyarticles are making great contribution to the development of the labour market. A typicalexample is that within the project of enhancing the development of the labour market,the design of dataset and information on employment has been carried out as a pilotand run effectively at several localities. Among this, the noticeable outcome is in DongNai province. The Department of Labour, Invalids and Social Affairs quarterly releasesthe information on the recruitment demand of enterprises operating in the province,hence the workers are able to find jobs. Nevertheless, it is only possible to collect andrelease the information on labour demand (employment) but not the information onlabour supply.

In the coming years, the number of labour participating in the labour market will keeprising and the labour market will be more and more diversified. Therefore, it is essential


to have certain regulations to instruct and manage the activities of the labour market toupgrade the efficiency of the labour supply-demand as well as to protect the benefitsand determine the responsibility of the participants of the labour market. Properlymanaging the labour market plays an important role in arranging the employment,reducing the unemployment and enhancing the flexibility of the labour force as well aspreventing and mitigating many other socio-economic consequences.

Environment and Working Conditions

Environment and working conditions are among the important contents of theemployment and labour policy. In fact, environment and working conditions has beenexpressed in policy documents and regulations of the State about safety, labour protectionand labour hygiene.

Nevertheless, the concern and investment to improve the environment and workingconditions are now irrelevant to the requirements and cannot catch up with theadvances of production science and technology and of labour hygiene and safety. Thesystem of organization and human resources in the field of labour hygiene and safetyremains weak and insufficient. The amount of labour accidents and injuries gettinglarger and larger is the manifest evidence of the insufficient and irregular interest in theenvironment and working condition issue. The main reasons are:

– Subjected to the urgency and essentiality of job generation for the employees,which focuses on job creation for a number of people but not in working conditions.That means it is only concerned about the quantity but not the quality of the jobs(to the extent of environment and working conditions).

– Lack of investment capital: due to the limitation of investment sources, theprojects of investment on building production units often concentrate onassembly lines but do not invest or invest at a minimum level in the solutionsfor environment and working condition issue. The environment and workingcondition issue was not mentioned reasonably at the beginning of thetechnological designing process or it was but truncated during the process ofimplementing.

– The legal framework is inadequate and loose. There is no specific and completeregulation on making the environment and working conditions safe in investmentprojects as well as in operating production and service units. The regulationson bonus and penalties are not strong enough. The staff working in the fieldof labour hygiene and safety is insufficient and unable to catch up with thereality. The work of supervising and monitoring is weak and not conductedregularly.


Employment Policy

a) Macro policies on job creation

These are the policies on job creation and employment adjustment in a macro aspect(the nationwide). The objectives of these policies are to create more jobs for theemployees and enhance the employment structure transformation in a modern andadvanced way in order to extend the social labour productivity and improve the livingstandard of workers. These policies express the fundamental guidelines of the State;and the great approaches of the period of mid-term and long-term plans to develop thesocio-economy and labour-employment policy of the country (5 year Plan, Developmentstrategy and plan for the coming 10-15 years, Long-term vision, etc.). The key macropolicies on employment include:

– The policy on diversifying the employment and capital source and subjectsfor job creation: These are incentive and supporting policies for job creationinfluencing all the subjects in the society who create jobs for the employees.

– The investment policy on encouraging and supporting the job creation: The Stateplays an active role in job creation in all national economic industries and givesthe priority to industries which have the incentive and spreading effects on othereconomic parts. The content of the policy is not only to set up a comfortablelegal corridor but also a financial support (preferential credit, infrastructure building,educations, information supply, and so on).

– Policy on employment structure: Through investment policy, the State directlyinvests and gives measures to encourage or limit the investment in someindustries, fields, regions, etc. to create jobs. It has a decisive meaning andinterdisciplinary and inter-regional impacts on creating an advanced employmenttransformation with three main forms of structure as employment structureaccording to industry (transferred from agricultural labour to non-agriculturallabour), employment structure according to technical qualification (transferredfrom low-skilled handicraft labour to mechanized labour and heading toautomated labour) and employment structure according to regions (mainlytransferred from rural labour to urban labour with industrial working behavior,requirement for professional education and skills for higher productivity, qualityand efficiency).

b) Specific policies on employment

These are specific policies and solutions on directly creating jobs and on supporting jobcreation. They are involved in particular action programs, plans, projects edited andimplemented during each certain period of time. For example, Decision No. 120/Q§-TTg by the Prime Minister about National program on employment settlement for the


period of 1996-2000, National target program on employment and HEPR for 2001-2005,labour policies in the process of equitizing State-owned enterprises, etc. Besides, thereare also other important policies relating to participants of the process of job generation,the adjustment of industrial relations as minimum wage policy and wage managementpolicy, social insurance policy, regulation on labour protection, labour safety andhygiene, etc.

c) Supporting programs for the unemployed

+ Pension for losing job

The Labour code 1994 (amended in 2002) and under-law documents regulate thesystem of pension for those who lost job and who left job as follows:

– Pension for losing job: In case the enterprise changes the structure andtechnology making the workers lose their job, the workers will get pensionscalled pension for losing job. It means they get one month salary for each year ofwork. The given pension is paid by the employer withdrawn from the backupfund of the enterprise which was deducted from the enterprise’s profit.

– In case of leaving work due to labour contract termination for continuationworkers who worked in the enterprise for 1 year and above, they will get thepension for leaving work equaled to 50 percent of one month salary for eachyear of work. The budget for this pension is calculated in products’ price ordelivery fee.

Recently, on implementing the policy on redundant labour because of therearrangement of State-owned enterprises, the Government has promulgatedthe Decree No. 41/2002/N§- CP dated April 11, 2002, which said that theGovernment establishes a fund to manage the redundant labour with the amountof 6000 billion VND (about USD 400 million) to pay the workers. According tothis program, all the workers who lost their jobs have the right to get a sum ofmoney depending on the years of work, the current salary and pay the socialinsurance fee.

+ Supporting the training and re-training for those who lost job

The Labour Code stipulates that the enterprise is responsible for re-training theemployees who have lost their jobs to find a new one.

Decree No. 41/2002/N§- CP dated on April 11, 2002 specifies that besides the pensionfor losing job and early retirement, the redundant labour can also take part in freetraining courses with the maximum time of six months in vocational training centresassigned by the local Department of Labour, Invalids and Social affairs. Afterwards,they can change to other suitable work.2


– Employment services

With 177 Stated-owned employment introduction centres in the nationwide, more than500,000 turns of people are offered advice about employment, nearly 400,000 people,including the unemployed, are offered work every year. Since 2000, hundreds of privateemployment centres established and run in compliance to the enterprise law haveparticipated in providing employment services for the labourers.

– Supporting the capital lending to deal with the employment

The national fund for employment support provides loans with preferential rate ofinterest for the workers to create new jobs themselves, and assists vocational training.Annually, this fund creates jobs for 250,000-300,000 labourers, including theunemployed and those who have lost jobs.

Besides, the unemployed are able to participate in credit and employment supportprograms of NGOs and socio-economic organizations.

CURRENT SITUATION OF DECENT WORK IN VIETNAM

Encouraging basic rights in working place

The constitution of Socialist Republic of Vietnam asserts that working is a basic rightand every citizen has the right to get a job. This right is identified more specifically in theLabour code. The Article 5 stipulates that “all the people have the right to work, be free tochoose work and occupation, put up with no discrimination in terms of sex, minority,social class, religion, faith. Illtreatment of workers is not allowed; working obligation inany form is not allowed.”

a) Right to group

The Constitution 1992 (Article 69) clarifies that “Every citizen has the right to freelyexpress his/her ideas, inform, group and demonstrate in compliance with the law.”

The Labour code 1995 (Article 7, Clause 2) clarifies that “Every worker has the right toestablish, participate in union according to union law to protect his/her legal rights andbenefits.”

At present, the grouping law is in the process of accomplishment to be submitted to theNational Assembly for approval.

b) Right to sign collective bargaining agreement

The law of Vietnam stipulates that signing the collective bargaining agreement has toensure the principles as voluntariness, equity, transparency, and compliance with law.


Several research results conducted recently prove that 100 percent of state-ownedenterprises have unions but only 80 percent of the foreign-invested enterprises and 20percent of private enterprises have unions. In non-public sector, the role of union islimited, especially in playing the role of a representative and protecting the workers’rights and benefits.

Similarly, signing collective bargaining agreement even has the characteristic offormality. The collective bargaining agreement has really not been a background for thesettlement of industrial relations in the enterprise.

c) No child labour

In Vietnam Labour code, article 120 says that “no child under 15 years old is allowedto work, exclude several occupations and work regulated by MOLISA”. In case ofaccepting children as workers, there must be the permission and supervision of theirparents or patrons. Vietnam agreed on the UN’s convention about children right andconvention 182 about forbidding and acting urgently to eliminate the worst types of childlabour.

There is now no officially publicised statistics on child labour in Vietnam (with the coreconcept of child labour). Nevertheless, several researches based on the results of pilotsurveys or population general survey show estimated data on child labour in Vietnam.According to the VHLSS in 1997-1998, it is estimated that the number of child labour inVietnam was 1.645 millions3 , a strong decline in comparison with the number of 4millions in 1992-1993.

Several research results indicate that almost child labour doing manual work withoutany skill (occupied 93 percent) concentrate mostly in the agriculture sector (occupied97 percent). The majority of child labour is working in household economy and smallnon-public enterprises. The hired child labour holds a small percentage (5.7 percent).There is no proof of child labour in state-owned enterprises or in production businessesof exported-products.

Creating jobs and better jobs

The Party and State of Vietnam always consider job generation to be a basic socialpolicy. In order to create jobs for the workers, it is vital to facilitate all the economiccomponents to expand production and trading. Besides, job generation is conductednot only through expanding domestic production and trading but also “enhancing labourexport.”

In recent time, through many solutions, the economy has annually created more andmore jobs decreasing the unemployment rate in urban area and increasing rate of


working time in rural area. Especially, employment quality and labour productivityhave been improved, hence, the workers’ income has been raised leading to theenhancement in the living standard. Job creation has become a key tool of hungerelimination and poverty reduction, imparity reduction, and social stability.

It is likely to say that the achievements of employment field are foremost fundamentalchange of the awareness and method of job creation; the mobilisation of all resourcesfor investment in developing and creating jobs; great interest of all ministries, industriesand localities at the beginning of designing the plan of job generation linked to nationaland local socio-economic targets; improved job quality.

However, there remain some shortcomings, mainly as follows:

– The change of awareness about labour and employment is not unified amonglevels, industries, especially in strategically planning and investment; theinequality of labour demand and supply is high while the possibility of the economyto attract the labourers and create jobs, particularly jobs with high productivity,high added value, high income for the workers are limited.

– The rate of unemployment stays high, especially for young labour and in bigcities; the situation of unemployment is slowly improved. It is noticeable that theunemployment is rather serious in areas wherein the strong transformation ofeconomic structure from agricultural to non-agricultural subjected to the rapidurbanization that is taking place.

– Lack of powerful policies on encourage investment, mobilise all resources,expand the markets (including labour market), hence to develop the economyand create jobs.

– The job generation contains the instability and risks subjected to the globalizationand integration such as foreign investment attraction, markets for product andlabour export, and the competitiveness of Vietnamese enterprises.

– The unequal development across regions, especially between rural area andbig cities, concentrated industrial zones (in Hanoi, Ho Chi Minh City, Vung Tau,Hai Phong, Da Nang, Can Tho, etc.) results in a flow of people spontaneouslymigrating from rural area to big cities at a higher rate and bigger scale,especially in HCM City with about 70,000 people, and about 20,000 in Hanoi.These people come to the cities looking for jobs with higher salary (mainlyunskilled labour doing hard work) but they also result in troubles of urbanmanagement making the social low-layer services overloaded (transportation,health, school, water supply, etc.). Especially, a number of people fall into drugaddiction, prostitution, or the children have to wander on the street to earn theirliving.


Expanding and making the social protection better for the labourers

In Vietnam, expanding the system of social protection has been interested by the Partyand Government at the very first establishment of the Republic Democratic of Vietnamin 1945. Along with the socio-economic development, this system is graduallycompleted. The steering direction is to conduct the economic growth together withsocial progress and equality in the condition of economic integration. An importantissue is to continue to expand and complete the system of social protection for theworkers to properly deal with social affairs.

According to this spirit, in the past few years, Vietnam has:

� Designed a regime to link the social protection policy to economic growth policyin order to harmonize economic growth with social progress and equality.

� Designed and completed the legal system to institutionalize the guidelines, pointsof view and solutions of the Party and State about social protection (Labourcode, Social insurance law, Education Law, Children Protection – Care andEducation law, Ordinance on Nation’s devoted people, the Disabled, theOld-aged, etc.).

� Setup national target programs and funds for social protection (Employmentprogram, HEPR, support program for especially difficult communes, rural freshwater and environment hygiene program, program of preventing social evils,and funds for Employment, HEPR, Compassion fund, etc.).

� Completed the system of compulsory social insurance (including healthinsurance), step by step formed and developed system of voluntary socialinsurance. Strengthened the system of social assistance for vulnerable groups,people in difficulties and people who have the demand for regular as well asprompt assistance because of acts of God, flood, and so on).

� Implemented the guideline for socialization to mobilize all resources, especiallyresources of the inhabitants and localities; simultaneously combined with othertarget programs to use these resources for social protection in an effective way.

The renovation of social insurance policy and the extension of the coverage ofcompulsory social insurance, on one hand, create the equity for the workers in everyeconomic component, and on the other hand, strengthen the employers’ responsibility,which helps increase the financial source and balance the fund. The changes of socialpolicies play an active part to stabilize the living of millions of workers in case of illness,maternity, labour accidents and retirement. The number of workers participated incompulsory social insurance has been remarkably raised. Up to now, approximately 6million people (holding 16 percent of the labour force) are able to participate incompulsory social insurance.


About 22.11 percent of the vulnerable people (the disable, lonely and homeless elders,orphans, etc.) benefit from continuation allowances.

The State continues to give financial support for the settlement of redundant labourresulted from the renovation and rearrangement of state-owned enterprises, and makethe conditions for labour of state-owned enterprise better.

However, there remain many shortcomings and challenges for Vietnam system ofsocial guarantee, as follows:

– The rich-poor gap tends to get wider and wider;

– Annually, the number of people needed prompt aids due to Acts of God, cropsfailure is about 1-1.5 millions; the rate of people falling again into poverty isaround 3.5-4 percent of the whole number of people escaped from the poverty.

– The system of social guarantee has not been completed; especially only 6millions of people have been involved in social insurance, holding 16 percent ofthe labour force, mainly in State sector. The large-scale enterprises (in thecoverage of Labour code) have not had Unemployment insurance; the majorityof workers in rural area, non-agriculture, non-state-owned sector, and freelancersare unable to join social insurance. The living standard of the vulnerable groupstays low and in difficulties.

Strengthening the mechanism of tri-partite discussion and social conversation

Tripartite discussion and social conversation are now taking a great concern in Vietnam.The objective is to develop a healthy, harmonious and stable industrial relation. Therefore,the tripartite discussion is in compliance with the principles of co-operation, equality,democracy and respect for the benefits of related parties.

The mechanism of tripartite discussion and social conversation is set up according tothe Labour code, Government organization law, Union Law and other papers.

Article 39 of Government organization law 1992 stipulates that “the Governmentcoordinates with… Vietnam General Confederation of Labour… to fulfill its tasks”, “theGovernment invites… the President of Vietnam General Confederation of Labour…. toattend the meetings organised by the Government to discuss about related issues;regularly inform… Vietnam General Confederation of Labour… the status of socio-economy and important policies of the Government.” According to this law, theGovernment, together with Vietnam General Confederation of Labour builds a specificmechanism of working relation.

It is likely to say that, the Government organization law 1992 set up a legal backgroundfor the regime of coordination and information between the Government and VietnamGeneral Confederation of Labour.


The Union law 1990 clarifies the mandate and duty of the union to cooperate with stateagencies to protect the rights and benefits of the workers. Article III of Union law 1990says that “state agencies, heads of units, organizations and unions need to strengthenthe cooperation in every activity to build the agencies, units, to construct the countryand take care of the workers’ benefits. If there is a different idea, it is necessaryto discuss and negotiate to find out a solution according to the law.” Or Article IV saysthat “The Union representing the workers combines with the State to design andimplement the socio-economic development program, policies, economic managementmechanism, guidelines and policies relating to the workers’ rights, responsibilities andbenefits.

The President of Vietnam General Confederation of Labour has the right to participate inthe meeting of the Minister Council (now Government). The Presidents of Unions at alllevels has the right to join meetings of state agencies, units, involved organizations todiscuss issues relating to the workers’ rights, responsibilities, and benefits.”

For union at working place, Article XI of Union law 1990 specifies that “The Union atworking place represents the workers to sign collective bargaining agreement with theenterprise’s director in all economic components; supervise the signing and complianceof labour contract”; “the union represents the workers to negotiate with heads of theagencies, units, organizations to deal with industrial disputes emerged in their agencies,units, organizations”; “State agencies, heads of units or organizations need to discusswith the union at the same level before making a decision on issues related directly tothe workers’ rights, responsibilities and benefits.” (Article XIII)

In the relationship with the employers, since 1998, the Prime Minister has organizedannual meetings with the enterprises. In these meetings, the Prime Minister talks to theenterprises about the issues relating to the enterprise activities. Especially, on May 27,1998, the Government Office announced the guideline of the Prime Minister to ask theenterprise for recommendations on designing enterprise-related papers. Theannouncement specifies that “For legal enterprise-related papers, it is essential to askthe enterprises for recommendation through the Vietnam Chamber of Commerce andIndustry, related associations of enterprises or directly ask the enterprises.” At present,the representative of the employers, depending on individual sector, is the VietnamChamber of Commerce and Industry, Alliance of Cooperatives or other organizations.

CHALLENGES FOR LABOUR ADMINISTRATION TO ENHANCE DECENT WORKAND DIRECTION OF SOLUTIONS

Challenges:

– The amount and percentage of trained labour, especially in rural, mountainousand remote areas, undeveloped areas are still very low. The number of trained


labour are still insufficient, especially skilled labour, high qualified labour tosupport the development of industries, new manufacturing industries, industrialzones, and labour export. Besides, the awareness of abiding by the regulation,and the labour discipline, and technological discipline need to be put into theeducation and training program for human resource.

– The Labour-Employment policy mainly focuses in creating the number of jobs,thus its impact on improving employment quality is limited. Although the quantityof newly created jobs is large and continuously raised per annum but most ofthem are craft work, and work that need no technical qualification. Obviously,the employment quality should be enhanced.

– Several macro policies giving priority to job generation are unclear. The policiesdo not clarify the priority and incentives for developing the industries andproducts with high volume of labour. Many State source of capital are used mainlyfor the industries and products with high volume of capital but low volume of jobcreation (cement, chemicals, steel refining, etc.).

– Some measures of job creation supporting is inefficient. For example, theregulated value of household credit is still small (though it was raised to VND 20million per farmer household); the organization of vocational training does notlink to the real demand. There has been no specific policy on the youngsterswho newly join the labour market.

– The labour market is undeveloped with low competitiveness and in danger ofbeing further lagged behind in comparison with other domestic markets as wellas with the labour markets of other neighbouring countries. It is reflectedthrough the low rate of wage workers, undeveloped transaction system, hightransaction fee, and out-of-date information on labour market and almostinaccessible for the workers.

– Rate of unemployment among the labour aged between from 15 to 24 yearsold in urban area remains significantly high in almost all provinces and citiesnationwide. Also, that of trained labour tends to increase.

– There is no comprehensive and effective solution of job generation for the labourin areas, wherein the transformation of land use purpose is taking place, and inurbanized areas; no solution for dealing with social issues emerging in industrialzones and urbanized areas.

– The awareness of labour code, and the rights and responsibilities of both theemployers and employees is still restricted resulting in industrial disputes, evenstrikes in many places.

– The system of social guarantee is not completed and has not played a role ofensuring the safety net for vulnerable groups in the labour market.


Direction for improving Decent Work in Vietnam

In terms of point of view

Improving Decent work needs to be regarded as a priority in the labour-employmentpolicy. It should be represented in the strategy, plan and investment for human resourcearrangement.

Several solutions

– Strengthening the work of inspecting, supervising the compliance of labour law;Timely giving reasonable bonuses and penalties to enhance the law complianceof both the employers and employees.

– Encouraging the enterprise to widely fulfill the social responsibilities, strength-ening the State role in improving the awareness and instructing the direction forthe activities.

– Building harmonious relationship in the working place, strengthening the role ofthe union, discussion and the quality of labour contract and collective bargainingagreement.

– Designing the strategy for human resource development, especially high-qualified labour, enterprise managing officers, credit experts to replace foreignlabour and create the human resource for expert export.

– Absolutely handling social issues emerged in industrial zones such as socialinsurance, accommodation, social service supply (education, health, kindergarten, cultural entertainment activities, and other entertainments) to ensure ahealthy social environment for the workers;

– There should be a fundamental change, from job generation by quantity toconcentrating to improve the employment quality to create stable jobs with highincome;

– Creating jobs for vulnerable groups such as youngsters, female workers, thedisabled, ethic minority people in the market mechanism, as well as the labourwho have to confront a wide range of risks like prostitutes, people who havefinished the imprisonment, and so on;

– There should be a fundamental change, from informal work to formal work.Rapidly increasing the number and rate of the wage employees (involved inindustrial relation) to 40 percent in 2010.

– Linking the employment strategy to socio-economic development strategy. Itis necessary to put the indicators of job generation into socio-economic


development plans, and make up solutions to supervise the implementation ofthese indicators.

– Linking the job generation to the development strategy of the industries andfields, especially services, tourism, high-tech agriculture, expanding the SMEsand trade villages, enhancing the job quality in informal sector and improving thequality of labour force education.

REFERENCES

1. Source: Circular no. 19/2004/TT- BL§TBXH dated 11 November 2004 about the guidelines forimplementing several articles of Decree no. 41/2002/N§-CP dated 11 April 2002 about policy onredundant labor resulted from the rearrangement of State-owned enterprises which was amendedand supplemented in Decree no. 155/2004/N§- Cp dated 10 August 2004 of the Government.

2. Child labor survey in Vietnam in the period of 1992- 1998, Socio-labor Publish house, 2000

3. In this period, the number of those who do not perform economic activities is raised considerably,mainly because of the rapid growth of enrollment and house-worker.

Ministry of Labour Relations andForeign Employment — A CaseStudy on Restructuring andRevitalization in Sri LankaRobert Heron

SUMMARY

Commencing in 2002, the ILO supported a change process within the then Ministry ofEmployment and Labour, (formerly the Ministry of Labour, and later to become theMinistry of Labour Relations and Foreign Employment), based on an ILO report titledFuture Directions for the Ministry of Employment and Labour: Balancing Growth andEquity in a Changing Society. This report established the need for Sri Lanka’s labouradministration to ‘catch up’ with the country’s transition to an economy based increasinglyon market forces as the means of resource allocation, and recognised the need for thenational labour administration system to adjust, adapt, restructure and reorganise toaccommodate the new policy initiatives outlined in Regaining Sri Lanka, the NationalEmployment Policy, and the National Productivity Policy (Parts I and II).

The ILO’s support enabled the Ministry to rethink its role in national development andsucceeded in the Ministry embracing a range of development initiatives in addition toadopting new approaches to its traditional role in labour protection and industrialrelations.

ILO’s assistance resulted in a number of significant outputs, some of which haveresulted in specific activities and benefits to the clients of the labour administrationsystem, and some of which require further action before the benefits are widely felt.

Apart from the preparation of Balancing Growth and Equity in a Changing Society thatestablished a new vision and mission for the Ministry and its Department of Labour, ILOassistance has generated the following outputs.

7


� A comprehensive Human Resource Audit has been completed and acomputerised data-base containing a profile of all Ministry/Department staff isnow available within the Ministry to support its human resource managementfunctions.

� A Performance Improvement and Reporting System report has been preparedto guide the Department of Labour in improving its staff productivity and overallperformance, particularly at district level.

� The employment services system has been totally reorganised in the form ofJOBSNET, an innovative public-private sector partnership that includes acomputerised placement service.

� A report has been prepared for the strengthening and development of theNational Productivity Secretariat.

� Hundreds of Ministry/Department staff have been trained in computer andEnglish language skills.

� A Computer Training Centre has been established within the Department ofLabour and is fully operational.

� Operational plans have been prepared for all the Divisions within the Ministry/Department to guide their activities over the next 2-3 years, and implementationhas now commenced.

� Many labour officers have received training in technical areas of labouradministration including new approaches to dispute resolution under the 4-3-2System, social dialogue and collective bargaining, and the extension of labouradministration services to persons engaged in informal economy activities.

� A report on Strengthening the Procedural and Operational Aspects of the LabourInspection System has been prepared and implementation commencedthrough the introduction of a new inspection report form, based on an integratedinspection system. The preparation of a master register of all establishmentsliable to inspection has also commenced.

� A report on the computerisation of the Ministry/Department’s administrative andinformation systems has been prepared.

� Various project proposals have been prepared to enable the Ministry to approachthe donor community with projects that are compatible with the new balancebetween protection and development the Ministry seeks.

� Advice has been provided on the nature and purpose of the National Institute ofOccupational Safety and Health and comments made on the draft bill to createthe institute.

Ministry of Labour Relations and Foreign Employment – A Case Study on Restructuring and Revitalization 143

� Advice has been given on the nature and purpose of the proposed Institute forLabour Studies.

� A culture of performance improvement has been accepted and embracedby the majority of staff within the Ministry/Department, and obstacles toperformance improvement identified.

The ILO has succeeded in transforming the Ministry/Department ‘on paper’, but muchremains to be done to ensure that specific action is taken to implement the new visionand plans, not for the benefit of the Ministry itself but for its clients, namely, workers andemployers.

The ILO assistance has identified a number of factors that need to be present if positivechange is to result from technical assistance activities. Such success factors providevaluable lessons for other countries seeking to reform their labour administrations andprovide the basis for a ‘change agenda’ that might be applied more widely.

This report also outlines a number of matters Sri Lanka’s labour administration needsto consider and act upon if it is to achieve its ultimate objective of contributing to bothsocial and economic progress of the nation, based on a culture of service to clients.

INTRODUCTION

In 2001, Sri Lanka’s labour administration with the then Ministry of Labour as its focalpoint operated on traditional lines with a strong emphasis on labour protection throughthe enforcement of a detailed, complex and somewhat outdated Labour Code. TheMinistry’s contribution to national development was predominantly the same as it hadbeen for the last 50 years and more, namely, protecting workers’ interests through theenforcement of labour laws.

The Ministry, comprised of a large Department of Labour under the responsibility of aCommissioner General of Labour, and a small cadre of Ministry staff providingcomplementary and support services, was seen to be reasonably effective inadministering the laws within its jurisdiction, and its staff at all levels was comfortablewith this role. Although some changes in procedure and process had taken placeduring the last 50 years or so, essentially, the Ministry’s role and purpose remainedunchanged. This was a traditional Ministry of Labour, doing traditional things, and in alargely traditional way.

Things began to change in 2002. In December 2001, the Ministry of Labour wasre-named the Ministry of Employment and Labour and a new Minister appointed. TheMinister was strongly committed to reform and initiated policy development with aparticular emphasis on employment and productivity. Meanwhile, work began onpreparing the strategy paper Regaining Sri Lanka that spelled out the Government’s


poverty reduction strategy. Regaining Sri Lanka identified a number of shortcomings ingovernance including enormous overstaffing in the public administration, an excessivenumber of institutions, excessive reliance on administrative procedures, weak institutionalcontrol mechanisms, and politicisation.

It is clear that the perception of public sector institutions was one of resistance to change,highly bureaucratic, operating without clear visions and plans, and with little interest instaff training and development. The government expressed its intention to transformthe public service and achieve good governance through a number of initiativesincluding the revival of the independent Public Service Commission, new recruitmentschemes, incentive schemes related to work performance, reduction in duplicationbetween government departments, devolution of authority to local authorities, and theintroduction of modern management practices.

As well as taking a strong position on improved governance, the government indicatedits commitment to a thriving private sector as evidenced by the preparation during 2002of three policy documents, namely, the National Employment Policy, the NationalProductivity Policy—Private Sector Component, and the National Productivity Policy—Public sector Component. These policies were:

The nation was faced with unacceptably high levels of national debt, unacceptablyhigh levels of unemployment, limited growth in per capita incomes, low productivitygrowth rates relative to other countries in Asia, and unacceptable inflation rates. Thepreparation of the three key policy documents was an important step to improving thecountry’s overall economic performance by increasing employment opportunities,raising productivity, and increasing its international competitiveness.

The functions of productivity and employment were assigned to the Ministry ofEmployment and Labour, thereby creating the need for the Ministry to reconsider itspurpose and functions in response to the changing political and economic environment.Clearly, in such an environment a concentration on the traditional approach to labouradministration was no longer sufficient. With the change of government in 2004, theMinistry of Employment and Labour became the Ministry of Labour Relations and ForeignEmployment. A new minister was appointed but the restructuring and revitalizationexercise that had commenced in 2002 was endorsed and continued largely as originallyenvisaged.

ILO assistance to the Ministry clearly recognised the importance of economic expansionand employment growth but, at the same time, the Ministry, with its new mandate inemployment and productivity, was advised that economic growth should not erode thecore values of social justice and decency in the world of work. Economic growth andsocial equity must be in balance and this was a recurring theme in the ILO FutureDirections document, Balancing Growth and Equity in a Changing Society.


The World Bank Group was also a strong advocate for reform of the public service. Inits Country Assistance Strategy 2003-2006, three core themes of peace, growth andequity build on the poverty reduction strategy contained in Regaining Sri Lanka. TheWorld Bank Strategy further supported the need for Sri Lanka’s institutions to adjust andadapt to changing circumstances.

Political processes were driving the need for change, the poor economic environmentwas an equally important factor, and external agencies were willing partners to helpfacilitate the change process. With the Ministry of Employment and Labour expected toplay a leading role in the nation’s development efforts the need for its renovation,revitalisation and restructuring was important and urgent.

The ILO agreed to assist the Ministry in its pursuit of a new direction with an emphasison employment creation, productivity enhancement and human resource developmentbut, at the same time, ensuring that labour protection standards are such that theinternational community, including the buyers of Sri Lanka’s goods and services, couldbe confident that Sri Lanka’s quest for competitiveness was not at the expense of fairand reasonable working conditions. Indeed, the adherence to acceptable labourstandards was seen as an integral part of Sri Lanka’s competitive advantage, and mustnot be compromised.

During 2002, the ILO proceeded to assist in the preparation of a Future Directionsdocument for the Ministry and Department of Labour, starting with a clear vision andmission, identifying the functional responsibilities both new and old required to enablethe Ministry’s purpose and objectives to be achieved, and creating an organisationalstructure that could meet the dual requirements of efficiency and effectiveness.

The preparation of a new direction for the country’s labour administration system wasguided by ILO Convention 150 (Labour Administration), and its related Recommendation.These instruments establish a framework for a modern and comprehensive labouradministration system, encompassing both the protectionist and developmentalfeatures, and provided important guidelines to support the restructuring and revitalisationprocess.

