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The following is an excerpt from the Straits Times article dated 12 October 2020. More sectors may adopt the progressive wage model – to Prisca Ang
Waste management and food services may be next in line to adopt the progressive wage model (PWM), a wage ladder that spells out compensation and career pathways for workers at each skill level. National Trades Union Congress (NTUC) deputy secretary-general Koh Poh Koon told The Straits Times (ST) that the labor movement has submitted its proposal to the Government for the model to be implemented in the waste management sector.
“NTUC is looking into other industry sectors with a sizeable resident workforce having a median income below the bottom 20th percentile, and this includes the food services sector,” added Dr. Koh who is also Senior Minister of State for Health. He said that perhaps only certain types of food establishments would be selected so that prices do not rise for consumers. The move must be coupled with job redesign and business model transformation so food and beverage (F&B) operations become more manpower-lean and efficient through productivity gains and new dining concepts.
In Parliament, last Monday, Deputy Prime Minister Heng Swee Keat reiterated the Government’s commitment to expanding the PWM to more sectors while ensuring businesses can absorb the change. Union leaders and experts told ST that the model would work well in sectors that have a larger proportion of lower-wage workers as well as visible career pathways.
Singapore Business Federation chief executive Ho Meng Kit said retail, accommodation, and food services are examples of this. “For example, in retail, you can start off as a sales assistant, before taking on a more specialized role like a sales administrator, and eventually become a supervisor or shop manager. So, there is possibly a ladder for progressive wages.” Some companies such as Decathlon Singapore, already have structures for progressive wages. Its managing director, Nils Swolkien said most managerial positions are filled through internal promotions, and all store managers can
expect to progress. “In the end, the increase in wages is connected with the strategy of internal promotion within the company.
Association of Small and Medium Enterprises vice-president Ang Yuit said industries facing tight labor shortages would benefit from the PWM, as better wages and career prospects might help attract local workers. These include areas such as F&B, hospitality, and construction.
a) From the above article, examine the impact of government policy, market forces, and unions in their influence to adopt Progressive Wage Model (PWM) in the lower-wage industries.
(b) Distinguish