This current report follows a simple change cycle model that commences with anassessment of the current labour administration system (a process of ‘stock taking’ inwhich strengths and weaknesses, achievements and shortcomings are identified), andthen proceeds to the preparation of a new vision and operational strategies. Once thevision and strategies have general endorsement, it is necessary to decide on the prioritiesfor implementation, and then take steps to actually implement the agreed plans, andmonitor and report on the implementation process. The final step in the change cyclerequires an assessment of what was achieved as a result of executing the plannedchange, and an identification of the lessons learned in the process.


This report is divided into six chapters as follows:

Chapter 1, Functions structure and organisation of the Ministry of Labour in 2001 outlinesthe status of labour administration as it was before the changes commenced, identifiesa number of functional and operational gaps in the labour administration system, andgives an overview of the Ministry’s performance in relation to the standards set out inILO Convention 150 and its related Recommendation.

Chapter 2, The need for change outlines the key factors driving the change processincluding a range of political and economic factors, and the allocation of employmentand productivity responsibilities by the Prime Minister to the Ministry of Employment andLabour (replacing the Ministry of Labour.)

Chapter 3, A new direction provides an overview of the vision and operational strategiesrequired for the Ministry to undertake new initiatives, and also to improve its performancein existing functional responsibilities. It provides an outline of Balancing Growth andEquity in a Changing Society, and indicates the nature and significance of the HumanResource Audit and the resultant computerised data-base as important tools to be usedduring the change process.

Chapter 4, Priorities achievements and progress outlines the main changes introducedfrom 2003 onwards including the introduction of JOBSNET; the preparation of a conceptand strategy paper to guide the work of the national productivity secretariat; strategiesfor employment creation, human resource development, the gender bureau, and labourmarket information system; as well as improving the performance of the Department ofLabour concerning labour inspection, dispute resolution, workplace industrial relations,and the introduction of a labour extension service to address the needs of personsengaged in the informal economy. A distinction is made between the outputs producedunder the change process, and the need to ensure that such outputs are transformedinto positive outcomes for the benefit of workers, employers and the nation as awhole.

Chapter 5, The tools of change indicates the main processes of change includingdialogue through formal and informal discussions, the importance of detaileddocumentation to underpin desired changes, and the importance of an informationsystem that reaches all persons affected or likely to be affected by proposedchanges.

Chapter 6, Lessons learned and follow-up, provides an indication of some of the issuesto be addressed if the change process is to proceed smoothly and for plannedoutcomes to become actual outcomes. It also briefly outlines further action required onthe part of the labour administration if it is to better serve its clients and contribute moreto economic and social progress of the nation.


CHAPTER 1: FUNCTIONS, STRUCTURE AND ORGANISATION OF THEMINISTRY OF LABOUR IN 2001

In 2001, the Ministry of Labour focused almost exclusively on labour protection activities.The Ministry consisted of the Department of Labour under the direction of theCommissioner General of Labour, on the one hand, and the Ministry itself under theresponsibility of the Secretary, on the other. Although the Commissioner General ofLabour reports to the Secretary, the position carries a number of responsibilitiesexpressly stipulated by law. This has led to the Ministry and Department being seen asseparate entities, albeit within the same Ministry, under the responsibility of the sameMinister.

Ministry

In 2001, the Ministry under the direction and guidance of the Secretary, had functionalresponsibilities that clearly emphasised its role in policy formulation, liaison, and supportactivities, as distinct from the technical functions typical of a labour administration. Thetechnical responsibilities typically associated with labour administration were vested inthe Department of Labour. The Ministry’s functions were as follows:

� Various statutory responsibilities relating to the Sri Lanka Foreign EmploymentBureau, Employees’ Trust Fund, Workers’ Compensation, and other statutoryand corporate bodies.

� Public relations for the Ministry as a whole.

� Coordination of policy development and planning.

� Financial and human resource administration.

� Secretariat and administrative duties relating to the work of the National LabourAdvisory Committee.

� Liaison with the Department of Labour.

� Liaison with regional and international agencies, including relations with the ILO.

Department of Labour

The Department of Labour under the direction and guidance of the Commissioner-General of Labour had functional responsibilities in most areas of labour administrationinvolving the enforcement of a wide range of laws and regulations. Its functions includedthe following:

� Labour protection including all aspects of labour standards and labourinspection, including special investigations, relating to working conditions andthe working environment (including occupational safety and health), withspecific attention to child labour, young persons, and women.


� Industrial Relations including trade union affairs, dispute resolution, and liaisonwith the Labour Tribunals under the Ministry of Justice.

� Worker education activities.

� Statistics and Surveys, involving the collection, collation and distribution ofstatistical information collected from both primary sources and administrativerecords.

� Training and publications involving the design and implementation of trainingactivities for Department staff, and the preparation and distribution ofDepartmental publications.

� Social security activities including responsibility for the EPF, which currentlyoperates as a Division within the Department.

� Human Resource Placement Services involving the registration of jobvacancies and job seekers, and their matching leading to eventual placement inemployment.

� Administration and finance including personnel, and supervision of theDepartment’s library.

� Field services including labour protection, labour relations, workers education,and EPF responsibilities in various Zone, District and sub-District offices. Zoneoffices were in the early stage of development but the 31 District offices and 23Sub-District Offices were fully operational.

In 2001, the Ministry and Department’s activities focussed almost exclusively on labourprotection, labour relations and other activities for the benefit of workers and employersengaged in the formal economy, including the plantation agriculture sector. Although theproportion of Sri Lanka’s working population covered by the labour administration wasconsiderably larger than in many other developing countries, the large number ofworkers engaged in the nation’s informal economy in both urban and rural areas(perhaps as high as 60-70% of the working population) fell outside the scope of theMinistry/Department activities.

This emphasis on ‘protection’ as distinct from ‘development’ saw a strong reliance onlaw enforcement as distinct from other approaches to gaining compliance with lawsand regulations, an emphasis on dispute resolution rather than dispute prevention, anda concentration on formal economy enterprises as distinct from all forms of economicactivity in all sectors and locations.

Under a ‘culture of enforcement’ limited attention was given to the idea of ‘service toclients’, namely, workers and employers, with the result that legal issues tended todominate the operation of the labour administration system.


In addition to a number of ‘functional gaps’ in the Ministry/Department operations, itwas clear that a number of operational factors were affecting performance. Theseincluded

� limited skills of officers and support staff, including a lack of English languageskills for labour officers, a lack of computer skills for virtually all staff, and a lackof specific skills for selected technical staff in such areas as alternative disputeresolution, integrated inspection., labour extension, and workplace cooperation,

� insufficient training of staff at all levels,

� out-dated information systems,

� administrative processes dominated by excessive paper work and an almosttotal absence of computerised processes and systems,

� inefficient bureaucratic procedures,

� low staff motivation, partly related to salary levels and conditions of service,including a lack of opportunities for career advancement,

� insufficient decentralisation and delegation of both authority and responsibility tozone and district offices,

� poor logistic support, including a lack of office space, office equipment, andtransport,

� a lack of career and succession planning resulting in a high level of vacantmanagement positions in the Department.

Ministry and Department Capacity

In 2001, the Ministry and Department were ‘locked in’ to an approach to labouradministration that was traditional, narrow, bureaucratic, and inward looking, and generallylacked the capacity to make the transition to a modern, innovative, and service-orientedlabour administration, driven by the need to contribute to the social and economicdevelopment of the nation. Capacity was lacking in four main fields, namely: TechnicalCapacity, Management Capacity, Information Capatcity, Logistics Capacity.

Technical capacity

The Ministry and Department, with some 2600 positions, had no overall shortage ofstaff, but staff with the required technical qualifications and skills were in short supply.The Ministry and Department did not have officers with the ability to critically analyseimportant economic and social development issues, draft good quality policydocuments, and ensure that policy papers prepared in other ministries took full accountof labour and employment issues. Officers were sufficiently skilled to perform theirexisting functions, but were ill prepared to assume wider responsibilities.


Management Capacity

The Department, in particular, suffered from a major shortage of officers in managementpositions due, in the main, to the nature of Sri Lanka’s Civil Service system and itsvarious cadres of officials, coupled with a promotion system based largely on years ofservice. Many management level positions remained substantively unfilled and occupiedon a temporary basis by lower level officers on a ‘seat warming’ basis. This situation,together with the limited technical capacity of officials, resulted in a management systemthat elevated the importance of the status quo, offering little or no incentive for managersto innovate and extend their thinking to doing different things, as well as doing existingthings differently.

Information Capacity

The Ministry and Department had a limited information base to support the decisionmaking process, within a system that relied heavily on manual records rather thancomputerised systems. Information generated from manual systems was drawn largelyfrom administrative records relating to inspection, labour disputes, and employmentservices, but there was no comprehensive labour market information system in placethat brought together statistical and narrative information related to the needs ofusers.

Logistics Capacity

The Ministry and Department lacked the logistic support required for the operation of anefficient system, with a heavy reliance on paper work generated by handwriting or manualtypewriters. The few computers in headquarters were used largely for word processingand there was no plan in place for the widespread introduction of computers, or atransition to electronic forms of communication. The Department, in particular, sufferedfrom a lack of transport to support its field activities thereby requiring its officers to relyon inadequate public transport, or the use of private vehicles under an inadequate andunfair mileage allowance scheme.

Performance in relation to ILO Convention 150

Although Sri Lanka has not ratified ILO Convention 150 on Labour Administration, theConvention, together with its accompanying Recommendation (Recommendation158), provides an appropriate benchmark to assess the nature and scope of theMinistry/Department’s labour administration in 2001. The Convention defines labouradministration as ‘public administration activities in the field of national labour policy’and identifies some four key ‘fields’ of focus for a nation’s labour administration system.These are as follows:


� employment and human resource development, including employment servicesand aspects of manpower planning;

� labour protection encompassing labour inspection, work safety and health, andsocial security;

� labour relations, including dispute prevention and dispute resolution;

� information and research, encompassing information derived from administrativerecords as well as from surveys and applied research activities.

In addition to these technical fields, the Convention refers to the importance ofregular dialogue between government, workers’ representatives, and employers’representatives on matters relating to national labour policies.

In 2001, how did Sri Lanka’s labour administration measure up againstConvention 150?

Employment

The Department of Labour operated a basic human resource placement service thatwas successful in registering job seekers, and reasonably successful in registering jobvacancies. It had limited success, however, in actual placement because of themismatch between the skills and expectations of job seekers, and the requirements ofemployers.

In 2001, the unemployment issue was dominated by discussions on the supply side ofthe labour market, particularly concerning improving the quality of the nation’s humanresources. Insufficient attention was devoted to the demand side of the market, includinghow jobs would be created, what types of jobs, and where. In short, the labouradministration and, indeed, the work of other Ministries and agencies, focused onemployment promotion rather than employment creation, and no attention was given tohuman resource forecasting and related issues.

Labour Protection

In 2001, Sri Lanka had a reasonable labour inspection system, and separate inspectionsystems relating to work safety and health, and social security. These systems weredriven by the objective of enforcement of the law and focused exclusively on workersand enterprises engaged in the formal economy in which a contract of employmentwas required. Contrary to the provisions of Convention 150, there was no attempt toextend labour protection services to workers engaged under non-traditional arrangementsin the informal economy. This was based on the view that there are no laws regulatingthe employment of such people, and thus they fall outside the scope of labouradministration.


Industrial Relations

In 2001, Sri Lanka focused on the settlement of labour disputes in a system dominatedby legal procedures and lawyers. The three-tier system was subject to considerabledelays in reaching settlement and relied on outdated procedures and inadequatelogistic and resource support. Few resources were devoted to dispute preventionand assisting employers and workers to resolve their own problems through dialogue,negotiation, and the inclusion of dispute settlement procedures in collectiveagreements.

Information and Research

Information generated by the labour administration system was largely derived fromadministrative records resulting in information that was not always relevant for decisionmaking, that was not always accurate, and was often outdated before it reachedpotential users. Research on labour matters was limited and survey work was notfocused on priority issues. There was no comprehensive labour market informationsystem in place that brought together the users and producers of information, and thelimited system that was in use was dominated by information producers rather thanresponding to the needs of users.

Social Dialogue

A National Labour Advisory Committee, chaired by the Minister of Labour, was in placebut in 2001 did not meet regularly and was not regarded by employers and workers asa vigorous forum for exchanging information and ideas with a view to influencing theshape of labour policies. There were no sector, provincial or district level tripartiteforums in place.

Overall

Overall, Sri Lanka’s labour administration system as compared with the systemenvisaged in Convention 150 was limited in depth and breadth, lacked a wider vision,and appeared to serve the system itself rather than the economic and socialdevelopment needs of the nation.

Increasingly, however, the need for change was being voiced both from within andexternal to the Ministry/Department. The need to revitalize and restructure the Ministryand Department was recognized and some new initiatives from within the Departmentwere in progress. A consolidated Labour Code was in preparation, the Safety and HealthDivision was preparing for the commencement of the National Institute of OccupationalSafety and Health, and the Workers’ Education Division was preparing for the creationof a National Institute for Labour Studies.


These initiatives provided every indication of a willingness on the part of the Departmentto consider new and broader approaches to its work, but still within its relatively narrowapproach to labour administration. Clearly, however, the Department was willing toembrace change initiatives but without moving too far from its traditional functions.

CHAPTER 2: THE NEED FOR CHANGE

Change is a process designed to ensure that things will be different in future, whetherwithin days, months, or years. Change can be both positive and negative and thus it isnecessary to adopt a managed approach to the change process to ensure that thepositive aspects of change are maximised and the negative impacts minimised.

A managed approach to change requires an understanding of the current situation,followed by a realisation that existing deficiencies and weaknesses, assessed in relationto an acceptable or ‘good’ standard of performance, need to be addressed. In somecircumstances the need for change comes from self-realisation that performance isunacceptable and things need to change. In the case of the Ministry of Labour, selfrealisation, or the drive for change from within, had resulted in various changes overtime, but these were more in the nature of doing existing things differently rather thanseeking a new direction leading to major rather than marginal change.

This is expected in a traditional and conservative labour administration that sees itspurpose attached to the past. For major change to occur in such an environmentusually requires a strong external influence. Such was the case in Sri Lanka with anumber of factors external to the Ministry itself identifying and driving the need for change.

Role of Government

The strategy paper titled Regaining Sri Lanka stresses the need for public sectorreform to improve its overall performance, streamline its procedures, and make it moreservice-oriented and proactive in outlook. The public service is significantly over-staffed,there are an excessive number of government institutions, an excessive reliance onadministrative procedures, and weak institutional control mechanisms. The publicservice is also seen to be highly politicised.

Public sector institutions are perceived as resistant to change, operating without clearvisions and plans, and lacking modern management approaches as evident, forexample, by the lack of information technology. Modern concepts of human resourcemanagement are not applied in the public service, resulting in low levels of motivation,low productivity, and limited attention to staff training and development.

In 2002, the Government stressed its commitment to transform the public service toachieve high standards of good governance. Some of the key initiatives proposed wereas follows.


� The revival of the independent Public Service Commission to ensure thatadmission to and promotion within the public service is based purely on criteriaof need and professional merit;

� Pilot-testing of a new recruitment scheme for designated special seniormanagement and technical posts within Government, based on an opencompetition and offering training opportunities to new entrants;

� Introducing incentive systems based on job-related work performance withtransparent screening criteria and promotion process;

� Consolidating Government departments to reduce duplication at all levels andto ensure devolution of functions to local authorities;

� Introducing modern management practices through, among others, regularconsultations with stakeholders, business plan development, public scrutiny ofprogress in achieving reform goals.

In addition to the above pronouncements on the modernization of its central functions,the Government made it clear that a vibrant private sector was a vital component ofnational development. The importance of the private sector was recognised by thepreparation of three key policy documents, namely, the National Employment Policy,National Productivity Policy: Private Sector Component, and National Productivity Policy:Public Sector Component.

The Prime Minister assigned the subject of productivity to the Ministry of Employmentand Labour and it established a special Advisory Committee with tripartite representationto undertake the task of formulating the National Productivity Policy documents. TheNational Employment Policy, drafted earlier in 2002, provided an important source ofinput to the work on productivity issues.

The Ministry of Employment and Labour expressed an intention to be in the forefront ofthe modernisation of the public service and this, together with the Ministry’s newresponsibilities in employment and productivity, led to a request from the Ministry to theILO for technical assistance to restructure and revitalise the Ministry to enable it toimplement its new mandate and, at the same time, become a performance orientedMinistry that the other Ministries would be able to emulate. The ILO’s immediateresponse to this request was to provide technical assistance to help introduce theJOBSNET system, and for the preparation of a document to give the Ministry the newdirection and transformation it sought.

Thus, the driving force behind the need to change was a recognition of the poorperformance of Sri Lanka’s economy, combined with the political will to address theproblem.


The World Bank Group was also a strong advocate for reform of the public service. Inits Country Assistance Strategy 2003-2006, three core themes of peace, growth andequity were stressed, to build on the poverty reduction strategy contained in RegainingSri Lanka. The World Bank Strategy further supported the need for Sri Lanka’sinstitutions to adjust and adapt to changing circumstances and financial resources weremade available to government to facilitate public service reform.

In 2003, the Bank commenced a programme focussed on the reform of public sectoremployment systems and structures, and the related structure of public expenditure,including the issues of decentralization of decision-making and revenue sharing.The restructuring program includes retraining for redeployed staff and general capacitybuilding activities. The need for staff development activities for public servants is alsostressed in Initiative VI of the National Employment Policy, which indicates the needfor officers to be “…..reoriented to enhance their mobility in addition to servicing andsatisfying the needs of the private sector and reducing the bureaucracy in publicservice.”

The change in the nation’s labour administration system was initiated by government,as part of its wider economic reform program. The Government recognised the needfor a strong and dynamic private sector and for its public institutions to ‘catch up’ andserve the real needs of private sector development. At the same time, it was necessaryto ensure that economic growth did not erode the core values of social justice anddecency in the world of work as these factors are an integral component of securing acompetitive advantage.

International financial institutions

Although the Government was the key factor in initiating and highlighting the need forchange, other factors were also important. The international financial institutions,particularly World Bank and the Asian Development Bank, and the donor community,were keen to support the country’s economic transformation and improved governance.Although this interest and support was not focussed specifically on the nation’s labouradministration system, the new emphasis on employment and related issueshighlighted the importance of the Ministry of Employment and Labour as a key institutionin the transformation.

International Labour Organization

The International Labour Organisation was of particular importance in supporting andfacilitating the development of the ‘new’ Ministry and a reorientation of the labouradministration system. The strengthening and development of Ministries responsiblefor employment and labour matters is an important part of the ILO’s mandate, and the


ILO Office in Colombo responded positively and quickly to the Ministry’s request fortechnical assistance. The ILO mobilised its own technical and financial resources andwas instrumental in enlisting the support of bi-lateral donors and ADB to fund particularcomponents of labour administration reform.

Barriers to change

In spite of high-level Government support and donor willingness to assist in thetransformation of the nation’s labour administration, obstacles to change wereinevitable. These included the following.

Technical barriers

Although the need for change was recognised and supported, a wide range of technicalissues had to be addressed to transform intentions into action. This required access totechnical expertise not available in the Ministry of Employment and Labour andnot necessarily available in Sri Lanka, to prepare detailed proposals, monitorimplementation, train staff, and generally assist in the overall management of the changeprocess.

Resource barriers

Apart from technical expertise, financial resources were required to support new projectsand activities. This required the preparation of proposals, submission to governmentfinancing and donor agencies, discussions and negotiations with donors, and thepreparation of detailed budgets and implementation arrangements. Resources wererequired to support this preparation and planning phase but even greater resourcesupport is required for successful implementation to meet operational costs, purchaseequipment, and employ staff.

Psychological or people barriers

The best of intentions and plans for improvement can be frustrated by people who,for various reasons, oppose the proposed changes. These reasons include lack ofknowledge and understanding of the change, uncertainty as to what the change reallymeans, fear for loss of employment or a reduction in status or benefits, the possibilityof reduced power and influence under the new arrangements, and sheer laziness.In many respects the psychological barrier is the most formidable of all obstacles,and requires different response strategies for different individuals and groups, includingimproved communication to clarify the intention and nature of the proposed change,negotiation with those who feel their power is threatened, education for the ignorant,and more generous time frames for those who are wavering.


Time barriers

Once change has been planned and commitments made, action is required within anagreed time frame. ‘Lack of time’ is often cited as a reason for failing to implementchange, or for delays in achieving targets and objectives. Time is the most fixed of allresources and although it is popular to speak of ‘time management’, this really amountsto self-management to ensure that the available time is utilised to the best advantage.This can be particularly difficult in circumstances where it is necessary to implementnew things but, at the same time, continue to do the old.

The Ministry of Employment and Labour had to address these obstacles to ensure thatthe actual outcomes of the change process matched those that were planned. Theshortcomings in actual outcomes involved a combination of the above barriers, with thepeople or psychological barrier often proving to be the most difficult to manage.

CHAPTER 3: A NEW DIRECTION

Once the general need for change had been articulated and the need for a new approachto labour administration endorsed, it was necessary to identify in detail the performancegaps in the existing system, as outlined in Chapter 1. Knowing ‘where we are at’ andcomparing that with ‘where we want to be’ enabled various gaps to be identified. Someof these represented things that had not been done before, others things that werecurrently being done but needed revision, extension or adjustment in some way. Thisprocess led to the preparation of a ‘new direction’ for labour administration in Sri Lankaunder the title Balancing growth and equity in a changing society.

This Future Directions Document provided the Ministry with a new vision, a new missionand new functions, as well as new approaches to existing functions and operations. Itwas considered necessary, however, to give particular attention to a ‘new direction’ forthe officers and staff of the Ministry. This was done by conducting a Human ResourceAudit that went considerably further than taking stock of the existing staffing situation,by making a series of key recommendations for staff development and humanresource management if the Ministry was to successfully implement its new missionand vision.

Accordingly, the new direction as outlined below is based on two key documents, namely,Future Directions for the Ministry of Employment and Labour: Balancing Growth andEquity in a Changing Society (2002) and Human Resource Audit (2003).

Balancing Growth and Equity in Changing Society

The following paragraphs, extracted from the Future Directions document, outline anew vision, mission and functional responsibilities for the Ministry.


Introduction

Sri Lanka must improve its overall economic performance by increasing employmentopportunities, raising productivity, and increasing international competitiveness. At thesame time, it must ensure that economic growth does not erode the core values ofsocial justice and decency in the world of work. Economic growth and social equitymust be in balance and proceed on the same path rather than in separation from eachother.

The transformation of the economy must start with the formulation of innovativeeconomic and social policies and supporting laws and regulations, as necessary. Butnew policies and laws are not enough. The country’s institutions must adapt and changeif they are to lead and support the transformation process. Crucial in this regard is theMinistry of Employment and Labour. Its renovation, revitalisation and restructuring arevital to the country’s economic and social progress.

The Ministry must pursue a new direction with emphasis on employment creation,productivity enhancement and human resource development and, at the same time,ensure that labour protection standards are such that the international community,including the buyers of Sri Lanka’s goods and services, can be confident that Sri Lanka’squest for competitiveness has not been at the expense of fair and reasonable workingconditions. Indeed, the adherence to acceptable labour standards is an integral part ofSri Lanka’s competitive advantage, and must not be comprised.

The Ministry of Employment and Labour has both a development and protectionist rolein Sri Lanka’s drive for economic and social progress. Its developmental role focuseson employment, human resource development, and productivity enhancement, with aview to increasing the nation’s international competitiveness and generating benefits forall Sri Lankans.

Its protectionist role focuses on securing compliance with laws and regulations andstrengthening the capacity of employers and workers to assume greater responsibilityfor the nature and outcomes of their interactions, particularly at enterprise level.

The Ministry’s policies and operations are guided by social dialogue, partnerships andlinkages with the private sector, gender equality, and service extension, all of whichunderpin its reputation as an institution driven by fairness, efficiency, effectiveness,transparency and accountability and, above all, by the provision of quality services forthe benefit of all engaged in the world of work.

Vision

The Ministry’s vision stresses the balance between growth and equity and is expressedin the following terms:


Achieving higher living standards and better quality of life for all Sri Lankansthrough striking a suitable balance between considerations of economic growthand social equity.

Mission

The Ministry of Employment and Labour is dedicated to the promotionof economic and social development through the formulation andimplementation of relevant and innovative employment, human resourcedevelopment, productivity, and labour protection policies, and the provision ofquality services for the benefit of all engaged in the world of work whetheremployer, employee, or self-employed, in both formal and non-formal sectors,in all parts of the country

Functional Responsibilities

Thirteen areas are identified in which development is required to enable the Ministry toachieve its stated objectives. Some of these are new, involving major changes, othersrepresent a modification of existing functions focussing more on doing existing thingsdifferently.

Employment and Human Resource Development including

� Employment growth through shaping and encouraging macro-economicpolicies and programs that support job creation.

� Coordinating the implementation of the National Employment Policy for Sri Lanka.

� Employment growth through self-employment.

� Human resource planning including manpower demand and supply forecastsfor particular sectors, industries and occupations.

� Active human resource development policies and programs to minimizesupply-demand imbalances.

� Skill development in relation to specific labour market shortages.

Employment Promotion including

� Cooperating in the operation of the JOBSNET system.

� Providing registration, matching and referral services for job seekers andenterprises through human resource placement centers to complement theservices provided through JOBSNET.

� Providing information and advice on self-employment opportunities and theavailability of assistance.


� Providing career guidance and counselling services to complement thoseprovided through the JOBSNET system.

� Administering special programs to promote employment for particular groupsincluding graduates, retrenched workers, workers returning from overseas,disabled persons, youth, women and rural workers.

� Supervising the registration and monitoring the operations of privateemployment agencies operating in domestic, as distinct from overseas, labourmarkets.

Productivity Improvement in both Private and Public Sectors including

� Supporting the National Productivity Secretariat.

� Coordinating the implementation of Productivity for a Prosperous Nation.

� Preparing Productivity Impact Assessments of government policies anddecisions, and their implementation (e.g. Board of Investment decisions)

� Coordinating productivity initiatives in all sectors.

� Advising on the collection of labour market and employment data on productivityrelated matters.

� Encouraging a ‘culture of productivity’ throughout the nation.

� Encouraging productivity improvement throughout the Ministry itself to serve asa model for other ministries and government agencies to emulate.

Foreign Employment Services including

� Cooperating with and supporting the activities of the Sri Lanka ForeignEmployment Board.

� Promoting the demand for Sri Lankan workers in overseas markets.

� Encouraging the supply of high quality, skilled, well prepared workers to meetoverseas demand.

� Regulating the activities of foreign employment agencies.

� Cooperating with JOBSNET centers in which Foreign Employment Boardofficers will be located.

� Establishing minimum standards for contracts of employment for overseasworkers.

Labour Protection Services including

� Ensuring compliance with labour laws and regulations concerning workingconditions and the working environment.


� Operating a system of accredited agents and authorised person to undertakeparticular aspects of inspection work.

� Operating an integrated labour inspection system.

� Encouraging compliance through self-reporting on the part of selectedenterprises.

� Facilitating Wages Boards and encouraging new approaches to thedetermination and adjustment of wages and working conditions.

� Extending labour protection services to workers and enterprises not coveredby typical employer-employee arrangements.

Labour Relations Services including

� Facilitating the registration and reporting arrangements for trade unions andemployers’ organisations.

� Arranging for the conciliation of labour disputes.

� Arranging for the arbitration of labour disputes.

� Cooperating with Labour Tribunals in the process of labour dispute adjudication.

� Encouraging the development of labor-management cooperation and socialdialogue in workplaces.

� Encouraging collective bargaining processes and the formulation of collectivebargaining agreements.

Social Security Services including

� Ensuring the effective operation of existing social security arrangements throughthe collection of EPF contributions.

� Encouraging the extension of social security and social insurance arrangementsto all Sri Lankans.

� Advising on new initiatives in social security and social insurance, particularlyconcerning unemployment insurance and health insurance.

� Promoting public awareness on all aspects of social security and socialinsurance.

Training, Research and Information Services including

� Operating an effective system for the collection, collation and distribution ofstatistical information derived from the Ministry’s administrative records.

� Conducting labour force, enterprise and other surveys as appropriate, as part ofthe national labour market information system.


� Preparing and distributing labour market information bulletins on a regularbasis.

� Designing, conducting, and evaluating training activities for the benefit ofMinistry officials.

� Designing, conducting, and evaluating training activities for the benefit ofemployers, managers, workers, and trade union officials.

� Preparing training materials in support of training activities.

� Arranging for the accreditation of trainers in all employment and labour relatedfields.

� Conducting applied research on employment and labour matters in supportof policy formulation processes and to assist planners and managers indecision-making.

� Facilitating the conduct of research by institutions and agencies outside theMinistry.

� Operating a library and resource centre for Ministry officials and accreditedusers.

� Publishing an annual report on all aspects of the Ministry’s operations.

Gender Equality Issues including

� Promoting awareness of gender and equality issues throughout the Ministry,other government ministries and agencies, employers and workers organisations,and the community at large.

� Ensuring that new policy initiatives and their related laws and regulationsconform to national and international standards and practice concerning genderequality.

� Ensuring that government programs and projects take proper account ofgender equality issues.

The Extension of Labour and Employment Services including

� Ensuring that employment and labour services are available to all who seekthem throughout the country.

� Facilitating the extension of employment and labour advisory services to groupsnot covered by formal employment arrangements, including self-employedpersons, members of cooperatives, domestic workers, farmers, and othersworking under non-formal sector arrangements.

� Cooperating with government and non-government agencies to provideinformation and advice on labour protection matters to non-formal sectoroperators.


Consultation, Coordination and Social Dialogue including

� Facilitating the operation of the National Labour Advisory Committee by theprovision of secretariat services.

� Encouraging the establishment of a NLAC sub-committee on poverty reduction,and other issues as appropriate.

� Facilitating the exchange of information between the Ministry and otherinstitutions and agencies concerned with employment and labour matters.

� Encouraging social dialogue at provincial, sector and industry levels.

International and Regional Liaison including

� Facilitating the attendance of Sri Lanka’s representatives at international andregional forums on employment and labour related matters.

� Arranging for the selection of participants on international and regional trainingcourses on employment and labour matters.

� Advising on the adoption of international standards concerning labour andemployment matters.

� Arranging for the reporting on the implementation of international standardsunder existing conventions and agreements.

� Responding to requests for information and assistance from regional andinternational bodies concerned with employment and labour matters.

Public Relations including

� Maintaining regular relations with the national and international media on theMinistry’s successes and achievements.

� Preparing press releases on a regular basis on all aspects of the Ministry’swork.

� Maintaining regular contact with all divisions in the Ministry, including its officesin provinces and districts.

The Future Directions document outlined the structural and organisationalarrangements required for the effective implementation of the stated functionalresponsibilities, including arrangements for vertical and horizontal communication andcoordination.

Once the Future Directions document received general endorsement, an operationalstrategy was prepared for each of the Divisions and Units within the Ministry/Department structure to guide the implementation of its responsibilities. The strategyfor each Division/Unit indicated are stated below:


� the mission for the Division;

� the objectives to be pursued by the various units within each division;

� the activities to be implemented in order to achieve the stated objectives;

� the specific action required to ensure that planned activities produce therequired outcomes;

� the resource requirements including staff, office space, and office equipment;

� job descriptions, in those cases where new positions were a key component ofthe strategy.

The Future Directions document also identified and examined a number of key issuesexpected to impact on the Ministry/Department’s future operations, as follows:

� Staff effectiveness and individual productivity needs to be improved. A HumanResource Audit should be undertaken to take stock of both the quality andquantity of existing staff, identify gaps that need to be filled, identify staff who canbe retrained, and indicate staff who might be replaced.

� New job descriptions will need to be prepared for all staff at all levels. Theseneed to extend beyond generic statements to embrace the details of eachindividual job. Such descriptions will be the starting point for the Ministry’straining interventions, and its staff performance and appraisal system.

� There is a need for the computerisation of various routine processes,correspondence, and reporting systems. This may take some time but isessential if the Ministry is to boast a modern and effective labour administration.This is not merely a matter of acquiring the necessary hardware, andsupporting software programme. It will also require a major training effort toensure that all technical and support staff are computer literate.

� Staff training should be addressed in an on-going and systematic manner,related to the real needs of target groups. Needs-related staff training beginswith the preparation of detailed job descriptions, and then assessing staffcapacities against the specific job tasks as stated in the job description. Evenwithout such detailed descriptions it is possible, however, to identify a number ofkey areas where the need for training is unchallenged. It is very clear thatoperational performance would be improved by the following training activities.

� Computer skills for all technical and support staff.

� Language training, particularly English, for key officials including inspectors,industrial relations officers, and human resource placement officers. Thismight be done partly on a self-learning approach, making use of informationtechnology.


� Management training for all staff, irrespective of title, who are responsible forthe work of others as well as for their own work. Priority areas includeperformance management, work planning, leadership and motivation,communication, reporting, and project proposal preparation.

� Particular target groups will require training and upgrading in particulartechnical areas including officers responsible for social dialogue andworkplace cooperation, and inspectors under the integrated scheme. Thistraining should await the preparation of detailed job descriptions.

� Career planning is essential to the longer-term development of the Ministry if itis to avoid disruptions to service and performance caused by retirement,resignations and transfers. This requires a commitment to staff planning andstaff training, and a clear indication of what is required to enable an officer toproceed through the system in such a way that meets his/her careeraspirations and ensures that the Ministry always has the right person, in theright job, at the right time

� The mobility of Ministry/Department staff has two main dimensions. Firstly, staffmust be willing to move to locations where they are most needed in relation tothe Ministry’s mandate and services. This may involve a consideration of theincentives required to encourage staff mobility to and within the field, and it alsorequires that job descriptions and position profiles include mobility as a job requirement Secondly, employment and labour officials require transport toenable them to perform their jobs on a day-to-day basis. Access to vehicles isnot a luxury for labour administrators, it is a necessity

� Innovation is an essential component of a labour administration seeking toimprove its overall performance. The proposed integrated inspection system isan innovation and offers good prospects for better service to clients. Theproposed labour extension service is an innovation that offers the prospect ofservice to a client group previously ignored. The emphasis on social dialogueand workplace cooperation is another innovation that offers prospects forsignificant improvements in enterprises. These innovations should beencouraged and monitored with a view to making improvements and changes,if necessary, as they are implemented.

� Dedicated Responsibilities within the labour administration contributes toimproved performance. Labour administration systems sometimes opt for anapproach to their work that combines incompatible functions. In some countries,for example, labour inspection and labour relations functions are sometimescombined and placed under the responsibility of one officer. This may result insome staff efficiencies but is of questionable effectiveness. Labour inspectionand labour relations are different functions. Although there may be some marginal


overlaps, their separation at all levels in the system is strongly supported. Labourinspection is about legal compliance and enforcement, labour relations is aboutpositive interactions between worker and employers. Their separation will resultin improved performance in both fields.

� Information, as with staff, finance, equipment, and materials, is a resource thathas to be managed if it is to produce results. Information is a resource fordecision-making and the Ministry must take steps to ensure that its informationsystem generates the information to assist its own decisionmaking processes,as well as those of its clients. Information must be relevant, recent and reliableif it is to serve its purpose, and must be produced in a form that users canreadily understand. Designing and implementing a quality information system isa major challenge for the Ministry, but one that must be addressed.Computerisation will assist, but the design of the system is the key to success— what information do users need, in what form, and how can we deliver suchinformation accurately and quickly?

� The Ministry’s overall performance, to a large extent, will depend on the qualityof its overall management systems. Systems and procedures must be in placenot with the objective of exercising control, but with the purpose of attainingobjectives and improving performance. Setting objectives and targets,maintaining standards, preparing work plans, monitoring progress, andevaluating outcomes are the responsibility of every manager. This should notbe left to chance. Systems must be in place to ensure that resources are usedto achieve objectives and targets, and that managers do not abdicate from theirresponsibilities. This requires a disciplined approach to time management inparticular but, above all, a management system that both managers and staffrespect and work towards making it successful.

� Position Titles Although not an issue affecting the overall performance of theMinistry, the revitalization and restructuring exercise appeals as an appropriatetime to reconsider the position titles used in the Department of Labour. Witha Commissioner-General, an Additional Commissioners General, variousCommissioners of Labour, Deputy Commissioners of Labour, and AssistantCommissioners of Labour, the impression is given that every position aspires tohave the term commissioner adjoined in some way. ‘Commissioner’ is notnormally associated with a modern labour administration system, andconsideration might be given to different position titles, particularly given theintroduction of new divisions and sections concerning employment, productivityand related issues.

The final chapter of the Future Directions document indicates a number of technicalissues and challenges the Ministry/Department needs to address to improve its


performance and provides brief project outlines in each of these areas with a view toenabling the Ministry to mobilise support for technical assistance projects. These are:

� Integrated labour inspection.

� Workplace cooperation and social dialogue.

� Labour law reform.

� Labour extension services.

� Wage determination reform.

Human Resource Audit

The Human Resource Audit was conducted in mid-2003 and was designed to:

� assess the current human resource capacity of the Ministry in terms of quantityand quality of staff;

� provide information to assist in the preparation of generic job descriptions andstaff requirements in relation to the Ministry’s future purpose, objectives andfunctions;

� identify the training needs of the existing staff to perform the future functions ofthe Ministry to the required standard.

The process

The collection of information involved the completion of a questionnaire by all staff,consultations with a sample of officers, and interviews with key informants.

The questionnaire used for data collection was drafted in close consultation with a‘Human Resource Audit’ Task Force in the Ministry. The Task Force was responsible fortranslating the questionnaire to Sinhala and Tamil, and for mailing the questionnaire toevery employee. The questionnaire was accompanied by an official explanatory noteexplaining the purpose of the audit and its importance to the future development of theMinistry.

Out of a total of 2200 questionnaires, 2147 were completed and returned by mid-July,2003. More than 1400 persons indicated on the form that they would like to speakdirectly to the ILO-team conducting the survey. These staff members were contactedby a multilingual research team via telephone to find out whether they wanted tocomplement information provided in the questionnaire. In addition, every questionnairethat showed data inconsistencies was followed up by telephone interview. The mainresult of the telephone interviews is encouraging for the modernisation process of theMinistry, as the overwhelming majority stated that they wanted to speak to the researchteam simply to indicate their general willingness to provide any further assistance.


It was subsequently decided to hold consultations with a sample of labour officers, fieldofficers, and other technical officers across the country. These consultations took placemid-August, 2003. Additionally, the Task Force suggested a number of key informants.Consultations with these senior officials from different technical areas and differentregions of the country were meant to complement research into training needs. Theindividual consultations with key informants took place in the first half of August. Anational conference of the Ministry on 15 August provided the framework for a focusgroup discussion with senior officers.

Parallel to the data collection, a software company developed a managementinformation system that reflects the questionnaire results and can be used for humanresource planning purposes of the Ministry. The software was presented to the Ministryand installed in its computers. Ministry staff were trained in data entry to ensure easyfuture updates of the database.

While the Task Force made sure that questionnaires were translated and posted intime, the replies from remote offices took longer than expected. All subsequent workingsteps were accordingly delayed. Also, data entry took longer than expected due to theamount of time needed to translate the open-ended questions in the questionnaireregarding training and working experience.

Information collected

By the end of the exercise the Ministry had made available the following information.

(i) A summary of its existing total human resource stock disaggregated by age, sex,position (senior management, middle management, technical/professional,clerical, support staff), highest education attained, location, and employment status(fixed term contract, without time limit).

(ii) A human resource profile for each employee based on existing records andinterviews, under the following headings.

� General information (including name, gender, age, current position, place ofresidence, place of origin (district/province), employment status, years ofservice.

� Qualifications including education levels (certificate, diploma, degrees, higherdegrees, including year of completion and main fields of study) and trainingcompleted (name of training course, year, duration, and skills acquired.)

� Employment history including current position, and all previous positions withreference to name of employer, dates and key tasks performed in each position.

� Skills profile including a self-rating (10-point rating scale) by each employee andby his/her immediate superior with reference to


– Leadership

– Verbal communication

– Written communication

– Interpersonal relations

– Problem solving

– Computer

– Languages (indicate specific languages)

– Other (e.g. driving licenses)

� Appraisal assessment by reference to the latest assessment by the Ministry.

� Future plans including reference to career aspirations, plans for higher study,willingness to move to a different location, willingness to undertake furthertraining.

Conclusions

The broad conclusions drawn from the exercise indicated the following:

� The total number of staff was more than sufficient to meet the Ministry’srequirements but the skill profile did not meet the needs of a modern labouradministration.

� The existing staff lack the knowledge and skills to undertake proposed newfunctional responsibilities in such areas as employment creation, humanresource planning, productivity, labour market information, labour extensionservices, and social dialogue and workplace cooperation.

� The ratio of support staff to technical staff is very high.

� There is a need for training at all levels in computer skills and English languageskills in particular.

� Officers are comfortable with their enforcement role, and generally lack aservice orientation in their work.

� The lack of promotion opportunities is a source of frustration for some staff.

� Few women occupy management positions.

� Officers in the Ministry prefer to be stationed close to their home. Once theyhave achieved this, they try to stay at that duty station for as long as possiblewith the result that there is little regional rotation among officers within thecountry.


� Management is aware of and familiar with modern management tools such asperformance appraisals. At present, however, annual appraisals are largely apaper exercise resulting in automatic salary increments for virtually all staff.

� Staff at all levels lack a ‘performance orientation’ in their work.

Recommendations

The Human Resource Audit Report contains a number of recommendations directlyrelated to human resources that might be considered to assist in the Ministry’s futuredevelopment.

� Communication, both horizontal and vertical, needs to be improved;

� The organisational culture of the Ministry needs to be shaped to embrace thedevelopment role outlined in the Future Directions Document;

� Creativity and innovative thinking needs to be encouraged;

� High performers need to be identified and encouraged through challengingassignments and accelerated promotion systems;

� Self-learning needs to be encouraged;

� Work plans of labour officers and field officers need to be adapted to provide fornew functions;

� The computerisation of the Ministry and computer skill training for staff is a highpriority;

� Once computerised, the Ministry should consider establishing an Intranet as astate-of-the-art tool to achieve improved communications;

� Once an Intranet is operational the Ministry might consider establishing virtualworking groups comprised of Ministry officers; (Island-wide), and resourcepersons from the private sector, employers’ organisations, trade unions,universities and research organisations. (The idea is to use non-hierarchicalteams of professionals from across the country to solve particular technicalproblems. These teams will work together temporarily until their objective isachieved. Members will change according to technical qualification needed.There can also be several working groups at the same time as well.);

� Set clear training priorities for specific target groups including senior managers,middle managers, professionals, clerical staff, and support staff, in both theshort and medium term;

� Move towards the development of a comprehensive staff training program toensure that training is provided on an on-going and systematic basis to replace


the existing ad hoc and one-off approach. This applies to training on all levelswith the intention to combine self-study including virtual learning over the Internet,in-house training, on-the-job assistance using in-house trainers, and externalcourses;

� Start an internal productivity improvement program directed to both professionaland clerical staff;

� Design and implement a gender equality program;

� Design and implement a career progression plan to ensure second and thirdline managers are properly prepared for higher-level positions.

CHAPTER 4 : PRIORITIES ACHIEVEMENTS AND PROGRESS

The Future Directions document and the Human Resource Audit identified many areaswhere improvements were required. The suggestions in these documents, as well asdiscussions with senior Ministry/Department officials, resulted in attention being focusedon the ‘development aspects’ of labour administration, particularly employmentpromotion, employment creation, productivity improvement, and labour marketinformation. The ‘protectionist aspects’ were not ignored, but focused on doing existingthings differently rather than taking on a large number of new responsibilities.

Priorities

The main priorities identified for action were as follows.

Employment services, with particular emphasis on the JOBSNET system, involving thepreparation of project proposals, establishing the public-private sector partnership,negotiations with donors. The acquisition of a suitable site for each centre, and theactual implementation and management of the JOBSNET project.

Productivity enhancement, involving the preparation of a concept and strategy paper forthe strengthening and development of the National Productivity Secretariat, including aseries of modules aimed to secure financial support for the short to medium termdevelopment of the secretariat.

Employment creation and human resource planning, involving the preparation ofoperational strategies for a new division within the Ministry, job descriptions for newpositions, terms of reference for national consultants, and project proposals forsubmission to both national and international agencies for financial support.

Gender issues, involving the preparation of an operational strategy for the GenderBureau, job descriptions for new staff positions, training on gender issues and thepreparation of a project outline directed to assisting in the establishment of the Bureau.


Labour market information, involving the preparation of an operation strategy for anew labour market information unit, job descriptions, and project proposals for thedevelopment of a labour market information system aimed to attract donor support.

Industrial relations, with particular emphasis on social dialogue and collectivebargaining, involving the preparation of an operational strategy for the new unit withinthe Department of Labour, training for Department staff, and the preparation of surveyinstruments to assess the current status of social dialogue in a sample of enterprises.

Dispute resolution focused on ensuring that labour officers, arbitrators and labourtribunal presidents were familiar with the 4-3-2 system for resolving disputes. Thesystem sets specific time limits for each stage in the resolution process with a view toeliminating the excessive delays that had become part of the system.

Integrated labour inspection involving the preparation of terms of reference for anational consultant to assess and report on the existing system of labour inspection,the preparation of the report, the design of a new inspection form, training of inspectors,the design of a survey instrument for the combing census to assist in developing amaster register of establishments liable to inspection, and the preparation of a projectproposal for the strengthening and development of the integrated system.

Monitoring and compliance in relation to the requirements of international buyers,involving training of labour officers on buyer requirements to determine how these mightbe better satisfied by the Department of Labour and its labour inspectors, and thepreparation of an operational strategy for a new unit in the Department to coordinateliaison with buyers and third party auditors.

Labour extension services involving the training of labour officers on the decent workdeficits prevailing in Sri Lanka’s informal economy, identifying what the Department ofLabour could do to extend a range of labour administration services to personsengaged in informal economy activities, the preparation of an operational strategy for a‘labour extension unit’ to be established in the Department, and the preparation of aproject proposal to build the capacity of the Department to extend its services to theinformal economy.

Training and information involving the training of officers and support staff in computeroperations and English language, the preparation of training materials, the preparationof an operational strategy for the training and publications division in the Department ofLabour, and the preparation of a project outline for strengthening and improving theTraining and Publications Division.

Career development involving the preparation of a detailed report assessing theexisting promotion and career path system, analysing problem areas and providing


recommendations, and discussing possible changes with the various staff unions withinthe Department.

Achievements and progress

Key documents

The preparation of Future Directions for the Ministry of Employment and Labour:Balancing Growth and Equity in a Changing Society and the completion of the HumanResource Audit and creating the human resource data-base were major achievements.These document and the discussions surrounding their preparation succeeded inestablishing a climate for change, and provided a firm foundation for the restructuringand revitalisation exercise. The content of these documents is summarised inChapter II.

Productivity improvement

The preparation of a proposal for the strengthening and development of the NationalProductivity Secretariat, initially as a division in the Ministry, was an importantachievement.

A document titled National Productivity Secretariat: Concept and Strategy was preparedfor submission to the Ministry of Economic Reform for funding support under a WorldBank loan. This was an innovative proposal for the development and strengthening ofthe National Productivity Secretariat as the unit within the Ministry’s structureresponsible for the coordination of the implementation of the nation’s productivity policy.

The proposal included five modules, to be implemented over three years, with eachsuccessive module being planned to accommodate the experience gained and lessonslearned during the implementation of the previous module. This ‘implement and designapproach’ was adopted to provide the flexibility to ensure that the project maintainedits focus and that each new phase was able to accommodate the experience gainedduring the implementation of each previous phase. This was an important aspect of theoverall approach to change – in some cases it is almost impossible to determine theshape and substance of the next change component until ‘things start to happen.’

Module 1 included the preparation of a corporate plan for the NationalProductivity Secretariat, the preparation of job descriptions and a staff trainingplan, planning of a productivity awareness program, mapping existing bodies andagencies concerned with productivity improvement, and procuring the equipmentand support resources required to enable the Secretariat to function efficiently.The planning of a productivity awareness program will also be done during thismodule.


Module 1 aimed to establish the mission, objectives, functions, structures,and operational arrangements for the Secretariat, as well as the preparationof a revenue model for the medium to longer-term sustainability of theSecretariat.

In Module 2, depending on the achievements and experiences gained duringModule 1, it was expected the Secretariat would begin working on the creation ofan enabling environment for productivity improvement. This would include aprogram to review and reform laws, regulations and procedures, as well as appliedresearch on productivity issues. The Secretariat would retain consultants,consulting firms and universities to undertake the actual research. Module 2 wasalso expected to include the preparation of Productivity Impact Assessment studies(as indicated in Productivity for a Prosperous Nation) to examine the productivityimplications of government policy initiatives. The revenue model for the Secretariatwas to be further developed and further staff training provided for productivityofficers.

This module was also expected to focus on Initiative VII of the private sectorcomponent of Productivity for a Prosperous Nation, concerning the ‘developmentof a culture of quality and productivity.’ Building on the planning work undertakenin module 1, it was expected that a number of activities would be implementedincluding a comprehensive awareness campaign through the media, schools,tertiary-level education and training institutions, and community groups.

For the public sector, it was expected that Module 2 will focus on increasing theproductivity of individual employees, units, and divisions through the mobilisationof specialists able to provide consultancy and training services including suchareas as work-study, job analysis, the introduction of new work processes, andcomputerisation.

Module 2 was also expected to see provincial and district level productivityimprovement institutions in place and operational.

Module 3 was expected to support the continuation of programs that commencedin Module 2 and was expected to focus on the issues of labour-managementrelations in workplaces in both public and private sectors, and on a range ofwork safety and health issues known to affect productivity. In cooperation withemployers’ and workers’ organisations and the Department of Labour in theMinistry of Employment and Labour, productivity improvement was to beencouraged through new approaches to workplace interactions that emphasiseimproved communication, dispute prevention, grievance handling, gain sharingarrangements, and improving the working environment.


It was also expected that consultants would be engaged to plan programs forproductivity improvement for micro, small and medium enterprises, such programsto be implemented through private sector agencies.

Module 4 was expected to focus on program implementation in both public andprivate sectors, with particular emphasis on the small and medium enterpriseprogramme, and industry-specific productivity improvement programmes. DuringModule 4 it was expected discussions would be finalized on the preferredinstitutional arrangements for the future development of the National ProductivitySecretariat.

Module 5 was expected to support a range of activities that would see theSecretariat in full operation including coordinating, supporting, and facilitating awide range of programs and activities. During this module it was expected thatfinal agreement would be reached on the future development of the Secretariat,including the drafting of legislation if the corporate entity approach was consideredthe most suitable.

Operational Strategies for each division within the new structure

Each division within the new structure was provided with a strategy to guide its activitiesover the next few years. The strategies were to be discussed with staff within eachdivision before final presentation to the task force, and endorsement by the MinistrySecretary and the Department’s Commissioner General. The dialogue within somedivisions was less than planned due in the main to delays in appointing or transferringkey staff to new divisions. The result in some cases was the preparation of a detailedstrategy, but with a significant time-lag in its implementation.

In spite of the delays, each division at least had a clear indication of its mission, specificobjectives, the activities it should pursue, and its resource requirements to ensureefficient and effective operations. This was particularly important for the units withinthe Ministry engaging in new areas of responsibility (e.g. employment and humanresource planning, gender bureau, labour market information), and for the units in theDepartment of Labour extending their existing responsibilities (e.g. social dialogue andcollective bargaining, labour administration and the informal economy, monitoring andsocial compliance.)

Performance improvement strategy

The ILO recruited a national consultant to undertake a performance review of variousadministrative and reporting processes within the Department of Labour. This focusedparticularly on the Department’s District offices and identified many areas wereindividual and group performance could be improved.


The report titled Performance Management and Reporting Systems made more than70 specific recommendations for performance improvement and provided a detailedagenda for administrative reform directed to increased productivity and improvedservices. This document proved a useful companion to the operational strategiesprepared for each division, by highlighting operational deficiencies and outlining theaction required to address them.

Labour inspection system

A career and succession planning proposal was prepared as an internal document,directed to solving two immediate problems, namely, the large number of vacancies atmanagement level in the Department, and the limited career prospects for labourofficers many of whom do not gain promotion throughout their entire career.

The proposal recommends that the current system of progression based on yearsof service be replaced by one that combines experience, performance, in-servicetraining, and formal qualifications, and also proposes new approaches to recruitment,in service training, and performance appraisal. The preparation of this proposal is amajor achievement but the implementation of its detailed recommendations hasimplications that extend beyond the Ministry and Department to include the entire publicadministration. Accordingly, it may take some time for the Department of Labour to fullyresolve its staffing problems.

One issue of particular importance is whether the labour administration system shouldbe closed, with the result that only officers from within the Department would be eligiblefor senior positions, and SLAS officers excluded. The report on career and successionplanning recommends that the system should remain open, and thus not be staffedexclusively by persons who commenced their careers as labour officers. The nature ofmodern labour administration is such that new functions emerge (e.g. new approachesto wage policy and wage determination, the introduction of third party auditing andcompliance systems, the extension of services to the informal economy, new approachesto training and staff development) requiring the services of people with differentqualifications and backgrounds. A modern labour administration is enlivened by adegree of diversity in its senior levels, including the appointment of persons from theprivate sector.

Apart from endorsing an open system, the report recommends that the career andpromotion system within the Department of Labour should have the following features:

� Entry should be competitive and demanding;

� Progression should be based partly on years of experience but also onadditional qualifications and training;


� Bars should exist throughout the system requiring examinations and interviewsin place of seniority;

� Job descriptions should be detailed and revised from time to time;

� Performance should be the basis for progression from one salary level toanother within a particular grade, thereby placing considerable emphasis on afair and impartial performance appraisal system;

� Training and staff development activities become a vital component of thesystem.

The preparation of project proposals

As well as preparing documents of a more general nature to guide the change process,a number of specific project proposals were prepared to provide the Ministry/Department with sufficient justification to support requests for technical assistance frominternational donors. In addition to the five proposals included in the Future Directionsdocument, the ILO prepared specific project proposals for the following:

– JOBSNET

– Youth Employment Network.

– Labour Market Information

– Employment Creation and Employment Promotion

– Gender Bureau

– National Productivity Secretariat

These proposals provided the Ministry/Department with technical information and ideasthat indicate ‘what is possible’ under a modern labour administration. In doing so, theyestablished a platform for future changes as and when resources became available. Inthe case of JOBSNET and Youth Employment Network (YEN) the ILO was instrumentalnot only in preparing detailed proposals but also for securing donor funds to supportthe implementation process.

The details of each of these projects are available through the ILO Office in Colomboand are not reproduced here. It is appropriate, however, to make special mention ofJOBSNET not only because of the content and substance of the changes it involved,but also for the actual process by which change was made.

The JOBSNET project constituted a major innovation in the nation’s labour administrationsystem, with the change process involving the Ministry/Department in a public-privatesector dialogue of a type not previously experienced in Sri Lanka’s labour administrationsystem. Sri Lanka has operated an employment service since 1966 through a system


of placement offices located throughout the country. It was generally conceded, however,that the centres were poorly located, poorly equipped, and operated under outdatedprocedures without the benefit of a labour market information system and withoutcomputer support.

The system was reasonably successful in registering job vacancies and job seekers,and provided career guidance information to job seekers as well as registering personsinterested in self-employment. Its impact in facilitating the operation of the nation’s labourmarkets, however, remains largely unknown due to the lack of information on the actualnumber of job placements. The National Employment Policy 2003 indicated that thenumber of placements made over a three year period was of the order of 5000, which,if correct, was indicative of an institution that needed to adapt and change and therewas a change, for cure.

Under Initiative 7 of the National Employment Policy 2003 the Government decided toreorganize and restructure the nation’s employment services in accordance with theguidelines provided in the policy document. This change was based on a system oflinkages and out sourcing to the private sector, with the overall management of thenew system, to be known as JOBSNET, the responsibility of the Ceylon Chamber ofCommerce. The Chamber was to establish a computerised job matching system tofacilitate the smooth matching of job seekers and job vacancies through 11 centres inthe first instance, but extending to 19 as soon as possible. The original intention was tohave the JOBSNET centres staffed by the human resource placement officers, allgraduates, from the Department of Labour, under managers appointed and employedby the Chamber of Commerce. This was an innovative linkage between public andprivate sectors but was not without its challenges, including the need to formally clarifythe roles of the various parties involved — Ministry, Chamber, managers, human resourceplacement officers union, and individual officers — particularly concerning the termsand conditions and general arrangements for the employment of Department of Labourofficials now required to work in a private sector environment.

At its inception, the JOBSNET system aimed to provide productive employmentfor unemployed Sri Lankans and envisaged a database of some 30,000 unemployedpersons in the first year of its operations. It proposed to place over 5000 persons in thefirst year of operations, 6000 in the second year, and 12000 in the third year.

The introduction of the JOBSNET system marked a major change in Sri Lanka’s labouradministration system and represented the start of a new approach to the provision ofservices previously dominated by government. The key aspects of the nature of thenew system, and the dialogue its creation required, are outlined below.

� JOBSNET began as a technical cooperation project designed by the ILO, fundedby an external donor (NORAD), with contributions from the Chamber ofCommerce, and in kind contributions from government.


� The project was implemented and managed by the Ceylon Chamber ofCommerce, signalling an intention on the part of government that aspects ofgovernment employment policy should be implemented by the private sector.

� The project was planned for implementation over a three-year period after whichit should operate as a private business, thereby indicating that the privatisationof employment services was acceptable to government.

� The JOBSNET system was to operate on a fee-for-service basis, withenterprises paying a fee for each placement. The services were without chargeto job seekers.

� The Chamber of Commerce agreed to develop a national computer network forthe registration of job seekers and job vacancies. Self-matching facilities wereto be made available, but in such cases enterprises would still pay for the use ofthe computerized data-base.

� The government agreed to provide the space for each centre.

� The government agreed to provide the employment officers, designated asCustomer Service Officers, to operate each centre.

� The Chamber of Commerce appointed managers to run each centre supportedby administrative, financial and ICT staff from the Chamber’s headquarters.

� The Centres were to provide overseas placement services.

� The regional Chambers of Commerce would play a role in soliciting jobvacancies from enterprises and receive a fee for this service.

Once the JOBSNET centres established their role in matching and placement,progressively services would be provided in training, career guidance, counselling, andself-employment promotion.

A review of the JOBSNET system in 2004 identified a number of areas for the improvedoperation of the system. These included the need to provide services to job seekers inrural areas and to increase the number of persons actually placed in employment. Theintroduction of JOBSNET was a major achievement, particularly given the verytraditional approach to employment services that had operated in the past. The systemhas some shortcomings but these are being addressed to ensure that JOBSNET playsthe leading role in the nation’s employment promotion efforts and the focal point of thenation’s labour market information system.

The various project proposals and outlines prepared for the Ministry and Departmentare important outputs. They require, however, that the Ministry take the initiative inseeking external technical and financial assistance to ensure that what exists on paperis transformed into specific activities. As project outlines, these documents will requirefurther development and elaboration to meet any specific requirements of the donor.


In general, the Ministry and Department lack the technical knowledge required forthorough project preparation. Although some staff received basic training in preparingproject proposals there is a need for a small, dedicated unit to handle such matters.In a Ministry/Department with some 2500 staff, this should be both possible andmanageable.

Projects represents the real cutting edge of change and offer the Ministry/Departmentreal opportunities for implementing the new initiatives proposed in the Future Directionsdocument and, at the same time, supporting new approaches in the traditional fields oflabour inspection and labour relations.

Clearly, the project outlines prepared are but a first step on the road to change but theiracceptance in general by the Ministry/Department is a significant achievement in aninstitution that has been dominated by tradition and a culture of law enforcement, asdistinct from one of service to clients and economic and social development.

Staff Training

Staff training is an integral component of the change strategy and the numbers trainedduring the transformation is a major achievement. Based on the advice of the ILO, theDepartment of Labour established and equipped a computer-training centre andapproximately 1000 officers and support staff have received basic computer training.The ILO also assisted in planning and implementing a program of English languagetraining and this is now being extended to field offices. This training was a result of thehuman resource audit that identified the lack of computer and language skills as amajor impediment to performance improvement.

In addition to general skills training, the ILO planned and supported a series of trainingworkshops in a range of technical areas, as follows.

Labour administration and the informal economy: that aimed to providelabour officers with an understanding of the decent work deficits that prevail inthe informal economy, and introduce them to what the labour administration cando to address these deficits.

Social dialogue and collective bargaining: that aimed to discuss the purpose,functions and operations of the Social Dialogue and Collective Bargaining Unit inthe Industrial Relations Division and outline what, specifically, the Unit and divisionshould do over the next year or so to promote increased social dialogue andcollective bargaining, particularly at enterprise level.

The workshop distinguished between tripartite and bipartite social dialogue, outlinedthe various forms of dialogue and interaction that can contribute to improved


enterprise level industrial relations, and outlined what needs to be done by whomto gain the cooperation of employers and workers to promote social dialogue andcollective bargaining.

Termination of employment: A series of workshops were conducted forarbitrators, labour officers, and presidents of the labour tribunal, respectively, toprovide them with an overview of the 4-3-2 System — a system designed toensure speedier resolution of termination of employment cases. The workshopsexplained the content of the legal amendments supporting the new system,identified the obstacles that impede the efficiency of existing termination processes,and propose solutions in procedure and process that will ensure compliance withthe time limits set under the 4-3-2 system. Particular emphasis was placed onimproving the conciliation process to ensure that cases were resolved by theparties themselves, thereby reducing the number of termination cases comingbefore the labour tribunals.

Preparing project proposals: that aimed to provide selected officials with anoverview of the phases of the project cycle including needs identification, feasibilitystudies, preparing a project outline, appraisal, preparing a detailed projectproposal, approval, project implementation(including monitoring and reporting)and project evaluation. The workshop also provided participants with the basicskills required to prepare a detailed project document.

Conclusion

The technical assistance provided by the ILO, and supported by the donor community,generated a range of outputs and achievements. It is too early to determine whetherthese outputs will result in sustained performance improvement for the Ministry andDepartment but, clearly, a firm foundation for change has been established and a changein organization culture has begun to emerge. New outputs are relatively easy toproduce but their transformation into positive outcomes is more challenging. This is theresponsibility of the Ministry/Department’s senior management — to ensure that thechange momentum is sustained and that outputs generate benefits for the clients of thelabour administration system.

CHAPTER 5: THE TOOLS OF CHANGE

The process and methodologies of change have a major influence in determining whetheractual outcomes of the change process are the same as those planned or intended.Change that is imposed through telling and directing may be appropriate in somesituations but, generally, is less preferable than a process involving close consultationwith all parties likely to be affected by the change. Every effort was made to encouragea participative approach to change, with varying degrees of success.


Task Forces

A task force was appointed to guide the overall restructuring and revitalization exercise,and another to advise on the planning and conduct of the Human Resource Audit. The‘Future Directions’ task force was comprised of senior Ministry/Department officialswith a Ministry Assistant Secretary as chairperson. The nature of the changes beingproposed and discussed were beyond the immediate experience of task forcemembers, and its main role became one of reacting to proposals and ideas advancedby consultants. The Task Force was not as successful as originally hoped due to anumber of factors:

� It was comprised of very senior officers who had many other duties to perform,resulting in fewer task force meetings than required.

� The transfer to another Ministry of the task force chairperson during theexercise resulted in some loss of momentum.

� The composition of the task force was top-heavy and would have benefited fromthe presence of some middle level officers. (It is doubtful, however, whetherlower level officers would have actively participated due to the nature ofGovernment hierarchical structures in which junior officers always defer to theirseniors.)

� There was no representation of the labour administration clients, namely,employers and workers, on the task force. The Ministry/Department consideredthis was not necessary as there were other arrangements, both formal andinformal, available to solicit the views of employers and workers.

Overall, the ‘Future Directions’ Task Force was moderately successful. Its shortcomingshighlighted the fact that the Ministry/Department senior managers were involved in somany things concerning the day-to-day operations of labour administration that theyhad limited time to devote to the restructuring and revitalization process. This is commonto many change situations — the need to ensure that existing things continue to operateas they should but, at the same time, striving to make things better for the future. It issomething like undertaking major renovations to a department store, but also trying tosee that despite the disruptions and inconvenience for customers, that sales figuresare maintained. Planning for the new is sometimes subordinate to the need to continuewith the old.

A second task force was appointed to guide the Human Resource Audit. This had thesame chairperson as the Future Directions task force but had considerably moresuccess for a variety of reasons:

� Its work was quite focused and time bound.


� Its composition included officers in middle management positions, and with timeto devote to the task.

� The nature of the work, particularly the preparation of the survey questionnairewas well suited to interaction and discussion.

� The task force was engaged in various administrative tasks associated with theexercise, which generated some sense of ownership.

� The final outcome of a comprehensive human resource data basis wasidentified as something very useful for the Ministry/Department.

This task force was very successful. Together with the work of consultants, it managedto achieve its objective within a reasonable time period, and saw the data base installedand available as a tool for human resource planning and development within theMinistry/Department. The regular updating of the data base and its actual use as amanagement tool are operational issues for the Ministry/Department to accommodatein future years.

Key documents and action plans

The restructuring and revitalization process relied heavily on the preparation of variousdocuments and proposals. Such documentation does not guarantee successful change,but without it, the change process lacks direction, lacks good practices to emulate, andlacks acceptable standards of performance to strive for. Change by documentationalone will never work, but where the documentation provides a realistic platform formedium to long-term improvement in overall performance, the time and energy devotedto preparing detailed and step-by-step change strategies is not only desirable, butabsolutely essential.

The various documents referred to in Chapter 4 guided the change process and werean essential management tool to help monitor performance improvement, a themeexpressed in all documents.

Meetings and discussions with Minister, Secretary, Commissioner General, andSenior officials

Various formal and informal meetings were held with Senior Ministry Officials todiscuss progress and to help overcome obstacles. These were important learningexperiences for all parties and built on-going commitment to the changes proposed.Such meetings were valuable in identifying the change priorities from the ‘what ispossible’ agenda, and ensured that the change effort was focused and realistic.

A number of meetings with the Minister were of particular significance and ensuredthat the reform agenda was responsive to political sensitivities and, at the same time,secured the on going support of the Minister to the changes envisaged.


The nature of these high-level meetings was such that the change process wassubjected to regular fine-tuning, but without the need to change direction. High-leveldiscussions as, for example, concerning the need to review the Department’spromotion and career planning system, took place not as new items in themselves but,rather, as additional things to be addressed if the changes outlined in the master planwere to be achieved.

ILO influence

The ILO played a crucial role in these meetings. The Colombo Director, staff andconsultants were ever-present to ensure that ILO-supported changes were in keepingwith ILO standards but, at the same time, responsive to the needs of the Ministry andits clients. The ILO’s role was always facilitative rather than prescriptive and alwaysstressed a partnership approach to change. Indeed, without the ILO’s presence andinterventions at such high level meetings, it is doubtful whether the Ministry andDepartment would have embraced such a formidable change agenda. Accordingly, theILO’s on-going presence was a major factor in ensuring that planned changeswere sound and realistic, and that proposed changes were of benefit to workers andemployers.

The ILO also developed and maintained close relations with the Minister’s office toensure that the Minister, personally, was fully and regularly informed of the ILO’sposition on the changes taking place, to offer advice as appropriate, and to enlist donorsupport wherever possible. This high-level partnership played an important role in therestructuring and rejuvenation process.

The work of International and National consultants

The terms of reference for all consultants were carefully drafted to ensure that theirefforts related closely to the new vision for the Ministry. All consultants adopteda facilitative approach that focused on the actual process of change, as well asthe outputs resulting from that process. This ‘process approach’ was adopted byboth national and international consultants and succeeded in gaining the confidenceof staff at all levels. National consultants worked in both English and Sinhalalanguages and this further assisted in developing rapport between the consultantsand staff.

The international consultant spent several months in the Ministry/Department and thiswas important in providing advice on an on-going basis, building staff confidence, andhelped promote the idea that change was coming from within as well as beingsupported by external agencies.


Discussions with staff associations

The international consultant spent many hours discussing change proposals withrepresentatives of the various staff unions within the Department of Labour. In hindsight,these discussions although very useful, particularly concerning career and successionplanning, commenced too late. Ideally, representatives of staff unions should have beenincluded in the task force to ensure they were fully informed on proposed changes atthe earliest possible stage.

Training activities

A series of training activities, as outlined in Chapter IV, were planned and implementedto help prepare officers and support staff for new responsibilities and provide theknowledge and skills necessary for improved performance. These activities stressedthat training is not an end in itself but a means to providing better services to the clientsof the labour administration system.

Training activities in the technical fields stressed that although training was importantand essential in facilitating change; change in itself was not enough. The acquisition ofnew knowledge and skills must be accompanied by opportunities to actually apply thelearning acquired. This sometimes requires a change of attitude on the part of seniorofficers, and requires the existence of logistic support to ensure that new plans areactually implemented. For example, the preparation of a new reporting form for labourinspection visits that relies on the use of information technology, will mean little unlessofficers have access to computers.

Consultations with key informants

The international consultant made considerable effort to contact ‘key informants’particularly from employers and trade unions to solicit reaction to various changeproposals. Although done informally, this was extremely useful in assessing theclimate for change amongst the clients of the labour administration system. This wasparticularly important, given the fact that employers and workers representatives werenot included on the Future Directions task force.

CHAPTER 6: LESSONS LEARNED AND FOLLOW UP

The restructuring and revitalization exercise, although far from complete, hashighlighted a number of necessary conditions if the change process is to have areasonable chance of producing actual and sustainable improvements. The lessonslearned concerning the transformation of Sri Lanka’s labour administration are outlinedbelow.


Lessons

Ministerial Commitment

The creation of the Ministry of Employment and Labour in December 2001, and theappointment of a new minister, was a vital step in the transformation process. Theaccession of a visionary minister was a driving force, and ensured that the Ministry’ssenior administrators would devote their energies to the new vision and direction, asdirected. The essential lesson is that a change initiative without the Minister’s endorsementand support is likely to be marginal and cosmetic. In the case of Sri Lanka, Ministerialinvolvement was initial and on going, as well as enthusiastic and sincere.

Commitment of Civil Servants

Commitment at ministerial level is necessary but not sufficient. It is also essential thatcivil servants responsible for implementing change and, indeed, affected by its processesand outputs, also commit themselves. This was secured at senior levels within theMinistry and Department but the commitment of middle level officers, particularly thoselocated in the field, was less certain. Many of these officers have worked for manyyears under the same conditions and bureaucratic arrangements and view changes ofthe type proposed with a degree of uncertainty or, in some cases, disbelief. This highlightsthe need for better communication with those affected by change and the need to secureearly ‘buy-in’ to ensure that psychological barriers are overcome.

External support

The importance of an external agency supporting the change process both technicallyand financially cannot be underestimated. The ILO provided such support and made itclear form the very outset that it was a committed partner, willing to marshal the technicalresources at its disposal to help plan and implement the change process. The ILO,however, has limited financial resources and relies on funding support from multi-bilateraldonors or international financial institutions. The funding support required to implementthe entire change strategy as one very large scale project was not available. This is thereality of international development assistance — good ideas for change cannot alwaysgain the degree of financial support they deserve.

Documentation

The change process begins with observation, thinking, introspection, discussion, and,often, informal consultation. As the process proceeds further the consultations anddiscussions become more formal, requiring the production of proposals, reports andother forms of documentation to guide the process. This was the strength of the process


in Sri Lanka — good quality documentation was available to guide the process andestablish performance standards to strive for. Documentation has to be clear andunambiguous, and in a form readily understood by all affected persons. Key documentscould have been more widely distributed within the Ministry and Department therebysecuring greater interest in and support for the proposed changes.

Performance standards and job descriptions

A change strategy of the type supported by the Ministry and Department requires newresponsibilities and procedures for virtually all staff. Very few officers and support staffremain unaffected. This requires that all staff know precisely what they are expected todo under the new arrangements. This includes the specific tasks and duties they arerequired to perform and the standards of performance necessary to meet appraisal andpromotion requirements. Much remains to be done in this area to ensure that detailedjob descriptions are made available to all staff, and that performance standardsbecome an integral component of Ministry/Department culture. The Ministry/Department is yet to embrace a modern approach to human resource managementbut a start has been made by creating the staff data-base as a result of the humanresource audit.

Dialogue

A participative change process requires that appropriate arrangements be made forconsultations with all parties engaged in, and affected by, the change process. TheMinistry task forces provided such a forum but wider representation in such bodies,including representatives of staff associations, may have helped shape the processand build commitment. The Ministry did not consider it necessary to involverepresentatives or employers and workers in the new directions task force, indicatingthat existing institutional arrangements were adequate to ensure their involvement. Thechange process may have been improved by more direct involvement from employersand worker representatives, in their capacity as clients of the system. Greater involvementof employers and workers in formulating some aspects of the change strategy mayalso have been useful as a way of mobilizing additional resources to support variouschange initiatives.

Resource support

The change process cannot rely solely on external resource support. Internal resourcesmust be mobilized to ensure that endorsed changes are transformed from paper toreality (e.g. integrated inspection, labour extension). The Ministry/Department showedstrong commitment in this regard by establishing and equipping the computer trainingcentre and purchasing computer work- stations for general use. Additional funds will be


required from national budgetary sources to support computer and language trainingon an on-going basis, and to provide adequate transport facilities for inspection andindustrial relations work. Ministry/Department budgets for future years need to beprepared in anticipation of the changes taking place now.

Monitoring and reporting systems

Change strategies require on-going monitoring, and the development of reportingsystems to determine whether planned changes become a reality and that actualperformance meets planned performance standards. Overall monitoring could beundertaken by a small task force but, ultimately, monitoring and performance standardsare the task of line managers, particularly officers at district and zonal level. Managementcapacity at these levels is not strong, and a concerted and on going training effort isrequired if line managers are to perform to the required standard. This will requireadditional resources and an on going commitment to management development.

Consultants

The change process illustrated the benefits of having consultants in-house on an on-going basis to enable them to provide on the spot technical advice, but also to operateas ‘process consultants’ to guide not only the content of change but also its processand methods. The full-time presence of consultants had an important demonstrationeffect and conveyed a message of commitment and involvement. There is a danger,however, that a committed consultant, present on a day- to-day basis, will be requestedto become involved in all sorts of marginal pursuits that might detract from the mainpurpose of the assignment. It is important that consultant’s engage in consulting, notline management.

Time

Making changes in a large, bureaucratic and conservative government ministrynormally takes considerably longer than implementing a change strategy in a privatesector enterprise. Time deadlines are not met, persons responsible for implementingchange complain ‘not enough time’ and time-bound action plans are put aside. Theremay not be enough time but everyone has all there is, and every one has the sameamount. The Ministry experience shows that what were thought to be reasonablyattainable time deadlines, in fact, were not. This is an issue to consider in preparingaction plans to ensure that the time lines are reasonable. It is also an issue of timemanagement or, more correctly, those responsible for implementing changes beingable to manage themselves to make best use of the time available. Time managementin the Ministry/Department is not only relevant to the change process, but is alsoimportant for daily operations.


Suggested areas for future assistance

The Ministry/Department has made considerable progress during the last three yearsbut it continues to face many challenges and much remains to be done. Externaltechnical and financial assistance will be required if the labour administration is tofurther contribute to the economic and social progress of the nation, but there is muchthat can be done through the efficient use of internal financial resources.

Revising the nation’s labour laws

The Department of Labour has taken steps to consolidate the nation’s labour laws butthere is an urgent need for revision and amendment to ensure that laws respond torather than dominate the nation’s development needs. Labour law revision is a majorand challenging task and will require external advice to ensure that laws and regulationsare consistent with national needs respect relevant international labour standards, andmeet the requirements of a modern labour administration.

Integrated labour inspection

A start has been made on the transformation of the nation’s labour inspection system.This must continue to ensure that the system operates smoothly in practice. This willinvolve the re-training of all inspectors, the preparation of inspection manuals, educatingemployers and workers to the nature and operations of the new system, and monitoringits overall impact. The introduction and operation of such a system could be used asthe vehicle for the introduction of new approaches to inspection and compliance, includingthe introduction of ‘self-inspection’ and self-reporting initiatives, as well as the introductionof systems inspection in which inspectors no longer concern themselves with theidentification of specific problems and the details of law enforcement but, rather, focuson examining systems and advising on their improvement with a view to preventingproblems from arising.

Social dialogue and workplace cooperation

A start has also been made to move the Department form a culture of labour disputeresolution to one of labour dispute prevention. This is an important development anddeserves adequate resource support to ensure that officers are trained in disputeprevention initiatives, that employers and workers are informed, and that collectivebargaining is encouraged. External technical and financial assistance would be beneficialbut there in much the Ministry, working in close cooperation with employers’ and workers’organizations, can do.

Social dialogue and workplace cooperation need to be promoted not only as a means ofdispute prevention but also as a means of productivity enhancement and improved


competitiveness. There is also a need to address and allay the suspicions of tradeunions that workplace cooperation is a backdoor means of reducing union power andinfluence in individual workplaces.

Labour extension services

The need to extend labour protection to persons engaged in the informal economy hasbeen accepted in principle, but now must be implemented. More information is requiredon the decent work deficits in Sri Lanka’s informal economy, and more thinking anddialogue is required as to how these can be addressed. The pursuit of this initiativeas well as benefiting millions of Sri Lankans would elevate Sri Lanka’s labouradministration to a leadership position in the region, and serve as a model for othersto emulate.

National Institute of Occupational Safety and Health

The establishment of this Institute has been initiated but technical and financial resourceswill be required to ensure that it operates as an independent institution meeting theneeds of a range of clients. The Institute would benefit from external financial andtechnical assistance but appropriately marketed could draw assistance form Sri Lanka’semployers. The key to its success as an independent institution is the preparation andimplementation of a viable revenue plan.

National Institute for Labour Studies

The establishment of this institute has also been initiated but its final organization andstructure is yet to be determined. The existence of such an institute could play animportant research and training role in various aspects of industrial relations andrelated fields. As with the OSH Institute, it would benefit from external assistance andfrom the preparation of a viable revenue model. It, too, could attract support from SriLanka’s.

Decentralization

The Department of Labour operates through a system of zone, district and sub-districtoffices as a basis for the provision of island-wide services. District and sub-districtoffices in particular represent the front-line of labour administration in Sri Lanka but,generally, lack the capacity to perform to the required standard. Staff lack training, logisticsupport is poor, and office space is sub-standard. The strengthening of the decentralizedsystem of offices will require a significant investment but every effort should be made toestablish at least a few offices as models to be emulated as resources become available.Once a Department of Employment is established, consideration will need to be givento the decentralization of the services it offers.


Career progression for labour officers

The problem of poor career prospects for labour officers is well known. Variousrecommendations have been made to address this problem. The Department of Labourshould not become a ‘closed’ department but short off that there is much that can bedone to improve the career prospects for labour officers. Many of these matters can beaddressed within the Ministry and this should be done as a matter of urgency.

Department of Employment

Issues of unemployment, under-employment, employment creation, productivity,human resource forecasting, labour market information and a host of employment relatedissues can be expected to dominate national development discussions over the nextfew years. These issues are of such magnitude and importance that they should notbe left to a division in a Ministry. The government should consider establishing afully-fledged Department of Employment within the Ministry thereby making it atwo-department Ministry, staffed and resourced accordingly. Such a department wouldbe expected to play a leading role in revising national employment policies, ensuringtheir effective implementation, and supporting the development of a comprehensivelabour market information system.

Strengthening Labour InspectionServices as an Integral Part ofLabour Administration toPromote Decent WorkA. Sivananthiran

GOOD GOVERNANCE AND LABOUR ADMINISTRATION

In the past, one of the main components missing in development strategies in manydeveloping countries was good governance of the labour market. In fact, the quality ofgovernance is a major factor in determining whether countries are successful or not inreducing their poverty levels. Improved labour inspections and safe work managementlead to a decline in the number of accidents, an increase in the motivation of the labourforce and thus higher productivity and better quality products. Good governance of thelabour market is vital to maintaining or enhancing productivity and competitiveness,particularly in the face of mounting pressure from government policies to open upmarkets and meet the challenges of globalisation. The key to competitiveness is quality,and products (and services) of high quality can only result from high quality workingpractices and production methods.

One of the most important institutions of governance in the labour market is the labourinspection system. In line with the Decent Work Agenda and the ILO’s responseto globalisation, labour inspection is entrusted with a broad set of responsibilities.Inspection systems and their managers must take into account the diverse forcesdriving economic, social and technological change. Their responses must be rapid,flexible and able to anticipate challenges. In many countries differentiated inspection oflegal, technical, medical and social systems has been abandoned in favour ofintegrated labour inspection, which brings together all the factors that influence andcontribute to improved labour protection.

8


Labour inspection also contributes to the strengthening of institutions of the labourmarket. The institutions for wage determination, in particular minimum wage, providingfinancial security for workers, boosting their purchasing power and raising aggregatedemand.

LABOUR INSPECTION IS AN INTEGRAL PART OF LABOUR ADMINISTRATION

A labour administration system cannot effectively operate without an efficient labourinspection. Conversely, a weak labour administration system cannot be expectedto support an effective labour inspectorate, which cannot develop in isolation. Theeffectiveness of the labour administration is in its ability to organise, coordinate andfund all services including the labour inspection services.

According to the labour administration Convention, No. 150, the term “system of labouradministration” covers all public administration bodies responsible for and/or engagedin labour administration, whether they are ministerial departments or public agencies.This also includes parastatal and regional or local agencies, any form of decentralisedadministration, any institutional framework for the coordination of the activities of suchbodies and for consultation with and participation by employers and workers andtheir organisations. Each member country ratifying this Convention shall, in a mannerappropriate to national conditions, ensure the organization and effective operation of asystem of labour administration, the functions and responsibilities of which arecoordinated in an appropriate manner.

The ILO Labour Administration Recommendation, No. 158 adds that “the system oflabour administration should include a system of labour inspection” and reiterates thisadvice while stating that “the system of labour administration should normally compriseof specialised units to deal with each of the major programmes”… “for example, theremight be units for such matters as the formulation of standards relating to workingconditions and terms of employment; labour inspection; labour relations; employment,manpower planning and human resources development; international labour affairs;and, as appropriate, social security, minimum wage legislation and questions relating tospecific categories of workers”. The General Survey on the Labour AdministrationConvention, No. 150, presented by the Committee of Experts to the ILO Conference in1997, stated that “measures for applying laws and regulations on conditions of work,terms of employment and occupational safety and health remain essentially theprerogative of the Ministry of Labour in the vast majority of countries (Paragraph 61).

The importance of coherence and coordination of the national labour administration isstipulated in Convention No. 150: “a Ministry of labour or another comparable bodyshall have the means to ascertain whether any parastatal agencies which may beresponsible for particular labour administration activities,… are operating in accordance

Strengthening Labour Inspection Services as an Integral Part of Labour Administration 195

with national laws and regulations and are adhering to the objectives assigned to them.”(Article 9).

During the last biennium, DIALOGUE carried out a number of assessments of labouradministration systems, mainly in Asia, Africa and South America. These took place inSri Lanka, India, Nepal, Iran, Namibia, Lesotho, Swaziland, Botswana, Malawi, Zambia,Indonesia, Egypt, and Jordan. The assessments also included audits of labourinspection services and generally sought to review the effectiveness and the efficiencyof the labour inspection system, more specifically to:

� revitalise the organisation and management of the labour inspection systems;

� improve reporting, evaluation and monitoring systems;

� improve the planning and programming of labour inspections;

� enhance the reporting systems between field offices and headquarters of therespective Ministries;

� explore the possibility of setting up integrated systems of labour inspection;

� improve the data flow for annual and quarterly reports;

� improve the linkage between the labour inspection systems and the socialpartners.

In conducting the audits, the experts from DIALOGUE met with senior representativesof the Ministry of Labour, including the Permanent Secretary, the Labour Commissionerand Directors of Labour Inspectorates, officials from the Inspectorate in the regionaloffices and districts and the leaders of workers’ and employers’ organisations. At theend of the assessment, the main findings were shared with the Permanent Secretary,Labour Commissioner and Senior representatives of the Ministry.

The audits/assessments generally indicated that whilst there were no inherent orstructural barriers to effective and efficient labour inspection services in the countriesconcerned, there was considerable room for improvement in the following functionalareas:

� policy planning;

� management procedures;

� communications;

� equipment; and

� training.

The audit showed that such improvements could be achieved by rationalising,streamlining and consolidating the inspection functions of the Ministry in its field


structure, with minimal added financial resources. This paper attempts to highlight thekey issues and recommendations made in these assessments.

MANDATES OF LABOUR INSPECTORS

Although the precise mandates of inspectors vary according to national legislation,amongst the many issues in the workplace which labour inspectors are called upon toaddress are: occupational safety and health, conditions at workplace, forced labour,child labour, employment relations, gender equity and discrimination, HIV/AIDS at theworkplace, and specific sectoral functions (e.g. agriculture, construction, mining,maritime, railways). Other law-enforcement and prevention-related activities mayinclude duties concerning social security, immigration, illegal employment, the informaleconomy and the registration of small enterprises.

NEED TO DEVELOP A NATIONAL PREVENTIVE CULTURE

By and large, the Department of Labour, and within it, the General Labour InspectionServices and the Safety and Health Inspectorate, are entrusted with the task of promotingand implementing labour laws. In order to adequately equip them for this task, it will benecessary to develop a new labour inspection and implementation policy to set theparameters for the enforcement of the new, integrated labour inspection system. Sucha policy must be comprehensive and have the basic enforcement, monitoring andevaluation policies to drive it towards functional integration. It must also have a practicalimplementation strategy to ensure compliance. The policy must promote nationalcompliance with basic labour laws and nurture a preventive culture on safety and health.The formulation of a national preventive culture is one in which labour laws are compliedwith, and the right to a fair, safe and healthy working environment is respected at alllevels, where governments, employers and workers actively participate in securing asafe and healthy working environment through a system of defined rights, responsibilitiesand duties, and where the principle of prevention is accorded the highest priority.

Building and maintaining a preventive culture requires making use of all availablemeans to increase general awareness, knowledge and understanding of labour laws,the hazards and risks in the workplace and how these may be prevented or controlled.Any national labour inspection policy should be formulated in consultation withrepresentative organisations of employers and workers.

Within the Labour Ministries, the General Inspectorate and the Factories Inspectorateundertake the task of labour inspections and enforcing the relevant laws. The servicesof the Labour Inspectorate are carried out by the General Inspectorate in the regionallabour offices and in the various district labour offices. The Labour Commissioner’sOffice/Labour Director’s Office coordinates the inspection undertaken by both inspection


units. In some countries, the General Inspectorate also undertakes labour relations andworkers’ compensation activities and registration of trade unions. The FactoryInspectorate on the other hand, handles health and safety issues and factory inspections.

CREATING A GENERAL LABOUR INSPECTION UNIT WITHINTHE LABOUR COMMISSIONER’S OFFICE

In the ongoing process of modernising the labour administration, the policy, managementand operational functions and activities need to be clearly defined. In modern-dayinspections, policy design, monitoring and evaluation at headquarters is clearly separatedfrom service delivery at the field level. In some countries, the present organisationalstructure at headquarters needs to focus more on the functional management oflabour inspection services.

The assessments indicate the need for the creation of a special unit for labour inspectionsat headquarters that will enhance the inspection system and also provide motivation forthe labour inspection officers. This new unit will be responsible for planning, monitoringand evaluation of all labour inspections at the headquarters to support policy formulationand implementation. It should be headed by a senior labour official with a higher gradethan the regional heads, reporting directly to the Labour Commissioner.

The main functions of this monitoring and evaluation of labour inspection services unitat headquarters, among others, could be as follows:

� to develop a draft labour inspection policy, preventive culture and an annualwork plan, after consultations with the clients of the labour inspection system(i.e. workers and employers);

� to set targets and priorities for regional and district labour offices in closecooperation with the Health and Safety Division;

� to prepare an annual report on the performance of the inspection system;

� to conduct periodic visits, checks and re-inspections in all regional and districtlabour offices in order to evaluate the quality of inspections and meet the clientsof the inspection system for feedback;

� to organise an annual meeting of all inspectors to discuss prevention issues,changes to the law, enforcement issues and training needs, and an annualtripartite meeting with ILO constituents to discuss the annual report on theperformance of labour inspections.

INCREASING THE NUMBER OF QUALITY INSPECTIONS

Data from statistical reports for many countries for the period 2002 to 2006 revealedthat for the country as a whole, the total number of inspections has gone down


considerably. In other words, many labour inspectors have not undertaken labourinspections, although it is their primary function.

The enforcement of minimum wage in less-developed countries, in particularengenders financial security for workers, boosting their purchasing power and raisingaggregate demand in the economy. For most workers, particularly in small and mediumenterprises, the inspector’s visit can make a big difference to the quality of life enjoyedby workers whose wages could be just above the poverty line. This is the essence ofILO Labour Inspection Convention, No. 81.

In most countries, inspections have not been regularly and systematically undertaken inthe last four to five years. Consequently, the creation of an in-house unit, which will plan,monitor and evaluate the general inspection system, will increase both the quality andquantity of labour inspections. The planning and the monitoring of inspections from allregional and district field offices is crucial for success in implementation.

The Labour Inspectorate could also direct the services of inspectors from neighbouringdistrict offices to target urban areas with a high incidence of violations. In this manner,the inspectorate will be able to achieve greater visibility and impact and also increasethe number of inspections. These targeted inspections will be in addition to the regularinspections undertaken in the rural areas.

The principal role of any inspectorate is law enforcement and securing compliance.Despite the constraints and problems, the inspectorate can improve its performanceby making better use of existing resources. This requires that inspection work be plannedto ensure that the enterprises at risk receive priority attention and those at low risk aregiven lower priority. It requires the proper planning and coordination of transportfacilities, as well as a change in the mindset, training and motivation of the inspectors,and an effective monitoring process both at the headquarters and in the field. Last butnot the least, it requires better planning of the financial resources allocated forinspections.

PLANNING OF INSPECTIONS

In a number of countries, the outer provincial towns and small establishments,smallholders/farms away from the core areas, few inspections have been undertaken.This neglect can be addressed with better planning of the use for both human andmaterial resources in order to enhance the number and quality of inspections both inthe core and outer areas. The strategy therefore would be to improve planning andattain a better balance between the industrial/commercial/areas and the smaller townsand farms in the outer areas:

� providing more and better-quality training;


� providing better office equipment such as fax machines, computers andsupport materials;

� setting inspection targets for vulnerable groups, both in urban and rural areas;

� establishing proper work plans;

� performance of monitoring inspectors; and

� evaluating performance to determine why targets are not met.

USING DIALOGUE TO ACHIEVE MORE COORDINATED LABOUR INSPECTIONSYSTEM

The assessments also saw no evidence of any dialogue between the Ministry and thesocial partners with respect to inspections. The discussions with the social partnersrevealed that they were very keen for information to be shared with them and for anational discussion to take place on progress being made in the labour inspectionfunctions. An annual report on the performance of labour inspection is best shared withthe social partners and used as a basis for initiating a national dialogue.

For labour inspection to be effective, dialogue with the social partners in labour inspectionis of great importance. The Labour Inspectorate can attain its objectives only if appropriatemeasures are adopted by the Labour Commissioner to promote effective collaborationwith employers and workers in its activities. A requirement along these lines is set out inArticle V of ILO Convention No. 81, and in Article XIII of Convention No. 129.Recommendation Nos. 81 and 133 also provide indications as to possible arrangementsfor collaboration in the area of occupational safety and health. Part II of the formerinstrument sets out possible forms and methods of collaboration. The latter advocatesrecourse in the agricultural sector to committees for hygiene and safety, which includeemployers’ and workers’ representatives, as one form of collaboration.

The assessment also pointed out the need for information-sharing on the outcome oflabour inspections between the health and safety inspectors, the Workers’ CompensationUnit, the General Inspectorate, the inspectors in the mining sector and officials in theHealth Ministry.

COOPERATION NEEDED FOR THE INSPECTION SYSTEM TO FUNCTION

Establishing inter-institutional cooperation is an inherent part of the concept of an effectivelabour inspection system. The effectiveness of labour inspection will depend in no smallmeasure on its capacity to function through interaction with its social and economicenvironment. It requires action to develop mechanisms and areas of cooperation withall the public and private sectors concerned and with the social partners and theirrepresentative organisations. The designation of a central labour inspection authority


ensures that the activities of the authorities placed under its control are coordinatedwith a view to achieving a clearly defined objective. It also ensures a degree of cohesionbetween mechanisms for cooperation and collaboration with other public and privatebodies and institutions, and with the employers and workers and their organisations,which are referred to in Article V of Convention No. 81.

Whatever may be the form of organisation or the mode of operation of the LabourInspectorate, labour inspection responsibilities should be shared among differentdepartments on a sectoral basis. In all cases, it is important that the LabourCommissioner/Labour Directors, take steps to encourage cooperation and exchangeof information on inspection methods and the results obtained between these differentdepartments, in order to streamline the procedures and save both time and materialresources. Rationalising and pooling certain material and logistical resources couldalleviate the chronic inadequacy of resources available to inspection services.

The existing inspection forms used by the general inspectorate in some countries alsocollects information on hazards and non-compliance with the Health and Safety Actand the Workers’ Compensation Act. It is important to convey any relevant informationto the competent authority for follow-up. A key recommendation of the assessment,emphasised the need for that information to be shared on a regular basis between allthe concerned parties, i.e. the Factory Inspectorate, the Workers’ Compensation Unitand the General Inspectorate. This will improve the collation and analysis of data andthe development of a preventive culture. A coordination meeting should take placeevery three months, chaired by the Labour Commissioner/Labour Director, which couldinclude discussion of strategies on prevention, media promotion, joint inspections,transport coordination, the role of workers and employers, occupational safety and healthmanagement systems, the budget for both preventive and compliance work, and therecommendations made in this report.

CONTRIBUTION OF LABOUR INSPECTION TOTHE IMPROVEMENT OF LABOUR LAW

The forms and frameworks of the employment relationship, production processes andtechnologies used at the workplace are changing fast. It is essential that relevantlegislation keep pace with these changes if the workers in new employment relationshipsor abusive conditions of work are not to suffer as a result of inadequate legal framework.Because of their free access to workplaces and special relationship with employersand workers, labour inspectors are potentially in the best position to identify situationsthat might call for legal and legislative solutions aimed at improving protection at work.Further, where appropriate, the Ministry of Labour needs to consult labour inspectorsduring the process of labour law reform. The most practical means of achieving thiswould be through the periodical reports, which they are now required to submit to thecentral inspection authority.


WORKING WITH THE SOCIAL PARTNERS IN THE FORMULATION ANDIMPLEMENTATION OF THE INTEGRATED LABOUR INSPECTION POLICY

A new labour inspection policy needs to be put in place to drive the implementation ofexisting labour laws and of the integrated system of labour inspection. As discussedearlier, the clients or stakeholders — i.e. the groups whom this policy is supposed toserve, must also be encouraged to play an important role in its development. A well-coordinated and integrated labour inspection policy is crucial for promoting compliancewith labour standards. This process will change the role of stakeholders from beingmere stakeholders at present to duty holders. Ownership leads to a higher level ofacceptance and better, sustainable implementation.

The main elements of a labour inspection policy

The proposed labour inspection and implementation policy, amongst others, couldconsider the following:

� the coverage of labour inspection, to include the informal economy and newestablishments;

� coordination of OSH, Workmen’s Compensation and general inspectionservices;

� vulnerable groups to be targeted;

� HIV/AIDS at the workplace;

� training programmes and their linkages with academic institutions;

� integration of inspection forms/services;

� balance between advisory and supervisory responsibilities;

� performance criteria for both the Factory’s Inspectorate and the General LabourInspectorate;

� types of inspection (regular, special, accidents and complaints, follow-up,re-inspection, etc.);

� involvement of social partners;

� delivery of training to workers and employers;

� planning, programming, and undertaking inspection visits and reporting;

� achievement indicators and targets;

� exchange of information between OSH inspectors and General labour inspec-tors on the use of personnel and material resources;

� effective methodology for setting of priorities;


� monitoring and evaluation;

� establishing a master register of establishments;

� information from the National Provident Fund;

� media campaigns; and

� inspection of SMEs and EPZs.

Setting up a master register of establishments

The key to successful planning depends to a large extent on an up-to-date masterregister of establishments at headquarters and field offices, which does not exist inmost countries. The meeting with the labour inspectors in the District Office andRegional Office in the countries concerned reveal the need for establishing this register.The lists of establishments must be entered into this register and updated regularly,including all relevant details and information on previous inspections.

There is thus an urgent need to develop a proper system to maintain and update thisregister at the various district offices. The list should be sent periodically to headquartersin order to update the master register. This list can be computerised at headquartersand in the districts. Computer training should be provided to district labour office staff. Indistrict offices where computer facilities are not available, they should be compiled in aregister with a hard cover.

The master register could be a useful tool for planning and for follow-up of inspections.This register of establishments should contain the following particulars:

� name and full contact address/details of the business establishment;

� nature of the business;

� name of the proprietor/owner;

� number of workers employed, listed by gender;

� date of last inspection; name/details of person who conducted the inspection;

� section of law where there are compliance issues;

� date of dispatch of compliance letter by the department;

� date of reply received from the employer; and

� date of follow-up inspection.

This list will enable effective planning and the use of scarce resources to targetnew establishments not previously inspected, and direct attention to those establishmentswhich were found to regularly violate legislation. Those establishments found regularlycomplying with the law that can be temporarily given low priority. The list will also facilitate


grouping inspections together for the same area, for both routine inspections and follow-up inspections.

Planning of quality inspections

Apart from the careful planning of inspection work and, in particular, arrangementsfor unannounced routine inspections, the conduct of each visit is important. Properpreparation is required before each visit and follow-up activities must be provided,including writing the proper inspection reports.

Training of labour inspectors

During the assessment, a number of inspectors requested the ILO to set up a trainingprogramme on how to conduct an integrated labour inspection. This training programmecould be made up of a practical module on conducting a quality inspection visit underthe integrated inspection system, and on ensuring effective reporting, monitoring andfollow-up, so that labour inspection enforcement and advisory activities, occupationalhealth and safety and conditions of work matters could be integrated into the daily workof each inspector.

Quality inspection visits carried out by properly trained inspectors can have an impactbeyond the immediate concern of law enforcement and compliance. The inspector’srole is at the frontline of the work of labour ministries. Through general observation andquestioning, they can identify problem areas and potential hazards. Thus, a well-executed inspection visit can play an important preventive role in the wider area ofcompliance.

Performance indicators and biweekly review meetings

Most of the countries did not dispose of mechanisms to monitor inspections. To ensurethat each inspector is able to undertake at least 18-25 inspections a month, dependingon the size of the establishments, it is necessary therefore, to hold the biweekly meetingsin the regional headquarters and in the districts in order to develop internal proceduresto assess the extent of compliance through inspections. In this regard, the biweeklyreview meetings are critical for performance management, both on the quality and quantityof inspections. These meetings are also training sessions which highlight the problemsencountered and the solutions to them, the quality inspections undertaken, strategiesfor reducing the incidence of accidents and non-compliance with the law, the efficientdeployment of office support staff, optimizing travel resources. It will also be useful toplan joint inspections and ensure quality control in follow-up inspections. However,sending monthly reports without receiving a response from management is demoralisingand demodulating and quickly leads to the degradation of the system’s information value.It would be useful to appoint an officer in the Senior Labour Officer at the Ministry charged


with facilitating communication between the field and headquarters, commend officesfor good performance and seek explanations for any shortfalls.

In addition, the heads of the regional and district Labour Inspectorate are responsible formonitoring the labour inspectors’ work plans and taking the necessary corrective actionso that the quarterly inspection plans are properly implemented. The responsible headsof inspectors in the headquarters must approve these plans at least 14 days in advance,of inspection, and then monitor their full and timely implementation. Labour inspectorsmust justify in writing any deviation from an approved work plan. This system mayappear burdensome at the beginning, but once properly applied, it should be of significantvalue for all operations of the inspection services. Brief, practical training or instructionby supervisors is essential in this context.

Linking complaints data on non-compliance toinspection planning and targeting

In many countries, the Department of Labour also had information on establishmentsfrequently not complying with the law. Reported labour disputes are on the rise, duealso to the new initiatives undertaken by the Labour Ministries to monitor compliancewith the law. Many of these complaints pertain to failure to pay statutory wages, failureto comply with leave provisions and cases of unauthorised deductions. The number ofcomplaints dealt with has been growing and there are cases settled after the employerhas been contacted by telephone by the Labour Department. It was revealed duringthe assessments that the complaints dealt with are not properly recorded. As such,records would be useful in identifying cases of non-compliance as well as to serve asindicators of the workload, it was therefore recommended that complaints be recordedin a register of complaints, with copies kept in the inspection file. Furthermore, a list ofestablishments with a high incidence of previous violations needs to be sent to themonitoring and evaluation unit for targeted inspections.

INFORMAL ECONOMY

Extending the protection of labour laws to workers in the informal economy is one of themain challenges facing labour administrations in developing countries and some industrialcountries. Inspectors are on the frontline. A sound approach to the informal economyrequires strategies that make it easier for micro and small businesses to formalise theiroperations, while safeguarding the job-creation potential of the sector. Employers’ andworkers’ organisations can play an important role in this process through advisory andrepresentation services, reaching out to community and other groups. A key step isoften the registration of micro and small employers with the relevant government serviceor services at local level. Labour inspection services need to be an integral part of localand central government strategies, which reduce the costs to businesses, workers and


the state of ensuring compliance with legal obligations. New strategic partnerships withinformal economy operator organisations, such as cooperatives, community groups,small traders’ and labour associations can be important means of building awarenessof the advantages of moving out of informality as well as the duties formal statusbrings.

THE CHALLENGES REGARDING TRAINING AND RECRUITMENTOF INSPECTORS

One of the main factors contributing to the recent challenge to the importance andrelevance of labour inspection is the decline in the quality of inspections undertaken indeveloping countries. The decline in the quality of inspections within the developingcountries is in part, largely due to their approach to recruitment and training.

In today’s labour market, inspectors face numerous challenges, including the growth ofnew technologies, new risks, outdated legislation, precarious contracts, illegalemployment relationships in child labour, illegal migration and the growing informaleconomy. These functions require a diverse set of knowledge, training and a soundeducation.

One distinguishing factor in countries with effective inspection systems is largely theefforts made by governments to attract a number of good qualified motivated inspectorsto this profession. The functions of inspectors are demanding as it requires technicalcompetence and human skills. This must be accompanied by stability in employmentpromotional prospects, remuneration guaranteeing commitment and incorruptibility,career prospects and the security of inspectors. Many successful inspectors have joinedthe private sector due to higher remuneration and career prospects.

In some of the countries where the system draws its existing inspectorate from secondaryschool leavers and from the clerical services, there is a growing feeling that futurerecruitment of the inspectorate should be such that it displays the personal qualitiesneeded for the performance of their duties and the recognised technical skills andqualifications. It is also felt that graduates generally have the personal and psychologicalabilities needed to deal with a wide range of people and situations in a manner that isboth firm and flexible.

A university education generally tends to facilitate the understanding of various aspectsof the law, and the grounding in economics and social sciences also provides graduateswith the confidence to provide appropriate technical advice to complex situationsregarding workers and employers and to build new networks.

This is fundamental in gaining the support of the social partners. Given that the primaryrole of the inspectorate is not to impose penal sanctions, but to detect and eliminate


risks well in advance. Recruitment interviews also need to be tailored to ensure thatcandidates have qualities of impartiality, integrity and discretion, which are essentialqualities of a labour inspector.

Furthermore, for many countries, the stability of the inspection systems was alsodue to regular in-house training and the fact that their inspectors were recruited inaccordance with suitable procedures and conditions of service, which gave them astatus to ensure their effective functioning. In such systems, a thorough knowledge ofsophisticated and powerful information tools are also required for the managementand evaluation of the statistical data that is needed for inspection systems to functionwell.

In many least developed countries, more often than not, labour inspection staff receivesonly limited initial training and have little opportunity to receive any in-service training.This experience acquired individually needs to be supported by formal training.

Successful implementation of the system of labour inspection will require determinedHRD effort throughout the system. First, any vacancies in the Safety and HealthInspectorate and the General Inspectorate need to be filled quickly. The assessmentsalso recommended a review of the appropriate qualifications needed for the labourinspectors posts, and suggests further training to meet the required standards. Forrecruitment to the new labour officers cadre, the minimum acceptable standard shouldbe a university education.

In addition to the concern regarding staff vacancies at the technical level, a seriousproblem encountered is poor motivation due to low salaries and limited career prospects.Personnel policies need to be redesigned to ensure that inspectors do not end theircareers in the same grade. The meeting with labour inspectors revealed that theconditions of employment of labour inspection are generally characterised by inadequatelevels of remuneration. As a result, some labour inspectors look for other sources ofincome such as a second job, either self-employment, or with a private sector employer.This leads to a high turnover and a downward trend on the number of inspectionsundertaken. It is vital that levels of remuneration and career prospects of inspectors besuch that high-quality staff are attracted and retained, and that measures are put inplace to enable them to carry out their work with integrity and without undue outsideinfluences.

There is a need to introduce performance appraisals to motivate high performers, andmore stringent entry qualifications and requirements for the recruitment of new officials.Managers need to be trained to use the performance appraisal system and ensure thatit is used to access training needs as well. Every official sent on an overseas training/workshop must prepare a report which includes all papers circulated, so that copies ofdocuments can be sent to the regions.


The assessments also recommended that active steps should be taken to raise theprofile of inspectors amongst employers, trade unions and the general public. Labourofficers can make valuable contributions to labour relations and consequently to stabilitywithin the labour market. By emphasising the positive roles they play, their status withinthe broader community will improve, and this could positively impact the existing lowlevels of morale.

REFERENCES

The ILO Labour Administration Recommendation No. 158.

The General Survey on the Labour Administration Convention No. 150, presented by the Committee ofExperts to the ILO Conference in 1997.

The Labour Administration Convention No. 150, 1978.

The Labour Inspection Convention, No. 81, 1947.

Labour Inspection Recommendation, No. 81, 1947.

Linking Research Institutionwith Labour Administrationin KoreaInjae Lee

INTRODUCTION

The role and function of a government-funded research institute are defined differentlyin each country depending on the historical background of its labour market andgovernment characteristics. But a commonly held belief seems to be that providinguseful research and information for the government and general public is an importantresponsibility. However, some differences may still be found in the specific researchscope and the degree of participation in the policy formation and implementation.

Government-funded research institutes in Korea have played up to their expected rolesin many policy areas. They have specialised in research and analysis oriented towardpolicy decisions that policymakers have faced. They have examined economic dataand research findings and produced economic forecasts designed to be accessible togovernment officials, private corporations, and general public. Their in-depth researchfindings have been widely recognised in the academic circle. The public researchinstitutes have emerged over the past four decades as the leading think tanks in Korea.

However, the quantity and quality of their research services for the labour administrationhad been more or less irrelevant until the Korea Labour Institute (KLI) was founded in1988. KLI is the public institute of research and analysis specializing in labour issues inKorea. KLI has been leading researches and policy suggestions on a range of labourissues including employment and labour market, human resource development,industrial relations, and industrial health and welfare.

For labour administration to play the role that social and economic actors expect in theareas of labour and employment policies, it must constantly respond to the changes in

9


the labour market conditions and revise its policies by the adoption of appropriatemeasures whenever necessary. To accomplish this purpose, labour administration isrecommended to have its own research services or specialised research institutes toundertake research on labour issues.1 Since its establishment in 1988, KLI hasconducted effective labour research for the labour administration in Korea. KLI hascontributed to the elaboration of government’s economic and social policies and hasbecome an integral part of the labour administration.

This paper reports the role of the KLI in the labour administration in Korea. Section IIintroduces the functions and organisation of the KLI. Section III is a case study on therole of KLI in the establishment of the Employment Insurance System in Korea. SectionIV concludes with some remarks on the role of KLI on the promotion of tripartism andsocial dialogue.

KOREA LABOUR INSTITUTE: ORGANIZATION AND FUNCTIONS

Founded in 1988, Korea Labour Institute has emerged over the past two decades asone of the leading think tanks in Korea. KLI is one of the member research institutes ofthe National Research Council for Economics, Humanities and Social Sciences (NRCS)2

Therefore, Korea Labour Institute is a research organization independent of the Ministryof Labour.

KLI employs some 100 staff, of whom 40 are professional research staff withPhD degrees. This staff draws on a wide range of disciplinary expertise, and includeeconomists, sociologists, econometricians, management scientists, and ergonomicscientists. In addition, KLI works extensively with a network of individual associates andpartner organisations.

Mission

The mission of the KLI is to:

� contribute to improving living standards of workers and people by conductinghumanistic research;

� provide scientific research based on neutrality and objectivity;

� promote social dialogue and high-quality industrial relations in the nation; and

� suggest labour and social policy directions for the 21st century.

Research Areas

The five main areas of KLI research are:

� Labour Market and Employment Policy

Linking Research Institution with Labour Administration in Korea 211

� Human Resource Development

� Industrial Relations and Human Resource Management

� Labour Laws and Regulations

� Workers’ Welfare and Quality

Organisation and Functions

The organizational structure of the KLI is composed of two main research offices, threeresearch centres, and an office for research management. The Office for IndustrialRelations focuses on industrial relations, Human Resource Management and labourlaw whereas the Office for Labour Market concentrates on labour market issues. Thethree research centres include Labour Insurance Research Centre, Data Centre, andCentre for Wage and Job research. These centres are established to support andenhance the quality of research. To support activities of this core research body, thereis the Office for Research Planning and Management. We also run an educationalprogram for social partners, namely, the Advanced Labour-Management RelationsProgram. In addition, New Paradigm Centre established in 2004 has been managed asan affiliated centre.

� Office for Research Planning and Management

This office is in charge of the overall research planning and management of theinstitute. Budget team, Publication team, Library team, International Cooperation teamand Data Processing and Technical Support team are under this office. In addition,Management Innovation Support Bureau was newly established in 2005 to introduceinnovative management of the institute.

� Office for Industrial Relations Research

This office comprises the Industrial Relations and Labour Law Research Team, theWage and Job Research Team and the Advanced Labour-Management RelationsProgramme. The research topics of this office range from employment relations ingeneral, trade unions, strikes, social dialogue, HRM practices, work organisation andwage system to labour law.

Wage and Job Research Team

The team aims to conduct theoretical and practical studies on innovative wage andjob arrangements and disseminate their results across the nation. This will not onlycontribute to increasing competitiveness and creating jobs but also enhance fairnessand protect the vulnerable group, maintaining social cohesion.


Advanced Labour-Management Relations Program

Begun in 1989, this six-month educational programme is designed for practitionerssuch as trade union officials, IR/HR managers and officials of government agencies.The programme is aimed at helping the practitioners understand theories, practices,policies of industrial relations, labour economics, and labour law, human resourcesmanagement and social security. By encouraging mutual understanding between labourand management, this program also aims to develop mutually acceptable rules at theworkplace.

� Office for Labour Market Research

There are two teams under this office for the labour market research. The LabourMarket Research Team covers research topics relating to employment, occupationalinjuries and compensation, income gap, HRD, poverty, and vulnerable group issuessuch as women and the elderly in the labour market. It also conducts studies of labourinsurance systems, i.e., employment insurance and industrial accident compensationinsurance. Recently, its research boundaries have been widened to cover industrialand regional labour market, effects of trade liberalisation on the domestic labourmarket, and relations between macro economy and labour market.

Labour Insurance Research Team

The team conducts in-depth researches on the Employment Insurance and theIndustrial Accident Compensation Insurance. Also jobs and work-related issues arescrutinised in order to suggest timely policy directions responding to the recent labourmarket challenges.

� Data Centre

This centre is composed of four teams including: Labour Trend Analysis, Korean Labourand Income Panel Study, Workplace Panel Survey (WPS) and Korean LongitudinalStudy of Ageing (KLSoA). This centre aims to provide an enhanced system of creating,managing and analyzing statistics. Data Centre also publishes a number of reports andperiodicals including Monthly Labour Review, Quarterly Journal of Labour Policy andKLI Labour Statistics.

� New Paradigm Center

The New Paradigm Centre aims at introducing a ‘new paradigm’ in the national economy.New Paradigm Centre will contribute to creating sustainable jobs and increasingbusiness competitiveness by introducing a lifelong learning system and new workingpatterns and strengthening industrial safety. To this end, the Centre develops newmodels and launches trial projects in order to help the private and public organisations


to initiate innovative ways of doing things. The New Paradigm Centre alsoperforms government-sponsored consulting projects and research projects to build‘people-centred’ organisations.

KLI Data

Effective research cannot be pursued without the compilation, analysis and publicationof adequate and reliable labour statistics. One of the strengths of KLI as a researchinstitute is that KLI produces several high-quality data sets.

� KLIPS

Korea Labour and Income Panel Survey is a longitudinal survey of households andindividuals residing in urban areas. The valuable data serves as a source formicroeconomic analysis of labour market activities and transitions and therebycontribute to development and evaluation of labour market policies.

� KLSoA

Korean Longitudinal Study of Ageing is an annual longitudinal study on the 45-or-olderpopulation nationwide, tracking changes in such categories as demographics, familycomposition, health, economic activities, income/assets and personal expectations. Asthe Korean population is ageing faster than other countries, the panel data will becomevaluable basic statistical information for the development of policies for the ageingpopulation.

� Korean Workplace Panel

Tracing workplaces has become necessary since the economic crisis. This is tosystematically understand the employment structure and labour demand as well as toevaluate the corporate systems of human resources management. As the industrialstructure rapidly changes with the trend of restructuring and globalisation, the workplacepanel survey will continue to contribute to the formation of the government’s employmentpolicies and human resources development policies, by providing useful information onKorean corporations’ labour demand and human resources management.

� Regional Labour Market Information

As different regions have different labour market compositions and industrialstructures, it is necessary to build statistics and employment information that is moreeffectively used by each region. By forming a model for regional labour informationbased upon advanced countries’ regional labour market information and managementstatus, more effective employment policies for individual regions will be developed,supported by detailed data on the regional labour markets.


� Labour-Management Relations Data Base

In response to the skyrocketing demand for labour-related information, basic labourstatistics and labour trend analysis are provided, as basic data for timely and in-depthlabour-management relations researches. Specific projects include labour-managementrelations DB, labour precedents DB, labour-management relations in governmentoffices and human resources DB.

ROLE OF KLI IN THE ESTABLISHMENT OF EMPLOYMENT INSURANCESYSTEM: A CASE STUDY3

Background

Talks of introducing an employment insurance program in Korea began in the 1960s.The Employment Security Act (law no. 807), enacted and promulgated by themilitary government on Dec. 6, 1961, expressed the government’s will to establish anunemployment insurance program by placing it within the scope of governmentresponsibilities (Article II). But Korea’s economic development at that time was notconducive to undertaking such a program, and vision remained in paper only.

Reality notwithstanding, it appears that the Labour Administration (predecessor to today’sMinistry of Labour) did ardently wish to introduce such a program. A classified reportdrafted by the Administration presumably in 1968 reveals that a plan to deliver limitedduration unemployment benefits to the low-income jobless to protect their livelihoodwas reported to and approved by the Administration’s director. At that time Korea was atthe initial stage of economic development with high unemployment, and the plan aimedto provide such benefits out of the government’s general account. But probably owing tothe sentiment that it was too premature for the country’s economy, the report becameclassified and was never announced. By its content, what the report called for was anunemployment assistance program, and it provides documented evidence that theKorean government reviewed the feasibility of a social safety net for the jobless as earlyas the late 1960s.

In another report, an unofficial one whose author, publisher or year remains unknown(presumed to be drafted in 1970 as a government-commissioned project), anargument is made in favour of an unemployment insurance scheme in the mosttraditional sense (i.e., providing benefits to the jobless). It recommends the financialresponsibility to be borne equally among the state, employers and workers, and definesthe benefit rate at 60% of pre-unemployment wage, and the premium rate at 16/1000 or20/1000 of the wage. It does not, however, make any mention of eligibility criteria.

At the government level, the Labour Administration produced several reports on theneed for an unemployment insurance program in the 1970s which were then submitted


to the director. But what was reviewed at the time was unemployment assistance ortraditional unemployment insurance, not modern-day employment insurance. Besides,the reports were all kept within the Administration, never to be shared or discussed withother government bodies. But the fact that unemployment insurance was consideredfrom as early as the late 1960s (although intermittently and covertly) leads to theassumption that the program was a long held ambition since the days of the LabourAdministration.

The beginning of the 1980s brought higher unemployment rates in Korea. Politicalupheaval and economic downturn spanning from the late 1979 to 1980 increased theunemployment rate in nonagricultural industries from 5.6% (1979) to 7.5% (1980) and6.5% (1981). The Fifth Five-year Economic and Social Development Plan, draftedbetween the second half of 1980 and first half of 1981, was created against a verychallenging economic and social backdrop both inside and outside the country. But theeconomy began to resuscitate in late 1981, and the government decided to revise theFive-year Plan accordingly. It was during the revision process that the Ministry of Labour(elevated from Administration status in 1981) made an official request to the EconomicPlanning Board (EPB) to adopt an unemployment insurance program, an idea that hadhere to for been kept within the Ministry. The Ministry had support from the academia aswell. The professors brought their handwritten report to the EPB to make their case forbringing an unemployment insurance scheme to Korea. Backed by such demand, anofficial process was launched during the revision of the Five-year Plan, where the EPBand the Labour Ministry were to review the possibility of introducing unemploymentinsurance. But it was not to bear fruit at this time, as concerns for the proposed program’snegative consequences, burden on companies, insufficient level of Korea’s industrialdevelopment, and resentment from the corporate sector and government ministries(except for the Labour Ministry) superseded all other arguments. In the end, theprogram was diagnosed as being ahead of time.

But the drive was not all for naught. From the discussion emerged a consensus that atraditional unemployment insurance program that provides post unemploymentbenefits would be far too inadequate in guaranteeing the livelihood of the jobless. Whatis more important is to prevent unemployment, improve the employment structure andenhance workers’ professional competence. Such objectives would be better servedwith a package that comprises vocational training, employment stabilization and othersimilar programs, and it was agreed to call such a program package “EmploymentInsurance System (EIS)” to denote its more proactive approach. Based on thiscommon understanding, the government started to use the term “employmentinsurance” in the early 1980s in differentiation from “unemployment insurance.”

Undeterred by its previous failure, the Labour Ministry again tried to introduce theEIS during the legislation process for the Sixth Five-year Economic and Social


Development Plan which took place from the second half of 1985 to the first half of1986. But it was to no avail again, as all it could manage after much controversy was toinsert a phrase, “introduction of the EIS will be positively considered.” But in fact,throughout the five year implementation period of the Plan, it was never even discussed,let alone “positively considered.”

The June 29 Declaration of 1987 (allowing popular election for the President) wasa breakthrough for the labour. The erstwhile severely repressed labour movementtook on a new life, and workers could more strongly express their views regardingmajor labour policies. On September 25, 1989, the Federation of Korean Trade Unions(FKTU), one of Korea’s two national unions, petitioned the National Assembly toimplement the EIS, then the Labour Ministry on September 30, 1989. They alsopetitioned for employment insurance legislation, first to the then ruling DemocraticLiberal Party on May 24, 1990, then to the Peace and Democracy Party on August 24,1990.

In December 1987, the Labour Ministry conducted an internal review in a reportentitled, Study on Japan’s EIS. The Korea Labour Institute (KLI) backed their effort bypublishing the International Case Studies of the EIS. Meanwhile, the governmentstarted to take a more positive look into the EIS while preparing for the SeventhFive-year Economic and Social Development Plan. Preparation for the Seventh Five-year Plan was characterized by outsourcing: a research institute was designatedfor each policy area, to be responsible for producing the first draft. On August 30, 1990,the basic concept for the Seventh Five-year Plan was announced, followed by theplanning guideline on October 23 the same year. In November, the research instituteswere designated, and members commissioned for the planning committee in eachpolicy area.

The Korea Development Institute (KDI) and Korea Institute for Health and Social Affairs(KIHASA) were put in charge of social security planning, which also included employmentinsurance. The Social Security Planning Committee had four subcommittees (SocialInsurance, Income Distribution and Public Assistance, Social Welfare Service, andEmployment Insurance), each of which was responsible for creating a first draft. TheEmployment Insurance subcommittee had eight members, including the chairman (headof policy research at FKTU), secretary (head of research at the Korea Employers’Federation), four scholars and two government representatives. But the compositionwas inherently problematic. Whereas in other subcommittees of Social Security Planning,a researcher from the designated research institute or a professor was appointed asthe chairman and an officer from a related Ministry as the secretary, the EmploymentInsurance subcommittee had a labour and management representative in each position.In addition, there was no representation from KIHASA, the institute in charge of writingthe first draft. These limitations were pointed out by KLI at the 1st meeting of the Health,


Medical and Social Security Planning Committee held on December 26, 1990 held atKIHASA to discuss the planning guideline and direction. The KLI also suggested thatthe institute in charge of employment insurance be changed from KIHASA to the KLI.The suggestion was met with a consensus at the Social Security Planning Committeemeeting held February 5, 1991, and a subsequent request was made to the governmentto replace the research institute in charge. The government responded positively,deciding the next day to hand over the responsibility for employment insurance to theKLI.

The initial timeline for the Seventh Five-year Plan was to finish the draft planning by theend of December 1990. But because the research institute for employment insurancewas finally designated on February 6, 1991, the draft report (created by the KLI) wassubmitted to the government in early March in 1991.

But understanding of employment insurance was only rudimentary at that time, andeven within the EPB, the ministry in charge of the Seventh Five-Year Plan, there was noconsensus on the need to introduce the EIS. Sensing the problem, KLI researchersand Labour Ministry managers visited the EPB on March 27, 1991 to hold extensivediscussions on the justification and direction for adopting the system in Korea. At theend of the meeting, the key managers of the EPB became more convinced of its need,and an agreement was reached at the working level to implement the system during theimplementation period of the Seventh Five-year Plan. The meeting was also a chancefor the working level (in charge of preparation for the Seventh Five-year Plan) tounderstand that a Korean version of the EIS should be fundamentally differentfrom traditional unemployment insurance and it should be closely integrated withemployment policies.

Based on the consensus built within the EPB, a policy discussion took place onJune 12, 1991 with participation from relevant ministries, academia, labour andmanagement. Finally, the decision was made at the Economic Ministers’ Meeting onAugust 23 the same year, to implement the EIS in the later stage of the SeventhFive-year Plan. The official go-ahead for introducing the EIS in Korea as part of theSeventh Five-year Plan was also fully reflected in the Plan itself.

The EIS also became a campaign promise in 1992 leading up to the general electionand the Presidential election, as the three major parties all promised implementationin 1995. The FKTU, at its general assembly on February 25, 1993, adopted the“Resolution for EIS.” In March the same year, the labour federation submitted its viewson the Five-year New Economy Plan where EIS implementation was once againproposed. Finally, implementation of the EIS was explicitly included in the Five-yearNew Economy Plan, the economic master plan of the new government inaugurated onFebruary 25, 1993, with the target date of 1995.


Korea Labour Institute and Employment Insurance Act

Launch of the EIRC and Development of the Korean EIS Model

Having decided to launch the EIS, the Korean government, at the HR Policy DeliberationCommittee meeting on March 9, 1992, approved installation of the EmploymentInsurance Research Commission (EIRC) under the Korea Labour Institute (KLI) to studyand determine the model best suited to the Korean environment.

The government initially committed to a financial support of KW 3.3 million to the KLI asthe budget for the EIRC’s operation and research (EPB, Labour Ministry, March 9, 1992).But in reality no support was delivered by the government at all as the EPB BudgetOffice was opposed to the EIS and refused to allocate the budget. To make up for theshortage, the Labour Ministry had KW 100 million of the KW 200 million researchbudget for the Human Resources Development Institute, an umbrella organization ofthe Human Resources Development Service of Korea, reallocated to EIS-relatedresearch. Out of this, KW 67 million was provided to the KLI as fees for two researchprojects: “Analysis of Vocational Training Demand Following the EIS” and “Studyon EIS-related Regulations (Including Sharing of Vocational Training Costs).” Inshort, the KLI had to run the EIRC against such a challenging situation, having toearn the operation cost of the EIRC from project fees while providing the projectsfor free.

Incidentally, there was a serious difference between the Labour Ministry and the KLIwith regards to the composition of the EIRC. The Ministry stated, “KLI researchersshould conduct most of the EIS study, and the EIRC shall have around 100 memberswho shall receive prior training to become EIS spokespersons once the system is put inplace.” To this, the KLI’s response was that “having 100 members in the EIRC wouldcreate sizeable difficulties in conducting meetings, not to mention excessive costs (atleast KW 10 million per meeting), which simply cannot be accommodated giventhe absolute lack of budget support from the government.” Its proposal was to limitthe membership to 10-15 in the interest of efficient operation. In the end, the twoorganizations agreed on a mutual compromise of 30.

The KLI, after several rounds of consultation with representatives from the government,academia, management and labour, selected the 30 members on May 18, 1992. TheKLI president was made the chairman and 29 representatives from the academia werecommissioned as members. Of the 29 members, three were unable to take part owingto personal reasons, leaving only 27 members including the chairman as participants ina real sense.

The EIRC consisted of one Coordination Team and Four research teams: Labour Marketand Employment Security; Model Development; Vocational Training; and Financial


Analysis and Impact Assessment. The Coordination Team was in charge of overalloperation of the EIRC, such as research topic selection and meeting organization, aswell as publication and communication of research results. The KLI vice president wasmade chairman and secretaries from research teams filled the membership. The LabourMarket and Employment Security Research Team was responsible for analyzing thecharacteristics of Korea’s labour market and unemployment structure. It also supportedthe Model Development Team by studying how to expand the job safety net. The ModelDevelopment Team was primarily responsible for comparing and analyzing the EIS ofmajor industrialized countries, the result of which was used to develop a modelappropriate for Korea. The Vocational Training Research Team mainly dealt with analysisof demand for vocational training and how such training should proceed once the EISis put in place. The Financial Analysis and Impact Assessment Team calculated thefinancial requirements for introducing and operating the EIS, the appropriate premiumrates, while analyzing the system’s potential impact on our society. Each team was ledby a senior scholar, and included a secretary who was a researcher at KLI. Researchactivities were mostly led by the secretary, but the content of the research had to bediscussed at EIRC’s chairmen and secretaries’ meetings, each Team’s meetings, andthe general meeting. Official position on the content had to be determined basedon the feedback and views gathered at different levels of meeting. Representativesfrom labour, management and government could also attend the EIRC’s meetings asadvisors and put forward their views.

For one year after its kickoff on May 18, 1992, the EIRC held about 40 rounds ofmeetings, the result of which was compiled in an interim report submitted to the LabourMinistry in December 1992. The final report containing EIRC’s official position on theimplementation direction was submitted to the government on May 18, 1993. The EIRCalso published around 20 other reports (e.g. Study on How to Implement the EIS) thatprepared the grounds for introducing the system. It stayed active until November 1995,well after the Employment Insurance Act was enacted, offering opinion on theEnforcement Ordinance and Enforcement Regulations of the Employment InsuranceAct, as well as other rules and guidelines.

Employment Insurance Act

The Report on EIS Implementation in Korea, adopted as the EIRC’s official position atthe Commission’s general meeting on May 18, 1993, was immediately delivered to thegovernment. Meanwhile, the Labour Ministry had installed the EIS ImplementationWorking Group under the Employment Policy Division of the Employment SecurityBureau in 1993 (almost immediately after receiving the EIRC’s interim report at the endof 1992). The Working Group was put in charge of drafting the Employment InsuranceAct based on the EIRC’s recommendations. After the final report was submitted in May1993, the Working Group’s activities took on a greater urgency. The Employment


Insurance Bill, produced by the Labour Ministry’s Employment Policy Division inconsideration of the views of the EIRC, the academia, labour/managementrepresentatives and relevant ministries, was announced for legislation on July 30, 1993.At the same time, amendment to the Basic Employment Policy Act and EmploymentSecurity Act was announced. The FKTU advocated the Employment Insurance Bill,calling for EIS implementation at the “National Rally for Economic Reform” on May 22,1993. Its representatives also had a meeting with the Labour Minister on June 14 torequest early implementation. The KEF also conveyed the management’s views on theEIS to the Labour Ministry on June 30, 1993.

On August 3, 1993, the government held a public hearing on the Employment InsuranceBill to gather feedback and comments from interest parties. The Bill was approved atthe Economic Ministers’ Meeting on September 24, then at the cabinet meeting onOctober 21, and proposed at the National Assembly on October 28. But at this stage, itcontained some provisions that were not consistent with the original spirit of the EIS (asa result of compromise among different ministries), foretelling of possible conflicts oncethe system went into effect.

The Employment Insurance Bill, after being proposed at the National Assembly(NA), was referred to the NA Labour Committee on October 29, 1993. On December 1,1993, the Employment Insurance Bill was unanimously approved at the ordinarysession of the National Assembly. On December 27, 1993, it was promulgated as lawno. 4,644.

On April 21, 1994, the Labour Ministry installed the Employment Insurance Divisionunder its Employment Security Bureau to fully prepare for the EIS. The DraftEnforcement Ordinance to the Employment Insurance Act was announced forlegislation on October 26, 1994. Feedback was received from interested parties,consultation made with related ministries, and deliberation conducted at the EconomicMinisters’ Meeting on November 25, 1994 as well as the cabinet meeting on March 1,1995. The final version of the Enforcement Ordinance to the Employment InsuranceAct was promulgated on April 6, 1995 as Presidential Decree No. 14,570. Thegovernment also announced for legislation the Draft Enforcement Regulations tothe Employment Insurance Act on March 8, 1995. Again, feedback was collected, andit was promulgated on June 12, 1995 as Labour Ministry Decree No. 100. At thesame time, rules, regulations, guidelines and notice needed for documenting andimplementing the EIS Operation Guideline were enacted. Also, regional labour officesthat would directly handle the EIS operations were reorganized, additionally staffed andtrained to ensure adequate response to the new role. In addition, computer programswere developed and tested for such functions as collecting insurance premiums,managing the insured, and paying out unemployment benefits.


KLI on Major Issues of the Employment Insurance System

Scope of EIS Programs

As explained above, it was largely agreed in the early 1980s, at the initial stage ofunemployment insurance discussion in Korea, that it would not be desirable to adopt atraditional version of the system. Instead, it was deemed wiser to introduce a packagethat combines active labour market policies with unemployment benefits, one that couldminimize unemployment and promote reemployment. The conclusion from the talkswas that if an unemployment insurance program was ever to be realized in Korea, itshould be in the form of active labour market policies (eg. vocational training) combinedwith unemployment benefits, and that such system should be called an “employmentinsurance system” in differentiation from “unemployment insurance.” But existence of along held consensus did not guarantee smooth sailing throughout. In the early 1990swhen the EIS was being discussed in earnest, there were controversies surroundingthe possible scope of EIS programs.

Even within the EIRC in charge of developing the Korean EIS model, some memberspreferred the traditional unemployment insurance, one that mostly handed out benefits.But most members remained steadfast to the belief that an EIS, as an organiccombination of active labour market policies and unemployment benefits, would betterserve the purpose of developing a public job stabilization program and building a lifetimelearning environment. But management representatives preferred to limit the scope oflabour market policies, arguing that the mandatory in-company vocational trainingshould be maintained and that the EIS should only provide outplacement training for theinvoluntarily unemployed.

A particular point of contention was whether to include the Employment StabilizationProgram (ESP), designed to minimize unemployment in the course of employmentadjustment and to promote hiring of the disadvantaged, as part of the EIS. The majorargument against it was that the program, as seen in the cases of industrializednations, often produced minimal net benefits owing to deadweight effect andsubstitution effect. The issue was also hotly debated within the EIRC and had to be putto a vote, which came out 5 to 5. The EIRC decided to leave it to the judgment of theLabour Ministry. The Ministry finally decided in favor of its inclusion in the interest ofpursuing active labour market policies through the EIS.

There was no objection against the Job Skill Development Program (JSDP). Allmembers agreed that it should be included in the EIS for the purpose of building alifetime learning system for workers and preparing for the onset of a knowledge-basedeconomy.


Neither did the Unemployment Benefit Program receive any objections. But opiniondiffered on its name. Some suggested that “job seeking allowance” or “job seekingactivity payment” may be better than “unemployment benefits,” to highlight that thepayment was compensation for faithful job seeking activities. The EIRC accepted theargument, and decided to call unemployment benefits “Unemployed Workers’Livelihood Stabilization Program” which would include job seeking allowance or jobseeking activity payment and employment promotion incentives. The latter wouldinclude vocational training allowance, early reemployment allowance and extendedtraining allowance. The EIRC unanimously found in favour of the extended trainingallowance, designed as an employment promotion instrument that supports vocationaltraining and reemployment at a stable job. Incidentally, it was in contrast with theirdecision against the extended unemployment benefits, which was to lengthen theperiod of benefits in times of high unemployment. The EIRC decided that suchextension should be considered after the EIS is well established and its financialoperations stable.

The government, upon reviewing the proposal from the EIRC, decided to use the moreunderstandable term “unemployment benefits.” The program would be divided intobasic benefits and employment promotion allowance. The latter would include earlyreemployment allowance, job skill development allowance, long-distance job seekingactivity allowance and relocation allowance. The decisions were reflected in thelegislation accordingly. As a result, the following programs were finally included inKorea’s EIS: Employment Stabilization, Job Skill Development, and UnemploymentBenefits.

One point of note is the discussion within the EIRC to include a “labour marketinfrastructure program” as an initiative to upgrade nation’s employment services. But itwas rejected in the face of opposition by the Labour Ministry, labour and managementwho argued that upgrading employment services and building a job security net shouldbe financed by the government’s general account.

Coverage

There was some discussion on whether the coverage should be specified in theEmployment Insurance Act or in the Enforcement Ordinance. The prevailing argumentwas that the coverage should be expanded on a gradual basis as the publicemployment services (the executive of the EIS) is streamlined and the EIS is morefirmly established. Accordingly, the decision had been made to state the principle ofuniversal coverage in the Employment Insurance Act, with exceptions being allowedper Presidential Decrees (Article VII, Employment Insurance Act). Now at the time ofdrafting the Enforcement Ordinance, the issue was what should be the criteria (thesize of the business) for such exceptions.


In terms of coverage by size, there was a standoff within the EIRC between the majorityopinion of “workplaces with five or more employees” and the minority opinion of“workplaces with 150 or more employees.” Ministry of Commerce and Energy andemployer organizations like the KEF and Korea Federation of Small and MediumBusiness (KFSMB) proposed the same criteria as for the mandatory in-companyvocational training (150 or more), while the FKTU was in favour of making it obligatoryto workplaces with five or more full-time employees and optional to those with lessthan five (to be determined by labour-management agreement). On the other hand, theKorea Trade Union Congress (predecessor to today’s Korean Confederation of TradeUnions) suggested that all workers be included regardless of workplace size oremployment status, but on a gradual basis: the coverage should start with workplaceswith five or more employees, and then extend to all workplaces within three yearsthereafter. Faced with such wide-ranging views, the EIRC, after much deliberation,decided to apply the EIS to all businesses or workplaces in principle, but to grantexception at the initial stage to businesses or workplaces with less than ten employees.

During the opinion-gathering process for the Employment Insurance Bill in the secondhalf of 1993, labour representatives, in consideration of the time required for administrativepreparation, suggested that the EIS coverage be defined as workplaces with tenor more employees from 1995 to 1997, to be expanded to workplaces with five ormore from 1998. In contrast, management representatives, citing the “150 or moreemployees” criteria for providing mandatory in-company vocational training, proposedthe same threshold for the EIS. The government also showed divided opinion. Whereasthe Ministry of Commerce and Energy sided with the management and advocated the“150 or more” criteria, the Labour Ministry was in favor of ten or more. In the end, acompromise was made to delegate the definition of coverage to the EnforcementOrdinance, which meant that the issue would again become a point of heated debate ata later stage.

In early 1994, the Labour Ministry went into the opinion-gathering stage for theEnforcement Ordinance. By this time, the job security organization, to be in charge ofmanaging and operating the EIS, was already defined as a regional administrative bodyof the Labour Ministry, and the Basic Employment Policy Act and Employment InsuranceAct had been enacted. But the government budget for the fiscal year of 1994 includedno allocation for EIS preparation, such as setting up the job security organizations,because during inter-ministry discussion on the Employment Insurance Bill, the EPBand the Vice Minister of Labour had agreed to postpone the final decision on theorganizational structure for managing and operating the EIS. They had agreed tocommission a study to the KDI and KLI and base the final decision on their conclusions.The situation severely hindered the Labour Ministry’s plan to apply the EIS to workplaceswith ten or more employees from July 1995.


As including all workplaces with ten or more employees became a near impossibilitygiven the government’s level of preparation, the EIRC unofficially proposed to thegovernment to start from workplaces with 30 or more. They also tried to make theircase to the labour. For its part, the labour, upon seeing EIS preparation falter due toinsufficient inter-ministry collabouration, tried to come up with a joint labour-managementproposal in the course of the 1994 collective wage bargaining between the FKTU andKEF. Thus reached, the 1994 Central Labour-Management Agreement was announcedon March 30, 1994, and contained a proposal to the government on the EIS applicability:to apply the EIS to workplaces with 30 or more employees in the initial stage thenexpand it to those with 10 or more from 1998.

In light of the joint proposal and realistic challenges, the Draft Enforcement Ordinanceannounced by the Labour Ministry on October 26, 1994, stated that workplaces withless than 30 full-time employees shall not be subject to provisions of Article VII of theEmployment Insurance Act (Article II). But number II under the Addendum specifiedthat from January 1, 1998, the Employment Insurance Act shall be applicable to allworkplaces with ten or more full-time employees.

Cost Responsibility

For the cost of starting and operating the EIS, the EIRC espoused sharing among thethree parties of government, labour and management. The government shouldfinance the EIS management and operation, as well as job information service andcareer counselling out of its general account. The employer should be responsible forthe cost of the Employment Stabilization Program (ESP) and Job Skill DevelopmentProgram (JSDP). The employer and worker should each bear 1/2 of the cost forUnemployment Benefits Program (UBP).

The EIRC’s proposal was accepted almost in its entirety, and the EmploymentInsurance Bill announced by the Labour Ministry on July 30, 1993 stated the followingabout government support: (i) The state shall bear all or part of the annual cost formanaging and operating the EIS from its general account; (ii) The state may support apart of the cost required for EIS programs within a scope allowed by the annual budget.As for cost sharing between the employer and employees, the premium rate shall beunder 20/1,000 of the total wage paid (specific rate to be determined by a PresidentialDecree). The employer was to be responsible for the premium for the ESP and JSDP,and 1/2 of the premium for the UBP, the other half of which would be paid by theemployees.

Reacting to the legislation notice, the labour argued that the state shall pay for part ofthe program cost in addition to the management and operation cost of the EIS. Employerswere of the opinion that the EIS management and operation cost should be borne by the


state and that a part of the severance pay should be used to make the EIS premiumpayment. The labour was staunchly opposed to the latter argument, saying thatintroducing the EIS should not impact the severance pay in any way. Some scholarsopined that all costs for the EIS, including management and operation cost, should beborne equally among the government, labour and management (i.e., 1/3).

There was yet another differing opinion from the EPB Budget Office, who requested tochange state funding for EIS management and operation from mandatory to optional,and to delete the provision on possible partial support for EIS programs. The EPB’sopinion was fully reflected in the Employment Insurance Act, and the provision wasrevised as follows: “The state may bear all or part of the annual cost for managing andoperating the EIS from its general account (Article V, Employment Insurance Act).” Itwas a huge step backwards from the initial legislation notice.

No difference was expressed on the principle of equal sharing of the premiumbetween labour and management. But there was some difference on what should bethe appropriate premium rate. The Employment Insurance Bill only set the maximumpremium rate and let the specific rate be defined by a Presidential Decree. Therefore, acompromise was reached on the maximum rate, to lower it to 15/1,000 (paragraph 1,Article 57, Employment Insurance Act). But when it came to determining the specificrate under the Enforcement Ordinance, such harmonious compromise did not comeabout easily as different ministries advocated different rates.

Even within the Labour Ministry, there was a standoff between the EmploymentSecurity Bureau and Vocational Training Bureau, which resulted in splitting the accountsbetween the ESP and JSDP. To this development, the EIRC recommended keeping theaccounts together because having separate accounts for the two programs would hinderflexible execution of active labour market policies. The recommendation fell on deafears at the time, but after much trials and errors, the Labour Ministry finally decided tointegrate the two accounts. The decision was announced at the “Report on NationalEmployment Service Innovation” held on April 6, 2005 and was subsequently reflectedin the 2005 revision of the Employment Insurance laws.

UB Eligibility and Benefit Amount

The main contention points over the UB were the insured period and waiting period.The Labour Ministry, accepting the views of the EIRC, specified in its legislation noticethat eligibility would be granted to those who have been insured for no less than 12months in the 18 months preceding unemployment. But the labour held a differentview, preferring six months out of 12 months. As for the waiting period to receive thebenefit payment, the Ministry’s legislation notice specified 14 days, to which the labourcountered with seven days. Some even preferred four months as long as the


severance pay scheme existed. For the eligibility criteria, the Ministry won over, and itsviews were reflected in the Employment Insurance Act. But the labour’s views wereeventually reflected into the Employment Insurance laws through revision as thecountry grappled with the economic crisis.

As for the amount of the benefits, the Labour Ministry, again in accordance with theEIRC’s recommendation, specified in its legislation notice as 50% of the average wageduring one year before the unemployment. To this, the labour countered with 60% of theaverage wage during the three months prior to unemployment, or different rates fordifferent wage groups (on a scale from 60-80%) on a reverse cumulative basis. But theMinistry of Commerce and Energy and employer groups argued for 50% of the usualwage. After consultation among the relevant ministries and interest parties, the LabourMinistry’s opinion was carried over.

Another issue was over the duration of payment. The EIRC had recommended 90-210days depending on such factors as insured period and difficulty of reemployment (basedon age and physical disability). But the Labour Ministry’s legislation notice stated 60-210days. The labour called for 90-300 days depending on the difficulty of reemployment.After consultation, it was agreed to set it at 60-210 days as proposed by the LabourMinistry, but to gradually extend it according to the operational situation.

The labour also proposed extended benefits such as extended individual, training,long-distance and nationwide benefits. The EIRC’s view was that only extended individualand training benefits should be adopted in the initial stage, and the extended nationwidebenefits should be considered at a future date (around 2000) once the EIS is firmly inplace and the fund becomes more accommodating. The Labour Ministry reflected theEIRC’s recommendation in the legislation notice, and the provision was passed withoutfurther controversy. What was called the extended nationwide benefits were adopted in1998 at the time of economic crisis as “special extended benefits” as a response to thehigh unemployment rate.

Using Part of the Severance Pay as EIS Premium

The EIRC, as a way to minimize the financial burden that may arise from the EIS,recommended using part of the severance pay and the mandatory in-company trainingcost to pay for the insurance premium. But the Labour Ministry rejected the idea. TheMinistry’s legislation notice for the Employment Insurance Bill included no provisions forusing part of the severance pay. But employers argued, “As the legally required severancepay protected the livelihood of early retirees during the time of unemployment, theunemployment benefit component of the severance pay should be used for premiumpayment once the EIS is implemented.” The labour immediately opposed. As nocompromise seemed likely between the sharply divided labour and management, the


following provision was included in paragraph three under the addendum so that thecontroversy would not delay or hinder the launch of the EIS: “The Labour Minister shallseek ways to improve the severance pay scheme.”

CONCLUSION: RESEARCH INSTITUTE AND SOCIAL DIALOGUE

The episode in the previous section illustrates the role and functions of KLI in theformation and implementation of labour policies in Korea. First, KLI has facilitated theintroduction of new labour market institutions and improved the capacity of the labouradministration in policy making. Since its establishment, KLI has produced numerousresearches on labour issues in Korea. KLI researches have covered such acomprehensive range of issues as labour market and employment policy, humanresource development, industrial relations, human resource management, labour lawsand regulations, and workers’ welfare and quality.4

Second, KLI has contributed as an integral participant in social dialogue to thedevelopment of tripartism in Korea. By conducting independent and professionalresearch, KLI provides relevant data, information, and policy suggestions on controversiallabour issues with social partners. Based on in-depth and impartial research by KLI, therepresentatives of government, employers and workers opened the social dialogueand gained a wider perspective. KLI researches permitted the social partners and theMinistry of Labour to negotiate the necessary measures on national labour policies. KLIhas helped social factors have chances to reexamine their diverse views on objectivegrounds and build a wider consensus. By producing professional and impartialresearches, KLI has promoted tripartism and social dialogue of interested parties andraised the credibility of the government policy as well as the transparency in thepolicy-making process.5

Establishing a research institute for the labour administration is a complex task. Thereare numerous issues. For it to play the role of an observatory and act as a driving forcein the areas of labour and employment policies, labour administration must constantlykeep track of the evolution of the expectations and needs of economic and social factorsso that it may gauge all the parameters necessary for the development, implementationand enforcement of a coherent national labour policy. Labour administration with aspecialized research institute to undertake research on labour matters will have a betteropportunity to redefine its organization and labour policies and to accommodate suchexpectations and needs.


REFERENCES

Baccaro, L. and Lee, C., “Strengthening Industrial Relations and Social Dialogue in the Republic ofKorea,” Technical Note, ILO-Geneva, 2003.

Choi, Y. (ed.), Recent Development in Employment Relations and Labour Market in Korea, KoreaLabour Institute, 2005.

ILO, Meeting Changing Needs: Labour Administration (2nd edition), 2000.

Keum, J. et al, Employment Insurance in Korea: The First Ten Years, Korea Labour Institute, 2006.

Kim, J. (ed.), Employment and Industrial Relations in Korea, Korea International Labour Foundation,2003.

Lee, W. (ed.), Labour in Korea: 1987-2002, Korea Labour Institute, 2006.

Ministry of Labour, Labour Administration in Korea, 2005.

Park, F., Park, Y., Betcherman, G., and Dar A. (eds.), Labour Market Reforms in Korea: Policy Options forthe Future, World Bank & Korea Labour Institute, 2001.

Yoo, K., “Introduction of the Employment Insurance System in Korea” in J. Keum ed. EmploymentInsurance in Korea: The First Ten Years, Korea Labour Institute, 2006.

Website with useful information in English:

http://english.molab.go.kr

http://www.kli.re.kr

http://labourstat.molab.go.kr

NOTES

1. See ILO, Meeting Changing Needs: Labour Administration (2nd edition), 2000.

2. The National Research Council for Economics, Humanities and Social Sciences(NRCS) supportsand supervise government-funded research institutes in economics, humanities and socialsciences under the Republic of Korea’s Act on the Establishment, Management and Promotion ofGovernment-Funded Research Institute. It is responsible for the general management of 23government-funded research institutes in Korea, including KLI.

3. For details, see Kil-snag Yoo, “Introduction of the Employment Insurance System in Korea” inJ. Keum ed. Employment Insurance in Korea: The First Ten Years, Korea Labor Institute, 2006.

4. For the recent KLI research activities, see appendix 2.

5. Recently, KLI has done its expected roles in achieving the major agreements by the KoreanTripartite Commission. Recent examples are “basic agreement on working hour reduction” from 44to 40 hours, “social pact for job creation,” and “industrial relations reform measures” to improveindustrial relations laws and system.


APPENDIX 1

Organization of Korea Labour Institute

President

Office for Office for Office For Data NewResearch Planning Industrial Relations Labour Market Center Paradigmand Management Research Research Center

� Industrial Relationand Labour LawResearch Team

� Wage and JobResearch Team

� Advanced Labour-ManagementRelations Program

� Labour MarketResearch Team

� Labour InsuranceResearch Team

� Labour Trends Analysis� Korean Labour and Income

Panel Study� Korean Longitudinal Study of Aging� Workplace Panel Survey

� Research Planningand Coordination

� InternationalCooperation andinformation

� Budget

� Publication

� Library

� Data Processingand TechnicalSupport

Management Innovation Support Bureau

� Management & Innovation Support

� Accounting


APPENDIX 2

List of KLI Publications(Jan. 2004-June 2006; in Korean)

� Periodicals

Monthly Labour Review (Monthly)

International Labour Brief (Monthly)

Quarterly Journal of Labour Policy (Quarterly)


Evaluation of the 2004 Job Creation Program (June, 2006)

Labour Market Policies in Industrialized Nations at $10,000~20,000 Per Capita GDP(May, 2006)

Employment Relations in Small and Medium-sized Manufacturers (April, 2006)

The Current Status of Anti-poverty Training Policy and Tasks (April, 2006)

Changes in the Corporate Investment Environment and the Labour Market (April, 2006)

Pay Structure and Performance-based Pay in Korea (April, 2006)

Trade Liberalization and Its Impact on the Labour Market (April, 2006)

Study on Lifelong Learning and Labour Market (March, 2006)

Study on Cultural Industry Professionals (March, 2006)

Regional labour Market Analysis and Policy Recommendations -Analysis of labourmarket and local councils of Bucheon and policy recommendations (March, 2006)

Division of Labour and Employment Relations in the Manufacturing Industry ofNortheast Asia (?) (March, 2006)

Labour Market Polarization and Policy Tasks (March, 2006)

Macro-economic Policies: Impact on Employment (March, 2006)

Promoting Private Job Placement Service (February, 2006)

Korean Model for Industrial Relations (II) (February, 2006)


Labour Demand and Supply: Mid/Long-term Prospect (November, 2005)

The IIIrd Sector and Social Creation of Jobs (November, 2005)

Situation of Employment Instability and Employment Policy Tasks (September, 2005)

A Study on Strategies for Jobless Growth (I) (August, 2005)

A Study on Strategies for Jobless Growth (II) (August, 2005)

An Analysis of Labour Market of Expert and Technical Foreign Workforce (August, 2005)

Population Ageing and the Labour Market (August, 2005)

Mobility and Skill Development (July, 2005)

North Korean Defectors: Employment and Policy Tasks (July, 2005)

Employment Policies of Korea (June 2005)

Demand and Supply of IT Experts in 2003: Analysis and Forecast (May 2005)

Wages and the Market in Korea (April 2005)

Determining the impact of ICT on decent work (April 2005)

Market Analysis of Industrial Trainees for Overseas-invested Firms in Korea (April 2005)

Vitalizing the Regional Labour Market: Model Country Studies and PolicyRecommendations (March 2005)

A Study on the Working Poor in Korea (March 2005)

Education and the Labour Market in Korea (March 2005)

Reconciling Work and Family Life in Selected OECD Countries (March 2005)

KLI Labour Statistics in Selected Countries (December 2004)

Labour Demand and Job Change (December 2004)

Labour and Discrimination (December 2004)

An Analysis of Labour Market of Expert and Technical Foreign Workforce (November2004)

A Study on Strategies for Jobless Growth (November 2004)

A Comparative Study on Labour Migration Management in Selected Countries(November 2004; also available in English)

Labour Market Flexibility and Economic Performance (November 2004)


Labour Market Policies in an Ageing Era (November 2004)

Situation of Employment Instability and Employment Policy Tasks (October 2004)

An Analysis of the Turnover of the Insured Using the Employment Insurance DB (August2004)

A Performance Analysis of the Pilot Employment Security Centres (August 2004)

A Comparative Study on Labour Migration Management (August 2004)

Employment Promotion Training Program and Employment Prospects (August 2004)

Labour Market Analysis of Low Skilled Migrant Workers in Korea (August 2004)

Maternity Protection for Female Workers and Policy Agenda (June 2004)

Labour Market Policies in the Ageing Era II (May 2004)

Toward a “Flexicurity” in the Korean Labour Market: What has to be done? (May 2004)

Vocational Qualification and Labour Market in Korea (May 2004)

A Study on the Evolution and its Causes of Wage Differentials by EducationalAttainment in Korea (May 2004)

Knowledge-based Service Sector Employment Structure Changes (May 2004)

Working Hour Reduction and Employment Policies (May 2004)

Labour in the Financial Industry Before and After the Recent Economic Crisis (May2004)

The Effect of Information and Communication Technology on Workplace Participation— From the Perspective of Decent Work (April 2004)

Evaluation on the Employer-provided Training: The Korean Employment InsuranceExperience (March 2004)

Part-time Work as Women’s Alternative Employment Option (March 2004)


Labour Movement Ideologies of Korea (December, 2005)

Characteristics and Policy Tasks of Public Workers’ Union in Korea: As Revealed throughBackground Analysis and Survey (October, 2005)

Training and Education in the Construction Industry: How to Promote Labour-Management-Government Participation (September, 2005)


A Study on the Korean Industrial Relations System (August, 2005)

The Structure of Labour Demand in Korea (July, 2005)

Labour’s Participation in Management: Status and Challenges (June 2005)

International and Comparative Employment Relations (June 2005; translated edition)

The Structure and Characteristics of Labour Strikes in Korea (June 2005)

The Structure of Labour Division and Employment Relations in the Northeast AsianManufacturing Industry (May 2005)

Pay Structure and Performance-based Pay in Korea (March 2005)

A Study on the Korean Industrial Relations System (December 2004)

Employment Relations in Foreign Invested Companies (November 2004)

The Structure and Characteristics of Labour Strikes in Korea (November 2004)

The Structure of Labour Division and Employment Relations in the Northeast AsianManufacturing Industry(I) (November 2004)

Public Sector Restructuring, Changes in Industrial Relations, and StabilizationMeasures (July 2004)

The Current Status of Corporate Welfare and Policy Tasks (July 2004)

Collective Bargaining at the Industry Level and Policy Implications (June 2004)

Japanese Social consultation Against Globalization (June 2004; also available inEnglish)

Firm-level Labour-Management Agreement for Job Creation (June 2004)

Subcontracting Structure and Stratification of Employment Relations in the KoreanAutomotive Industry (April 2004)

Flexibility and Human Resources Management (April 2004)

Social Pacts in Selected Countries (February 2004)

� Labour Laws and Regulations

Wage Structure Reform: Challenge for Labour Laws (May, 2006)

Recommendations for the Labour Law in the Ageing Society (November, 2005)

A Study on the Unfair Labour Practice Remedial System (November 2004)


A Legalistic Study on Diversification of Trade Union Structure (October 2004)

An International Comparison of Equal Employment Laws (August 2004)

Changes in the Definition of Workers and the Imposition of Pertinent Laws (July 2004)

� Workers’ Welfare and Quality of Life

The Social Security System in the Netherlands (April 2004)

A Study on the Balanced Development of Public and Private Pension Systems (May2003)

An International Comparative Study on Social Safety Nets II: The United States (May2003)

� Employment Insurance

Effects of Reemployment Bonus System in Korea (April 2005)

Utilization of Childcare Leave and Future Policy Directions (August 2004)

Unemployment Benefits in the United Kingdom (August 2004)

Project Evaluation of Job Skill Development Program in Korea (August 2004)

The French Unemployment Compensation System and Labour Market Policies (July2004)

� Industrial Accident Compensation Insurance

Calculation of the 2006 Industrial Accident Insurance Premium Rate by Job Category(April 28, 2006)

Rehabilitation Programs for Industrial Accidents in Major Countries (July 29, 2005)

A Study on the Labour Mobility of Injured Workers (July 15, 2005)

Types and Legal Status of Pseudo-workers (special-type employees): the German case(May 2005)

Simulating Workplace Safety Policies in Korea (November 2004)

A Study on the Workers’ Compensation System for Workers of Atypical Types ofEmployment (November 2004)

Foreign Industrial Accident Insurance Schemes (August 2004)


Development of A Social Adjustment Program Model and Approaches for WorkersInjured in Industrial Accidents (August 2004)

A Performance Effect Analysis of 5-year Rehabilitation Project of the Industrial AccidentInsurance Scheme (July 2004)

A Study on Improving the Premium Rate Structure of the Industrial Accident InsurancePlan (July 2004)

Adjusting the Business Classification for Industrial Accident Insurance and Calculatingthe Industrial Accident Insurance Rate for 2004 (July 2004)

Workers’ Compensation for Commuting Accidents: A Comparative Study (June 2004)

Industrial Accident Insurance for Nonstandard Workers and Special-type Workers (June2004)

� Special Topics

Basic Report on the 5th Annual Korean Labour and Income Panel Study (May 2005)

Reshaping of Work-Incentive System in North Korea (June 2004)

Labour in Korea 1987~2002 (June 2004; available in English)

A Fair Globalization: Creating Opportunities for All (June 2004; translated edition of ILOpublication)

A Comparative Study on the Linkage between Special Economic Zones and GlobalLabour Standards (May 2004)

Labour Market and Industrial Relations in China (May 2004)

Basic Report on the 5th Annual Korean Labour and Income Panel Study (May 2004)

A Study on Actual Conditions of North Korean Workers and Their Utilization (May 2004)

List of Working Papers (Jan. 2004-June 2006; in English)


Job Creation Projects and Policy Tasks (January, 2006)

Polarization of the Labour Market and Policy Tasks - With Focus on Job Polarization(December, 2005)

Financial Crisis and Unemployment Measures: The Experience of Korea (December,2005)


Including Informal Sector Workers in Public Income Support (December, 2005)

Nonstandard Employment Arrangements in Korea: What Have We Learned?(December, 2005)

Wage System in Korea: What Do the Workers Want? (March 2005)

Korea’s Labour Market: Recent Trends and Outlook for 2005 (February 2005)

Flexibility, Turnover and Training (December 2004)

Grants to Promote Employment of the Elderly in Korea - Introduction and Evaluation(October 2004)

Preparatory Works to Launch an Ageing Population Panel Study in Korea (September2004)

Trends and Differentials in School Transitions in Korea and Japan (August 2004)

The Union and the Use of Flexible Staffing Arrangements in Korea: Evidence from anEstablishment Survey (July 2004)

Labour Market Policies to Meet Challenges in the Korean Labour Market after the 1997Financial Crisis (July 2004)

Nonstandard Employment Arrangements in Korea: What Have We Learned? (July 2004)

ICT and Wage Inequality (June 2004)

Migrant workers’ labour market in Korea (June 2004)

Cartel effects of Korean unions: empirical analysis on job separation and loss of wagepremium (June 2004)

The effects of unemployment benefits and compulsory severance pay on labourmarket participation and unemployment spell in Korea (June 2004)

The effects of foreign labour employment on the national economy (June 2004)

Economic crisis and the changes in employment systems in East Asia: the cases ofJapan and Korea (June 2004)

Changes in corporate environments and internal labour markets (June 2004)

Globalization and Decent Work (June 2004)

Labour Market Flexibility and Social Safety Net in Korea (May 2004)

Youth Unemployment: Current Status and Policy Tasks (May 2004)


Flexibility in the Korean Labour Market (February 2004)

Occupational Self-Selection and the Gender Wage Gap: Evidence From Korea andUnited States (January 2004)


Industrial Relations: Stability and Cooperation in the Changing Environment - Withfocus on collective bargaining, tripartism and dispute resolution mechanism (October,2005)

Corporatist Policymaking Coordination and Collective Bargaining Structure in Korea(July 2004)

Labour-management cooperation to overcome the hold-up problem in capitalinvestment (June 2004)

Unions and the contingent workers: the Korean evidence (June 2004)

Strategy matters: the sustainability of the South Korean social pact without neo-corporatist preconditions (June 2004)

Employment relations in the mobile telecom services industry (June 2004)

Effect of ICT on participation in the workplace: from the perspective of decent work(June 2004)

The transformation of firm-level IR systems in Korea: a case study of the Koreanshipbuilding industry (June 2004)

Employee relations in the process of business restructuring: the case of company A(June 2004)

High performance work system in Korea: its types, determinants, and outcomes (June2004)

Employment relations concerning working time reduction and flexibility: a comparativeanalysis of automobile industry practices in five countries (June 2004)

A Comparative Analysis of Corporatist Policymaking Coordination in Japan and Korea(June 2004)

� Workers’ Welfare and Quality of Life

Public Employment Service in Korea: its Past, Present and Future(July, 2005)

Impact of the Reduction in Statutory Working Hours (June, 2005)


Industrial Accidents, Occupational Diseases, Medical Care and Rehabilitation Programsin Korea (November, 2004)

Reasons for Retirement and Sources of Retirement Income (September 2004)

Retirement Income Systems in East Asia (July 2004)

Korean Severance Pay Reform: For Old-age Income Security or Coverage Expansion?(November 2003)

� Employment Insurance

Impact of the Reduction in Statutory Working Hours (June 2005)

Is levy-grant scheme for employer-provided training effective? : The experience ofKorean employment insurance system (June 2004)

Employment insurance and work injury insurance as a social safety net (December2002)

� Industrial Accident Compensation Insurance

Industrial Accidents, Occupational Diseases, Medical Care and Rehabilitation Programsin Korea (November 2004)

Analysis of job retention of employees injured in industrial accidents (June 2004)

Assessment of IACI (June 2004)

A discussion on the expansion of industrial accident compensation insurance coverageto workers of special employment (May 2003)

The Korean LabourAdministration Model:Lessons for DevelopingCountriesInjae Lee

INTRODUCTION

Labour administration in Korea has made a great progress despite its relatively shorthistory. It has not only contributed to economic development by supplying quality workforceduring the period of rapid industrialisation, but has also made steady efforts to expandworkers’ basic rights. Labour administration has also wisely responded to the explosiveincrease in industrial disputes in the process of democratisation of late 1980s and themassive unemployment during the financial crisis in 1997-1998. With the rapid growthof globalisation and the advent of knowledge-based society, labour administration inKorea now faces another challenge to adapt its functions and organisations to a newsocial and economic environment.1

This paper explores the role and functions of the labour administration in Korea.Section II introduces the employment policy pursued by the labour administration. Jobcreation has become a policy of top priority of the labour administration in Korea. Thelabour administration has proposed and implemented government-wide comprehensivemeasures for job creation in order to overcome weak employment conditions resultingfrom the delay in economic recovery from the financial crisis. Section III describes theEmployment Insurance System (EIS) in Korea. This section emphasises that the EIS inKorea is a comprehensive Active Labour Market Policy (ALMP) instrument as well as asocial security system. Section IV describes the framework of vocational training systemin Korea. Labour administration has been deeply involved in the human resourcedevelopment of workers since the early stage of its development. The first function of

10


labour administration is to implement laws and regulation for the welfare of workers.Section V deals with this traditional activity of labour administration. Section VI introducesthe recent policy efforts by the labour administration to redress gender discriminationand to promote employment of the disabled. Section VII describes the industrial safetyand health policy and workers’ compensation system. Section VIII presents the industrialrelations system in Korea. Dispute Mediation System, Labour-Management Consultationat the enterprise level, and the function of the National Tripartite Commission arementioned in this section. Section IX concludes with some remarks.

EMPLOYMENT POLICY

Due to continuous economic growth, Korea was able to maintained a low unemploymentrate of around 2% for a decade since 1988, but as the number of jobless people rapidlyincreased due to sharp economic contraction in the wake of the financial crisis of late1997 and subsequent corporate restructuring, the employment situation in Koreaworsened severely.

Faced with such massive unemployment, the Korean government tried effort intorecovering its economy, and at the same time took government-wide comprehensiveunemployment measures, such as strengthening the functions of public employmentservices, providing short-term jobs through public works programs and expandingvocational training opportunities.

As a result of these government-wide unemployment measures together with the nation’sdetermination to overcome the economic crisis and continuous restructuring, themassive unemployment abated somewhat, with the unemployment rate which soaredto 8.8%(1.81 million) in February 1999 having declined to around 3% since 2001(3.8%in 2001 3.1% in 2002 → 3.4% in 2003). However, as the potential growth rate hasgradually fallen, and the ability of companies to absorb workforce has been reduceddue to technological innovations and changes in industrial structure, the job creationcapacity of the Korean economy is weakening.

Trend in Labour Market Indications (Unit : 1,000 persons, %)

1998 1999 2000 2001 2002 2003 2004

Economically Active Population 21,428 21,666 22,069 22,417 22,877 22,916 23,370

(1.1) 1.9) (1.6) (2.1) (0.2) (2.0)

Activity Rate 60.6 60.6 61.0 61.3 61.9 61.4 62.0

No of the Employed 19,938 20,291 21,156 21,572 22,169 22,139 22,557

(1.8) (4.3) 2.0) 2.8) (-0.1) (1.9)Contd.

The Korean Labour Administration Model : Lessons for Developing Countries 241

No. of the Unemployed 1,490 1,374 913 845 708 777 813

(-7.8) -33.6) (7.4) (-16.2) (9.7) (4.6)

Unemployment Rate 7.0 6.3 4.1 3.8 3.1 3.4 3.5

Economically Inactive Population 13,919 14,092 14,118 14,162 14,086 14,424 14,347

Note : The numbers in the parentheses indicate year-on-year increase/decrease rates.

Source : National Statistical Office, “Monthly Statistics on Economically Active Population”, all editions.

Accordingly, ‘job creation’ has became a policy of top priority for the government andthe goal is being enthusiastically pursued by the Ministry of Labour and other relatedministries.2 At the same time, the government has focussed its efforts on reducinglabour market mismatches by expanding public employment services and byintensively pushing for employment measures; such as countermeasures against youthunemployment.

The followings are the key policy areas and measures pursued by the Ministry of Labour:

Job Creation Policies

� Implementing government-wide comprehensive measures for job creation.

� Providing social service jobs.

� Introducing new employment security projects to support job creation.

Employment Security for Vulnerable Groups

� Strengthening employment support for the youth.

� Enlarging the foundation for promoting the employment of the aged.

� Supporting the early employment of the long-term unemployed.

� Supporting the self-reliance of low-income earners.

Advancement of Employment Services

� Reorganizing employment security centers.

� Expanding and improving the labour market information system.

� Enhancing employment support services.

Employment Permit System for Foreign Workers


EMPLOYMENT INSURANCE

The Employment Insurance System (EIS) was introduced in 1995, to provide asystematic institutional device for striking a balance between workforce supply anddemand, supporting employment adjustment following corporate restructuring, andstrengthening vocational training.

Over a period of time as short as ten years, the EIS has provided a social safety net forthe unemployed. The EIS which provides unemployment benefits; not only worked asthe driving force in overcoming the massive unemployment just after the financial crisisin 1997 but also paved the way to upgrade the previous vocational training system. Thevocational training system has further focussed on cultivating skilled productionworkers into workers’ lifetime vocational competency development system.

The government has responded to changing labour market situations in a flexibleway by revising the Employment Insurance Act, and its Enforcement Decree andRegulations several times. As a result, the Employment Insurance System is applied toall workplaces. Moreover, the contents and conditions of the EIS have continued toimprove in consideration of realities.

Coverage of Employment Insurance

Size of Workplace covered by the EIS

Type of Program Jul. 1, 1995– Jan. 1, 1997– Jan. 1, 1998– Mar. 1, 1998– Jul. 1, 1998– Oct. 1, 1998–Dec. 31, 1996 Dec. 31, 1997 Feb. 28, 1998 Jun. 30, 1998 Sept. 30, 1998

Unemployment Benefits workplaces workplaces workplaces workplaces workplaces workplaceswith 30 with 30 with 10 with 5 with 5 with 1workers workers workers workers workers workeror more or more or more or more or more or more

Employment Security & workplaces workplaces workplaces workplaces workplaces workplacesVocational Competency with 70 with 70 with 50 with 50 with 5 with 1Development workers workers workers workers workers worker

or more or more or more or more or more or more

Total Construction 4 4.4 3.4 3.4 340 340Costs of a construction billion won billion won billion won billion won billion won billian wonbusiness

In the case of construction businesses, total construction costs are used as the standard for applying allthree programs, that is, unemployment benefit, employment security and vocational competencydevelopment.

In January 1, 2004, the coverage of the EIS was extended to construction businesses with totalconstruction costs of less than 20 million won.


The Employment Insurance System is a comprehensive Active Labour MarketPolicy (ALMP) instrument as well as a social security system. The EIS consists ofemployment security programs that are intended to promote corporate restructuring,prevent unemployment and boost employment, vocational competency developmentprograms, and unemployment insurance programs which fulfill the traditional functionof providing unemployment benefits to the unemployed.

The premium rates for unemployment benefits and employment security programsare fixed at 0.9% (employees 0.45%, employers 0.45%) and 15%(employers only),respectively, regardless of the size or type of business. The rate for vocationalcompetency development programs varies from 0.1% to 0.7% (employers only)depending on the size of a company.

Structure of the EIS

Employment Support for – Subsidy for Transforming Shift Work SystemSecurity Programs Employment Creation – Subsidy for Improvement of Employment Environments by small

and Medium Enterprises

– Subsidy for Hiring of Professional Workforce by Small andMedium Enterprises

– Subsidy for Entry into New Business by Small and MediumEnterprises

– Subsidy for Working Hour Reduction by Small and MediumEnterprises

Support for – Subsidy for Employment RetentionEmployment – Subsidy for Re-EmploymentAdjustment – Subsidy for Out-Placement Service

Support for – Subsidy for Hiring the AgedEmployment Promotion – Subsidy for Promoting New Hiring

– Subsidy for Childcare Leave

– Subsidy for Establishment and Operation of In-companyChildcare Facilities

– Subsidy for Hiring Middle- and Old- Aged Workers CompletingTraining


Support for RetirementMutual Aid Payment forConstruction Workerssubsidy for StabilizingEmployment ofConstruction Workers

Vocational Competency Subsidy for Employers – Subsidy for Vocational Competency Development TrainingDevelopment Programs – Subsidy for Training Workers on Paid Leave

– Loan and Subsidy for Establishment of Vocational TrainingFacilities and Equipment

Subsidy for Workers – Subsidy for Re-employment Training for the Unemployed– Subsidy for Workers Taking Classes– Loan for Workers’ School Expenses– Loans for Vocational Competency Development Training

Expenses– Support for Test Fees, etc.

Unemployment Job-Seeking BenefitsBenefits

Employment Promotion – Early Re-Employment AllowancesAllowances – Vocational Competency Development Allowances

– Wide-Area Job Seeking Allowances– Moving Allowances

Childcare Leave Maternity LeaveBenefits. etc. Benefits

Childcare LeaveBenefits

The Employment Insurance System is one of the four major social insurances inKorea. For the reference, main contents of the Korean social insurance system aredescribed in the following table.


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VOCATIONAL COMPETENCY DEVELOPMENT

The framework of a vocational training system in Korea was established with theenactment and implementation of the Basic Law for Vocational Training in 1976 whichobliged employers to provide vocational training. The main purpose of the obligatoryvocational training system was to provide industry with essential manpower. By trainingyouths who do not go to higher education to be technicians in key industrial fields, thetraining system has greatly contributed to Korea’s economic development.

With the introduction of the Employment Insurance System in 1995 and the LabourStandards Act in 1999 the obligatory vocational training system was abolished andvocational training was integrated into the vocational competency developmentprograms under the Employment Insurance System. The growing need to copewith rapidly changing industrial structure made job-skill enhancement trainingand job-transfer training more important. Thus, the focus of vocational training isshifting from producing technicians to developing workers’ lifetime vocationalcompetency.

The Ministry of Labour is responsible for establishing and administering overallvocational training policies, such as setting vocational training standards, designatingand managing training facilities, recognising and designating training courses, subsidisingtraining costs and providing training allowances, etc. The Ministry engages in developingvarious policy measures to expand training infrastructure, evaluate training institutions,operate public training institutions, and ensure the sound development of a private trainingmarket.

Vocational training institutions provide government-entrusted training for the unemployed,government-entrusted training in key industries, such as manufacturing, andemployer-entrusted employee training. They receive training subsidies from thegovernment.

Enterprises give employees training opportunities and get reimbursed for theirtraining costs from the government; and training participants, such as the unemployed,receive vocational training and training allowances after registering themselves asjob-seekers with Employment Security Centers and receiving counselling services atthese centres.

Various types of public or private institutions are actively involved in the vocationalcompetency development training programs: employee training, training for theunemployed, employment promotion training, and manpower fostering training. Thefollowing tables summarise the types of training institutions and the categories ofvocational competency development training.


Enterprise

� Employee training� Foster training

Structure of Vocational Competency Development Training in Korea

Training participants

� Job-seeking registration� Receipt of training allowances

Vocation Training Institutions

� Vocational training forthe unemployed

� Employer-entrusted training� Government-entrusted training

Ministry of Labour

� Establishment of training standards� Designation of training facilities� Recognition and designation of training courses� Support for training costs

Polytechnic Colleges

� Training of multi-skilledtechnicians

Special vocational School

� Training of skilled manpower

HRD Korea

� Competency development program� Qualification test� Employment promotion� Skill enhancement

Korea University ofTechnology andEducation

� Training of Instructors


Type of Training Institutions

Type Features

� Training Institutions run by legitimate publicorganizations.

- They include 21 special vocational schools, 23 polytechniccolleges, and the Korea University of Technology andEducation under the HRD Service of Korea, the KoreaEmployment Promotion Agency for the Disabled, eightvocational education and training centres under the KoreaChamber of Commerce and Industry

� Training Institutions run directly by localgovernments.

There are seven such training institutions in Seoul,Kyeongki province, Kyeongnam province, etc.(They provide training in occupational areas preferred bylocal residents)

� Training institutions run directly by the government(central administrative organizations).

Currently there are 36 such training institutions run bythe Ministry of Justice of develop inmates’ Vocationalabilities.

� Facilities established and run by not-for-profit corporationswhich obtain permission from the Minister of Labour tocarry out vocational competency development programs.

� Facilities established and run for women’s vocationalcompetency development pursuant to the Framework Acton Women’s Development.

� Universities (junior colleges), employers’ groups, andindividuals designated as training facilities when they meetcertain conditions.

� Employers, employers’ groups, schools or individualsunder the Higher Education Act, which are not designatedas vocational competency development training facilities,though their training courses are recognised anddesignated.

PublicTraining

Institutions

PrivateTraining

Institutions

PublicOrganisations

LocalGovernments

GovernmentAgencies

TrainingCorporation

Women ResourcesDevelopment Centre

Labour MinistryDesignated Facilities

Those other thanLabour Ministry

Designated facilities


Types and Target Groups of Vocational Competency Development Training

Category Training Types Target Group

� Vocational competency developmenttraining

� Training on paid leave

� Subsidy for taking classes

� Loans for competency developmentexpenses

� Training for job transfer of theunemployed

� Training for the newly unemployed,etc.

� Employment promotion training

� Training to foster technicians

� Training in priority occupations

The Ministry of Labour also takes overall responsibility for establishing policies neededto operate the qualification system, such as developing types of national technicalqualifications, improving qualification standards, etc., and overseeing thereimplementation. Other related ministries have the authority to establish plans on thereown qualification tests, announce the tests, decide those who pass the tests, cancel orsuspend qualifications, make use of qualification holders, etc. The HRD Korea and theKorea Chamber of Commerce and Industry are responsible for administeringqualification tests and managing qualification holders. At present, there are 574 types ofnational technical qualifications in total, of which 540 are in the skill area and 34 in theservice area.

Currently employedpeople

Unemployed people

Poor farmers andfishermen, and peoplein low-income brackets

The youth who do notgo to higher education

Employeetraining

Training for theunemployed

Employmentpromotion training

Manpower fosteringtraining


LABOUR STANDARDS

The purpose of the Labour Standards Act is to secure workers’ humane living byfinding out actual inequality in labour contracts between an employer and a worker andimproving the working conditions. Since, the Act prescribes minimum standards forworking conditions, the working conditions of a workplace should not be below theprescribed standards. If some working conditions set forth in a labour contract fall shortof certain legal standards, then such working conditions are invalidated and legalstandards are followed.

The Labour Standards Act was applicable to businesses or workplaces with five ormore workers, but in January 1999, the scope of its application was expanded to coverworkplaces with four workers or less. However, some provisions (relating to labourcontracts, restrictions on dismissal, working hours, leave, etc.) are not applied toworkplaces with four workers or less given their financial conditions and administrativeburdens.

40-hour Work Week System

The Labour Standards Act was revised in September 2003, the main feature of the actis the reduction of working hours to 40 hours per week. In its first phase of introduction,

Operational Structure ofNational Technical Qualification System

Ministry of Labour

� Overall operation & management ofqualification system

� Operation of the Policy DeliberationCommittee on National TechnicalQualification System

HRD-Korea and Korea Chamber of Commerce & Industry

� Administration of qualification test

� Management of qualification holders

Related Ministries

� Use of qualification holders

� Cancellation and suspension of qualification certificates


the 40-hour work week was implemented in July 2004 amongst workplaces with 1,000workers or more, especially in the finance and insurance companies, and companies inthe public sector.

If a flexible working hour system is adopted according to employment rules or throughwritten agreements with workers’ representatives, working hours can be extended tocertain duration. For instance, during a certain two-week period, it is possible to extendthe working hours of a specific week up to 48 hours without providing additional pay, aslong as the average weekly working hours do not exceed 40 hours. In the case of athree-month unit period, the working hours of a specific week and a specific day can beextended upto 52 hours and 12 hours, respectively, through written agreementsbetween an employer and workers, as long as the weekly average does not exceed 40hours.

The Ministry of Labour has made active efforts to ensure the successful entrenchmentof the newly introduced 40-hour work-week by providing guidance for the public sectorto take the lead in introducing the system and spreading various exemplary cases ofintroduction.

Statutory Working Hours in Korea (Table 5-1)

General Females Minors under Workeswith less 18 years engaged in

than one year of age Hazardousof childbirth jobs

Starndard Day 8 hours 8 hours 7 hours 6 hours Working Hours Week 40 hours 40 hours 40 hours 34 hours

Extendeable hours 12 hours 2 hours (a day); 1 hour (a day);with the agreement of (a week); 6 hours (a week)the parties concerned 150 hours (a year)

The workers falling under general category can have extended work hours to a maximum of 16 hours for

three years after the implementation of 40-hour work-week.

Introducing the Retirement Pension System

With the inception of Employee Retirement Benefit Security Act, the legislation tointroduce the retirement pension system in 2004, an era of retirement pension openedin Korea. The retirement pension system is a system that turns lumpsum severance


pay into pension annuities. In other words, the system requires employers to deposit agiven amount every month or every year in a pension fund and operate the fund througha financial institution outside company so that workers can receive pensions everymonth or every year after their retirement, instead of giving lumpsum severance pay toworkers on their retirement according to Article 34 of the Labour Standards Act.

Severance pay, introduced in 1961, is hardly used as a source of incomes in theold age, as the payment tend to be made frequently and in small amounts due to thetrends towards flexible work arrangements, such as, the increase in job transfer, thespread of performance-based pay systems; the growth in withdrawal of severance paybefore retirement, etc. Thus, the retirement pension system has been introduced tocope with population ageing by addressing the problems of the current severance paysystem.

To switch to the retirement pension system or not can be entirely decided by theemployers and workers themselves through agreement, while the government willsupport the adoption of the retirement pension system by giving tax incentives.Because the preferred type of pension plan may be different from company tocompany depending on the nature of a workplace and its workers, the governmenthas decided to introduce; Defined Benefit (DB - type) and a Defined Contribution(DC- type).3

If a company adopts the retirement pension rules which are a blueprint for theretirement pension plan of an individual workplace it must contain every detail requiredby the law. Any rules can be set by the employers and workers at their discretion as longas their level is above that of legal requirements.

Minimum Wage System

The minimum wage system is a system that allows the state to intervene in the wagedetermination process between the employers and workers, set a minimum wage andforce employers to pay higher wages than that in order to protect low-paid workers.

The minimum wage system is applied to all businesses or workplaces employingworkers (since November 24, 2000). The minimum wage, equal for all industries andoccupations, is determined by taking into account workers’ living costs, wages, ofworkers engaged in similar jobs, labour productivity etc. The Minimum Wage Council,comprising of nine workers’, employers’ and government’s representatives, isresponsible for deliberation and decision on the minimum wage. The Ministry of Labourhas to announce without delay the minimum wage no later than August 5th everyyear after deliberation by the Minimum Wage Council. The announced minimum wageis effective from September 1st of the year concerned to August 31st of the followingyear.


Minimum Wage by year (Unit : won)

Classification Sept. ’97- Sept. ’98- Sept. ’99- Sept. ’00- Sept. ’01- Sept. ’02- Sept. ’03- Sept. ’04-Aug. ’98 Aug. ’99 Aug. ’00 Aug. ’01 Aug. ’02 Aug. ’03 Aug. ’04 Aug. ‘05

Hourly rate 1,485 1,525 1,600 1,865 2,100 2,275 2,510 2,840

Daily rate 11,880 12,200 12,800 14,920 16,800 18,200 20,080 22,720

Source : Ministry of Labour

Restrictions on Dismissal, Wages, Holidays and Leave:

(a) Restrictions on dismissal

Employers cannot dismiss workers without justifiable causes. If dismissed withoutjustifiable causes, a worker can apply for redress to a Labour Relations Commission.Employers are punished for any unjustifiable dismissal. If an employer wants to dismisshis/her workers for managerial reasons, the employer should meet strict conditionsand procedures. In the first place, the employer should have urgent managerialreasons; should try and make every effort to avoid such dismissal, select those to bedismissed according to rational and fair criteria, and sincerely consult the trade unionor workers’ representatives in advance. Even, when an employer dismisses his/herworkers for justifiable reasons, the employer must notify the workers concerned ofdismissal atleast 30 days in advance. Otherwise, the employer should pay the workers30 days or more of their ordinary wages.

(b) Wages

In principle, workers should be paid their full wages on a specific day of each month.If a worker requests wages in an emergency situation, such as childbirth, sickness,accidents, etc., the amount of wages corresponding to the amount of labour offeredmay be paid even before payday. Besides this, from July 1st, 1998, onwards thegovernment has implemented the Wage Claim Guarantee System that guaranteesworkers who retire from a bankrupt company a part of their unpaid wages.

In the event of corporate bankruptcy, it is difficult for workers to claim their unpaid wages.Therefore, the government on behalf of the employers, guarantees the workers theiroverdue wages; shutdown allowances, unpaid wages of final three months andseverance pay of final three years.

MinimumWage


(c) Holidays and Leave

If a worker has worked for a week without an absence, one weekly holiday withpay should be granted (weekly holiday). If a worker has registered 80% or more ofattendance during one year, 15 days of annual paid leave are granted. For every twoyears of service, one day of annual leave is added, but the total annual leave should notexceed 25 days (annual paid leave). If a worker does not take leave despite the fact thathis/her employer actively urges him/her to do so, the employer is exempted from theobligation to make cash payments for the untaken leave. To prevent the misuse of thismeasure by employers, the requirements employers should follow are clearly stated inthe law. For instance employers are required to make a written request for workers todecide their leave period within the first ten days of the final three-month period duringwhich workers can take leave. Besides, a system allowing workers to choose leaveas compensation for their overtime work has been introduced. Under this system,employers can grant leave, instead of giving pay, to compensate for extended, night orholiday work, if they make a written agreement with workers’ representatives.

EQUAL EMPLOYMENT POLICY

As industrial structure has changed and employment type has been more diversifiedwith the advent of the knowledge and information society of the 21st century, nationalcompetitiveness to how well female workforce is used. Therefore, the government isnow implementing various support measures, such as reducing discrimination inemployment, preventing sexual harassment at work, protecting maternity andsupporting the reconciliation between work and family life, to create employmentcircumstances which enable women to display their abilities as best as they can.

Besides, the government is seeking to realize an equal society by taking active supportmeasures for the vocational competency development and employment promotion ofthe disabled who have difficulties in finding employment for themselves due to theirphysical or mental disabilities.

Reduction of Gender Discrimination in Employment

The Equal Employment Act enacted in December 4, 1987 laid the institutionalfoundation for reducing gender discrimination in employment and improving workingconditions. With the fourth revision of the Act on August 14, 2001, the scope of itsapplication was expanded to cover all workplaces; all male and female workersbecame eligible to take childcare leave; and a legal ground was established forguaranteeing workers’ return to work after their leave and providing support for thosewho take child care leave. The key policy measures are:


� Redressing gender discrimination in employment and working conditions

� Banning unfair dismissal of female workers

� Preventing sexual harassment at work

� Spreading awareness of gender equality in employment

Support for Expansion of Female Employment

Though the female participation in economic activities has steadily increased (from42.8% in 1980 to 47.0% in 1990 and 49.8% in 2004) in Korea, their participation level isstill relatively low as compared with that in developed countries. In particular, theeconomic participation rate among women between the aged group of 25-39, who areforced to take a career break because of pregnancy, childbirth and childcare, stands ataround 50%, which is significantly low as compared with 70-80% recorded indeveloped countries.

Female economic participation rates by year

Year 1980 1990 2000 2001 2002 2003 2004

Economic 42.8% 47.0% 48.6% 49.2% 49.7% 48.9 48.8participation rate

Source : National Statistical Office, KOSIS DB

Major policies in this area include:

� Support for establishment and operation of childcare facilities

� Subsidy for childcare leave

� Subsidy for female employment promotion

� Strengthening maternity protection

Support for Promoting Employment of the Disabled

In order to ensure that the disabled who cannot work because of lack of employmentopportunities accomplish humane life through work, the government has made itmandatory for central and local governments, as well as private companies larger thana certain size to hire disabled workers more than a certain ratio (2%). Along with this,5% of the public servants to be hired through open competition will be selected fromdisabled candidates, until the total number of disabled public servants reaches 10,000.In addition, if employers who ordinarily employ 300 workers or more are mandatorily


required to hire disabled workers to meet the 2% employment ratio, failing which theobligation to pay contributions is imposed on them.

Trends in employment rations

INDUSTRIAL SAFETY AND HEALTH &INDUSTRIAL ACCIDENT COMPENSATIONINSURANCE

Industrial Safety and Health

In the 1960s and 1970s when Korea was industrialized by fostering its chemical andheavy industries, serious industrial accidents and occupational diseases emerged as asocial problem, drawing more attention to the issue of industrial safety and health. Inresponse, the government enacted and promulgated the Industrial Safety and HealthAct in 1981, laying the foundation for pushing ahead with industrial accident preventionpolicy in earnest. However, the number of industrial accidents, such as those leadingto deaths, were still rather high, and accident-causing elements; such as smallworkplaces with poor safety and health management measures and non-regularworkers, were steadily increasing in Korea. To cope with these difficult times, thegovernment established the First Five-Year Industrial Accident Prevention Plan(2000-2004).

In the course of implementing the First Five-Year Plan4, the government faithfullycarried out major tasks, achieving most of the goals originally planned. For example,it established the CLEAN project; introduced a system of disclosing the names ofworkplaces with a poor record of industrial accident prevention; expanded the scope of

Source : Ministry of Labour

Year

Employment ratio

0.430.63

0.79 0.82

0.961.07

1.18

1.37

0

0.5

1

1.5

1991 1998 1999 2000 2001 2002 2003 2004


construction businesses whose accident rates should be checked, etc. Among manyprograms introduced by the government to enhance improved workplace and healthconditions, the following two programs are mentioned here:

Trends in Industrial Accidents

Number of deaths Accident rate

persons %

CLEAN Project

About 70% of industrial accidents tend to occur in workplaces with less than 50workers. Moreover, these workplaces are involved in plenty of harmful and hazardouswork, such as plating, press work, molding, dyeing, leather processing, etc., and havepoor working environments, they are not only too poor to invest in safety measuresbut also suffer from labour shortages because workers avoid working in theseworkplaces.

Since 2001, the government has carried out the CLEAN project to preventindustrial accidents and resolve labour shortages. The Government at the same timehas also provided financial and technical support for improving safety measuresand health facilities in small workplaces which have relatively poor workingenvironments.

The CLEAN project is aimed at making a workplace which is characterized as danger,dirty and difficult to a safe and healthy one by improving its facilities and workprocesses. It consists of two types of projects, one is to create a CLEAN workplace byproviding financial support for facility improvement (in the form of subsidy or loan) and

3,000

2,900

28,00

27,00

26,00

25,00

0

1.0

0.9

0.8

0.7

0

2,528

2,748

2,605

2,923

2,825

2000 2001 2002 2003 2004 Year 2000 2001 2002 2003 2004 Year

0.730.77 0.77

0.85

0.90


the other is to provide technical support for safety and health management throughorganizations specialising in safety and health measures according to the degree ofharmfulness and hazardousness.

A total of 14,411 (12,461 of them were recognized as CLEAN workplaces) workplacesreceived financial support for their facility improvement in 2004.

Process Safety Management (PSI) System

The Ministry of Labour introduced the Process Safety Management (PSM) Systemin 1996. This was intended to ensure that workplaces build a mechanism fordiscovering and removing in advance any accident risks hidden in their productionprocesses.

Workplaces subject to the PSM, whose number is 704 in total, are those (172 suchworkplaces) which fall into seven business categories, including oil refining, and those(532 such workplaces) handling any of the 21 chemicals, including inflammableand combustible substances, in quantities larger than the prescribed standard. Tosystematically manage large equipment which is highly likely to lead to seriousindustrial accidents, the government has asked workplaces to assess accident riskshidden in processes and facilities; discover and remove any such risks, prepare aprocess safety report containing detailed implementation plans on maintenance,repair, emergency measures, etc., and submit the report to the Korea OccupationalSafety and Health Agency for examination and confirmation.

Since 2001, the government has implemented a differentiated management system.Under this system, the government evaluates how well workplaces comply with what isstated in their process safety reports. Based on the evaluation results, workplaces witha good record of compliance are allowed to autonomously manage their safety whilethose with a poor record are given intensive guidance.

Industrial Accident Compensation Insurance

Industrial accident compensation insurance in Korea was established in 1964. Underthe system, employers are exempted from the civil responsibility for compensationby paying insurance premiums, and the government directly compensates thevictims.

The Industrial Accident Insurance plays two main roles: One is to prevent industrialaccidents by creating employers’ financial incentive to reduce industrial accidents, andthe other is to provide insurance benefits, and rehabilitation and welfare programs toaccidents victims.


The Ministry of Labour is responsible for deciding policies and programs of thesystem. The Korea Labour Welfare Corporation holds the charge for compensatingaccident victims and providing for rehabilitation and other welfare programs. The KoreaOccupational Health and Safety Agency conducts industrial accident preventionprograms.

The industrial accident insurance applies to all workers regardless of their type ofemployment. An employer can take out the insurance with his/her workers dispatchedoverseas as the insured after getting permission from the Korea Labour WelfareCorporation. The insurance does not apply to businesses in the agricultural, forestry,fishery and hunting industries, small construction businesses, domestic businesses,etc. But the businesses mentioned above can join the industrial accident insurance ifthey get permission from the Korea Labour Welfare Corporation.

Pay premiums Demand

benefits

Secure stable livelihood

Offer Labour

Implementationorganization

� Korea Labour� Welfare Corporation

Ministry of LabourProgrram and policy decision

Recipient� Accident victim� Victim’s family

Insurance holder

� Employer� Conractor

Providebenefits


Expansion of coverage of Industrial Accident Compensation Insurance

Year Workplace No. of Workplaces No. of WorkersSize Covered Covered

1964 500 workers or more 64 81

1965 200 ” ” 289 161

1966 150 ” ” 594 222

1967 100 ” ” 1,142 336

1969 50 ” ” 3,696 683

1974 16 ” ” 17,551 1,517

1982 10 ” ” 54,159 3,464

1988 5 ” ” 101,445 5,744

2000 1 ” ” 706,231 9,486

Source: Ministry of Labour; Annual Report on Industrial Accident Compensation Insurance Programs.

If a worker, protected by the industrial accident insurance, gets injured, has anoccupational disease requiring medical care for four days or more, or dies, insurancebenefits are provided at the request of the worker or his/her surviving family.

Type of Insurance benefits

Type of Benefits Level of Benefits

Medical care benefits cover all medical care expenses, such as formedical examination, medical treatment, surgery and others.

Wage replacement benefits amounting to 70% of average wages areprovided to compensate for wages during a medical care period

Workers with permanent disabilities are paid disability benefits to makeup for the potential losses to their wages according to the extent towhich their physical functions are damaged. The benefits are providedin the form of a lumpsum payment or an annuity.

- Disability grade 1-3 : annuity.- Disability grade 407 : annuity or lumpsum payment (optional)- Disability 8-14 : lumpsum payment

If disability benefits cannot be paid as an annuity to an eligible recipientbecause the recipient goes abroad or returns to his/her home country,the benefits can be paid in a lump sum at the request of the recipient.

Medical carebenefit

Wage replacementbenefit

Disability benefit

Contd.


If a worker dies, his/her surviving family members (spouses, children,etc.) are paid survivors’ benefits.

In principle, the payment (47-67% of monthly average wages) is madein the form of an annuity, however, if an recipient requests, 50% (1,300-day average wages) can be paid in a lumpsum and the remaining 50%as an annuity.

If a worker needs to receive nursing care after the completion of medicaltreatment because he/she cannot carry out activities of everyday life onhis\her own, nursing benefits are provided.

If an injury or a disease is not cured after two years of medical treatmentand is classified as grade 1, 2 and 3 of incurable injury or disease,injury-disease compensations are provided in lieu of wage replacementbenefits.

If a worker dies for work-related reasons, 120 days of average wages areprovided to his/her surviving family members.

Source: Ministry of Labour

An employer should report and pay the annual amount of insurance premiums to aregional branch office of the Korea Labour Welfare Corporation within the first 70 daysof the year concerned or within 70 days of the start of the business in case thebusiness starts in the middle of the year. An employer should report and pay theestimated amount of insurance premiums (estimated total wages to be paid to workersfor the year × insurance premium rate) to the Korea Labour Welfare Corporation everyyear. In the following year, they should report the finally confirmed amount of insurancepremiums (total wages actually paid to workers for the previous year × insurancepremium rate) and settle the balance between the estimated and final premiums.

Insurance premiums rates are announced by the Ministry of Labour every year.Business types are classified according to the risk of accident rates and the similarityof business activities. The insurance premium rate for each type of business isdetermined based on the ratio of total wages of the past three years to total insurancebenefits, and related administrative costs are also considered.

In 2004, there were 60 business types and the average of their premium rates was14.8/1000. The minimum rate was 4/1000 for the financial and insurance businesswhile the maximum rate 408/1000 for the timber business.

The premium rates may be adjusted with a view to strengthening accident preventionactivities by employers and increasing fairness. If total benefits paid over the past threeyears account for more than 86/100, or less than 75/100 of total premiums of the same

Survivors’ benefit

Nursing benefit

Injury-diseasecompensation

Funeral expenses


period, a new premium rate obtained by raising or lowering the existing premium rateupto 50/100 can be applied for the following insurance year.

INDUSTRIAL RELATIONS

Trend in Unionization and Industrial Disputes

Workers in Korea are free to organize or join a trade union. To establish a trade union,workers should report this to an administrative office having jurisdiction over the regionwhere the main office of the trade union is located, such as a regional labour office orlocal government. The day when the trade union receives a confirmation letter from theadministrative office, it is recognized to be established under the Trade Union and LabourRelations Adjustment Act (TULRAA).

Trade unions and employers should bargain and conclude collective agreementsin good faith. They should not refuse or neglect to do so without justifiable reasons. Inprinciple, collective agreements can be reached on matters related to workingconditions, such as wage, working hours, and welfare. After consultations betweenlabour and management, collective agreements can also be made on matters relatedto trade union activities. If standards set by employment rules or employment contractsdo not meet the working conditions and other stipulated standards in collectiveagreements, they should be invalidated and superseded by the standards in collectiveagreements.

If the difference of opinions between labour and management is larger on issues ofwage, working hours, welfare, dismissal, and other treatments that there is little roomfor them to reach an agreement through autonomous negotiation, the trade union isauthorised to launch industrial action. In this case, industrial action should be startedonly after a majority of union members agree to it as a result of direct or secret ballot,and the parties concerned go through the dispute mediation procedure under TULRAA.An employer can lockout the workplace after the trade union starts industrial action. Inthe case of lockout, the employer must report this to the responsible administrativeoffice and the Labour Relations Commission in advance.

At the end of December 2003, there were 6,257 trade unions with a total number of1,549,949 members and the unionization rate stood at 11.0%. The number of federationsof unions composed of unit trade unions were 45. There were two national confederations,such as the FKTU and the KCTU. The FKTU, under its flagship had 28 industry-levelfederations, 3,951 unit trade unions (including branches and subchapters) with 831,660members. The KCTU, which was recognized as a legitimate organization in 1999 had15 industry-level federations and 1,332 unit trade unions with a total of 673,880 members.There are around 974 unit trade unions with a total membership of 44,409 workingindependently without joining any national confederation.


Number of union members and unionization rate

Year No. of Trade No. of union members Unionization rateUnions (1,000 persons) (%)

1987 4,086 1,267 18.5

1989 7,861 1,932 19.8

1991 7,656 1,803 17.2

1994 7,025 1,659 14.5

1995 6,606 1,615 13.8

1996 6,424 1,599 13.3

1997 5,733 1,484 12.2

1998 5,560 1,401 12.6

1999 5,637 1,480 11.9

2000 5,698 1,526 12.0

2001 6,150 1,568 12.0

2002 6,506 1,606 11.6

2003 6,257 1,550 11.0

Source: Ministry of Labour, “2003 current Status of Organization of Trade Unions”.

Industrial disputes which have mostly been on the decline since 1987 started to in-crease following the economic crisis of 1998. The main reasons for industrial disputeshave been labour-management conflicts over wages, employment security, and collec-tive agreements. As industry-level unions have risen in number since 2001, conflictssurrounding industry-level bargaining have gradually grown, pushing up the proportionof strikes by industry-level unions in the total industrial disputes.

Current Status of Industrial Disputes (Unit: Cases, 1,000 persons, 1,000 days, days)

1999 2000 2001 2002 2003 2004 Year

Applications for mediation (cases) No. of Industrial Disputes (cases)

862

1,036 1,096 1,041

896868

198

250235

322 320

462

1999 2000 2001 2002 2003 2004Year


Dispute Mediation System

If a dispute occurs during wage or collective bargaining due to the difference of opinionson working conditions, such as wage, working hours, welfare, dismissal or treatment ofworkers, etc., In principle, the labour and management should resolve the disputeautonomously. However, in case the dispute is not settled autonomously, the partiescan be assisted in settling the dispute by dispute mediation bodies including the LabourRelations Commission.

The Dispute Mediation System in Korea can be broadly divided into two categories: thepublic mediation system by Labour Relations Commissions and the private mediationsystem by persons or groups other than the Labour Relations Commission undermutual agreements or collective agreements.

Public Mediation System through the Labour Relations Commission

The key role of the Labour Relations Commission is to settle industrial disputes(unfair dismissals, unfair labour practices, labour disputes, etc.) that arise in therelationship between labour and management. The Commission is composed ofmembers representing labour, management and the public interest. In particular, publicinterest members are selected by labour and management representatives on theCommission.

In addition to the National Labour Relations Commission, there are regional labourrelations commissions in 12 major cities. The National Labour Relations Commissionis responsible for dealing with the industrial disputes which fall under the jurisdiction oftwo or more regional labour relations commissions and re-examining decisions takenby a regional labour relations commission or a special labour relations commission.

1999 2000 2001 2002 2003 2004 Year

No. of participants (1,000 persons) Lost work days (1,000 days)

92

177

88 93137

1,366

1,893

1,083

1,580

1,2981,199

1999 2000 2001 2002 2003 2004 Year

211


If negotiations between labour and management fail to reach an agreement, one ofthe parties may file for mediation with the Labour Relations Commission. If theCommission receives such a request from general businesses, it should organize amediation committee comprising of three members each representing employers,workers and public interests to conduct mediation. If in case such a request is made bypublic interest services, a special mediation committee comprising of three publicinterest members conducts mediation. In general businesses, mediation should becompleted within ten days and in public interest services within fifteen days after therequest for mediation. After confirming the claims by each party concerned, themediation committee should prepare a mediation proposal and recommend bothparties to accept it. Although labour and management have the freedom to accept themediation proposal, they should take part in the mediation process in good faith. If incase an agreement fails to be reached through mediation within the mediation period,workers can take industrial action.

Arbitration, not like mediation, is a legally binding process of settling industrial disputes.Industrial disputes are referred to arbitration in three cases, (i) if both labour andmanagement agree to do so (ii) if either of the parties requests arbitration according tocollective agreements or (iii) if a special mediation committee recommends referringdisputes in essential public services to arbitration. Once a dispute is referred toarbitration, industrial action is prohibited for fifteen days. The Labour RelationsCommission organizes an arbitration committee composed of three public interestmembers. Since, the arbitration awards made by the Labour Relations Commissionhave the same effect as collective agreements, the parties concerned must follow them.If the parties consider that the arbitration awards rendered by a regional labour relationscommission violate laws or go beyond its authority, they may apply for re-examinationto the National Labour Relations Commission within ten days. If the parties cannotaccept the arbitration awards or decisions subsequently made by the National LabourRelations Commission, they can file an administrative lawsuit within 15 days.

Dispute Settlement through Private Mediation

Although parties usually undergo the public mediation provided by the Labour RelationsCommission to settle industrial disputes, they are not forced to do so. This means thatlabour and management can settle their disputes through mediation or arbitration bypersons or groups other than the Labour Relations Commission on the basis of theirmutual agreements or collective agreements.

Mediation of Disputes in Essential Public Services and Emergency Mediation

Special provisions on dispute mediation are applied to industrial disputes in essentialpublic services, such as railways, water, electricity, gas, oil refinery and supply,


telecommunications services, hospitals and the Bank of Korea whose stoppage ordiscontinuance may considerably endanger the daily lives of the general public orundermine the national economy which is hard to be replaced.

A special mediation committee composed of three special mediation members isorganized to mediate industrial disputes in essential public services. If disputes inessential public services are considered unlikely to be settled through mediation, thespecial mediation committee can recommend the Labour Relations Commissionconcerned to refer the dispute to arbitration. Once the recommendation is made, thechairperson of the Labour Relations Commission should decide, after consulting withpublic interest members, whether or not to refer the case to arbitration.

In case where the industrial action is large-scale, special in nature, and related to publicinterest services that is likely to undermine the national economy considerably orendanger the daily lives of the general public, the Ministry of Labour can turn toemergency mediation, after consulting with the chairperson of the National LabourRelations Commission. Once the decision to refer a dispute to emergency mediation ismade, industrial action is banned for thirty days.

Labour-management Consultation System

Labour-management councils have been formed at the enterprise level, with a viewto promote workers’ welfare and achieve sound corporate development throughlabour-management participation and cooperation.

Workplaces with 30 or more employees are required to set-up a labour-managementcouncil, regardless of the existence of a trade union. Members representingworkers should be elected by workers through direct ballot so as to strengthen therepresentation of workers on labour management councils. In case a workplace has atrade union with majority of all workers as its members, the trade union can selectworkers’ members.

On matters subject to resolution by a council, employers should implement decisionsby labour-management councils in accordance with prescribed procedures. Matterssuch as profit sharing, general guidelines for employment adjustment, managementof working and recess hours are subject to consultation. Employers are alsorequired to report and explain their companies’ economic and financial situations tolabour-management councils. If they fail to do so, workers can request relevantinformation.


Functions of Labour-management Councils

Matters subject to Matters subject to Matters to beresolution consultation reported

� establishment of a basicplan for workers’ trainingand competencydevelopment

� installation andmanagement of welfarefacilities

� establishment of a labourwelfare fund within a labourwelfare fund within acompany

� matters not resolved bythe Grievance Handlingcommittee

� setting up of various labour-management committees

� productivity improvement andprofit sharing

� hiring allocation and training ofworkers

� prevention of industrialdisputes

� handling of workers’grievances

� improvement of safety,health and other workingenvironments and promotionof workers’ health

� improvement of personnel andlabour management systems

� general guidelines regardingemployment adjustment,such as dismissal

� management of working andrecess hours

� improvement of wagepayment method, system,and structure

� introduction of new machinesand technologies andimprovement of workprocesses

� establishment and revisionof work rules

� support for employee stockownership plans and workers’other wealth accumulation

� promotion of workers’ welfare

� other matters regarding labour-management cooperation

� matters regarding overallmanagement plans andperformance

� matters concerningquarterly productionplan and performance

� matters concerningpersonnel planscompany’s economicand financial situations


Organization and Operation of Tripartite Consultation Body

Background of the launch of Social Consultation Body

The government has made its efforts to establish social and economic systemsfor actively responding to changing international environments and developingparticipatory democracy at home. The launch of the Tripartite Commission as the firstsocial consultation body in our history following the 1997 sweeping revision of labour-related laws is of great significance to the history of industrial relations in Korea. In theaftermath of the financial crisis at the end of 1997, a consensus was formed on theneed to organize a social consultation body to fairly share burdens and profits in theprocess of overcoming the economic crisis and of making structural reform throughcooperation between social partners.

Against this social and economic background, the Tripartite Commission composed ofrepresentatives of labour, management, the government and public interests wasorganized and has since then largely contributed to overcoming the economic crisis.The Commission has also made so large a contribution to reforms in the public,financial and labour sectors that it has come up to be recognized as the mostsuccessful social consultation body in Asia.

Operations of the Social Consultation Body

On January 15, 1998, the Tripartite Commission was launched in which representativesof labour, management, the government, public interests, and party officials participated.On February 6, 1998, the Tripartite Commission reached the historic Social Agreementfor Overcoming the Economic Crisis, which consisted of 90 specific tasks to be done,including corporate restructuring, unemployment measures, etc.

The 2nd Tripartite Commission which started on June 3, 1998 concentrated its effortson resolving labour-management conflicts over restructuring and employment issuesand intensively discussing and reaching agreements on various social and economictasks. The Commission produced legislative bills to enhance basic labour rights,such as one granting teachers the right to organize a union, one guaranteeing politicalactivities by unions, etc. Regarding restructuring in the public, financial and corporatesectors, the Commission adopted more than ten recommendations and proposals.

At the request of labour circles to operate Tripartite Commission as a permanentlegal consultation body, the Act on Establishment, Operation, etc. of the TripartiteCommission was enacted on May 24, 1999. Pursuant to the Act the 3rd TripartiteCommission was launched on September 1, 1999.

In February 2004, the Social Pact for Job Creation (covering 55 items in total) wasconcluded. Its main contents were enhancing cooperation with unions to stabilizewages in relatively high-paying areas, encouraging companies to refrain from artificial


employment adjustment, relaxing the government’s economic regulations, expandingsupport for corporate investment, etc.

On September 3, 2003, the Tripartite Commission organized a ‘Special Committee forWorkers in a typical Employment Relations’ to work on protection measures forworkers in atypical employment relations such as insurance agents, teachers of learningaid companies, ready mixed concrete truck drivers, golf caddies, etc. The Commissionis devising the protection measures by reviewing current labour and economy-relatedlaws, surveying the current state of these workers in Korea and making a comparativeanalysis of examples in other countries. In the meantime, measures to reform theCommission is being discussed so that it can establish its status as a genuine socialconsultation body by eliminating shortcomings revealed in the operation of theCommission since its establishment in 1997.

Major agreements and achievements by the Third Tripartite Commission)

� Wage payment to full-time union officials and multiple trade unions atthe enterprise level (Feb. 9, 2001)

� Measures to ensure the effectiveness of collective agreements (Dec.21, 2000)

� Basic agreements on working hour reduction (Oct. 23, 2000)� Agreement to improve the dispute mediation system and related

practices (Nov. 21, 2002)

� Tax reform measures to promote workers’ welfare (Jul. 25, 2000) andenactment of the basic Workers Welfare Act (Oct. 23, 2000)

� Laying the foundation for enforcing the National Basic LivelihoodSecurity Act better (May 30, 2000)

� Measures to protect human rights and working conditions for foreignworkers (Jun. 29, 2000)

� Securing financial resources for workers’ learning (Nov. 21, 2002)� Reforming the income tax system (Nov. 21, 2002)� Measures to promote employee stock ownership plans (Jun. 30, 2004)� Measures to advance employment services (Sept. 15, 2004)

� Restructuring in the public sector– Electric power (Jun. 29, 2000), Postal service (Aug. 4, 2000) Railways

(Dec. 14, 2000) Privatization of subsidiaries of Korea NationalHousing Corp. (Jul. 22, 2002) Privatization of subsidiaries of KoreaHighway Corp. (Jul. 22, 2002)

– The government’s resolution on the break-up of power distribution unitsin the electric power industry (Jun. 30, 2004)

� Restructuring in the financial service sector– Direction of the development and reform of the financial industry

(Jul. 12, Dec. 22, 2000)

Settlement of currentissues in the area ofindustrial relations

Expansion of socialand economic

policies

Agreements relatedto restructuring


Through exchanges with the ILO and many other tripartite bodies in Asia and Europe,the Tripartite Commission in Korea is internationally recognized as an efficient body forsocial and economic policy consultation and social dialogue.

CONCLUDING REMARKS

For the last 40 years, labour administration in Korea has developed into a hugeadministrative body. The Ministry of Labour has six regional administrations and 40regional labour offices around the country. It has 118 Employment Security Centresto implement the Employment Insurance System and to carry out active labourmarket policies. It also runs a Call Center to enhance the accessibility of workers andemployers to labour administration. There are four commissions5 and eight subsidiarybodies6 under the Ministry of Labour. The field of its activity include labour protection,national employment policy, unemployment insurance and active labour market policy,human resource development, public employment services, occupational safety andhealth, settlement of labour dispute, and social consultation.

There are several contributing factors to the development of labour administration inKorea:

First, there has been increasing demand for the public services of labour administration.As Korean economy has experienced rapid economic growth, attention has beendrawn to the role that labour administration can play in the process of socio-economicdevelopment. Responding to the increasing and changing needs of society for publicadministrative service, labour administration has reshaped its organization andredefined its appropriate role in a timely manner.

Second, labour administration in Korea has made utmost efforts to produce labourmarket information and research. To play the role of a leading actor in the areas oflabour and employment policies, labour administration must constantly keep track ofthe evolution of the labour market so that it can gauge all the parameters necessary forthe development, implementation and enforcement of a coherent national labour policy.7

The Ministry of Labour in Korea has conducted various national surveys on a monthly oryearly basis and published reliable labour statistics covering such areas as employment,labour cost, wage structure, labour demand and the working conditions at workplace.8

In addition, it has collected and compiled data on workers’ mobility, occupational injuriesand diseases, and industrial relations from its public employment services, labourinspection services, and industrial relations services, respectively. Using such data andinformation, countless researches have been undertaken by the Ministry of Labour,government research institutes, and university scholars. Many of these researcheshave been used to formulate, implement, revise, and monitor the labour marketpolicies in Korea.


Finally, labour administration in Korea has worked closely with its social partners,employers’ organization and labour unions. Labour administration has always furnishedforums to encourage dialogue between social partners on labour issues. It hasactively taken part in tripartism as a partner to encourage exchanges, carry forward thediscussion, and even to find support for its policies and actions. Tripartism and socialdialogue have been an integral component of the labour administration in Korea. Thecreation of the Tripartite Commission in 1998 can be regarded as an institutionalizationof the labour administration’s usual practice. Using tripartism and social dialogue asvehicles of achieving goals of labour policies, labour administration in Korea has drawneffective support from interested parties in many complicated policy issues.

REFERENCES

Baccaro, L. and Lee, C., “Strengthening Industrial Relations and Social Dialogue in the Republic ofKorea,” Technical Note, ILO-Geneva, 2003.

Choi, Y. (ed.), Recent Development in Employment Relations and Labour Market in Korea, KoreaLabour Institute, 2005.

ILO, Meeting Changing Needs: Labour Administration (2nd edition), 2000.

Keum, J. et al, Employment Insurance in Korea: The First Ten Years, Korea Labour Institute, 2006.

Kim, J. (ed.), Employment and Industrial Relations in Korea, Korea International Labour Foundation,2003.

Lee, W. (ed.), Labour in Korea: 1987-2002, Korea Labour Institute, 2006.

Ministry of Labour, Labour Administration in Korea, 2005.

Park, F., Park, Y., Betcherman, G., and Dar A. (eds.), Labour Market Reforms in Korea: Policy Options forthe Future, World Bank and Korea Labour Institute, 2001.

Website with useful information in English:

http://english.molab.go.kr

http://www.kli.re.kr

http://labourstat.molab.go.kr

NOTES

1. For a brief history of the labour administration in Korea, see Appendix 1.

2. See appendix 3: vision and goal of labour policy in 2005.

3. Defined Benefit (DB-type): The amount of pension benefits to be paid to workers is determined inadvance. The amount of contributions an employer should pay into a pension fund changesdepending on the result of fund operation. Defined Contribution (DC-type): The amount ofcontributions an employer should pay into a pension fund is determined in advance. The amount ofpension benefits to be paid to workers change depending on the result of fund operation.


4. Following the end of the First-Year Plan in 2004, the government established the Second Five-YearPlan for the period from 2005 to 2009. Major policy tasks of the Second Five-Year Plan are:(i) intensively managing areas vulnerable in terms of health and safety, (ii) promoting voluntaryindustrial accident prevention activities in workplaces, (iii) making workplaces more accountablefor accidents, and (iv) advancing industrial safety and health. 113 specific measures to enhanceindustrial safety and health are specified in the Plan.

5. There are Labour Relations Commission, Minimum Wage Council, Industrial AccidentCompensation Insurance Appeal Committee, and Employment Insurance Appeal Committee underthe Ministry of Labour.

6. The subsidiary bodies of the Ministry of Labour are Korea Labour Welfare Corporation (KLWC),Human Resource Development Service of Korea (HRD Korea), Korea Industrial Safety Corporation(KISCO), Korea Employment Promotion Agency for the Disabled (KEPAD), Korea Labour EducationInstitute (KLEI), Workers Accident Medical Corporation, Polytechnic Colleges, and Korea Universityof Technology and Education.

7. See ILO, Meeting Changing Needs: Labour Administration (2nd edition), 2000.

8. For the labour statistics provided by the Ministry of Labour in Korea, see http://labourstat.molab.go.kr


APPENDIX 1

Brief History of Labour Administration in Korea

Before the establishment of the Labour Administration

� 1945 - With the start of the U.S. military government following independence,the Labour Division of the Bureau of Mining and Industry under the Ministry ofCommerce and Industry began to deal with labour affairs in September 1945. Inthe following year, the Labour Division was promoted to the Ministry of Labourunder the U.S. military government.

� 1948 - With the promulgation of the Constitution and the GovernmentOrganization Act, the Labour Bureau was established under the Ministry of Healthand Social Affairs.

� 1953 - The National Labour Relations Commission was set up to mediate labourdisputes and adjudicate individual acts in a fair manner.

Period of the Labour Administration

� 1963 - According to organizational changes in the government, the LabourBureau under the Ministry of Health and Social Affairs was reorganized anddeveloped into the Labour Administration.

� 1966 - The first National Skills Competition was held. Selected through thiscompetition, skilled workers were fielded for the first time in the World SkillsCompetition in 1967.

� 1968 - A total of 25 job security centres were setup across the nation to ensureemployment security. The National Vocational Training Centre was establishedto promote vocational training.

Period of the Ministry of Labour

� 1981 -Given the rising importance of labour affairs, the Labour Administrationwas promoted to the Ministry of Labour. The Industrial Safety and Health Actgoverning industrial safety and health was enacted and announced.

� 1986 - The test for certified labour affairs consultants was administered for thefirst time. The Minimum Wage Act providing for workers’ minimum wages wasenacted.


� 1988 - The Equal Employment Act began to be implemented, which marked thestart of the government’s intervention in ensuring gender equality in the laboursector. The Korea Labour Institute responsible for professional researches onlabour issues opened.

� 1990 - In response to growing interests in the employment of the disabled, theAct on Employment Promotion and Vocational Rehabilitation for DisabledPersons was promulgated. The Korea Labour Education Institute responsiblefor providing education about industrial relations was founded.

� 1991 - Korea became the 152nd country to join the ILO. The Aged EmploymentPromotion Act was enacted to address the issue of employment of the aged.

� 1995 - The Employment Insurance System was implemented and theemployment insurance fund was setup. Both functioned as a cornerstone forresolving massive employment during the economic crisis of the late 1990s.

� 1998 - The first Tripartite Commission was launched to overcome the economiccrisis through social dialogue.

� 1999 - As a measure to counter massive unemployment due to the economiccrisis, employment security centres were opened across the nation.


APPENDIX 2Organization of the Korean Ministry of Labour

Vice-Minister

Inspector-General

Policy & PublicRelations Office

EmploymentPolicy Office

InnovationPlanning Team

Legal Affairs Team

InformationalizationPlanning Team

Labour StatisticsTeam

EmergencyPlanning Team

Public Employment Service(PES) Innovation TeamTeam for Policy on Creationof Social Service JobsQualification system Team

Inspection Team

Public Relations Planning Team

Finance & Planning Team

EmploymentPolicy Team

Youth EmploymentTeam

Foreign WorkforcePolicy Team

Job WorldFoundation Team

Employmentinsurance PolicyTeam

Industrial AccidentCompensationInsurance Team

InsuranceManagement &Support Team

SkillsDevelopmentPolicy Team

SkillsDevelopmentSupport Team

WomenEmploymentTeam

Team forEmployment ofthe Aged

General Affairs Division

Director General forPublic Relations

Director General forFinance & Planning

Director General forEmployment Policy

Director General forLabour Insurance

Director General forSkills Development

Director General forEqual Employment

Labour RelationsPolicy TeamTeam for LabourRelations Lawsand systemsLabour-Managementcooperation &welfare TeamPublic LabourRelations Team

Labour StandardsTeamTeam for Wageand working hourPolicyNon-RegularWorkers PolicyTeamRetirementBenefit SecurityTeam

Industrial HealthPolicy Team

Industrial SafetyTeam

Industrial Health& EnvironmentTeam

InternationalLabour PolicyTeam

InternationalNegotiationTeam

PreparatoryOffice for The14 ILO ARM

Labour RelationsPolicy Bureau

Labour StandardsBureau

Industrial Safety &Health Bureau

InternationalCooperation Bureau

Minister

Source: http://english.molab.go.kr


A Common Workplace, A Dynamic Society

More Jobs

I. Innovate employmentsupport services

II. Create new advancedjobs

III. Improve wage systemsand diversify employ-ment types

Advanced IndustrialRelations

I. Establish autonomousand responsibleindustrial relationspractices

II. Promote various labour-management dialogueand participation

III. Legislate the reformproposal for advancedindustrial relations lawsand systems

Better Jobs

I. Build lifelong vocationalcompetency developmentsystems

II. Guarantee basic labourconditions

III. Redress discriminationand reduce gaps

APPENDIX 3

Vision and Goal of Labour Policy in 2005

re-engineering labour administration to promote … · vi re-engineering labour administration to...

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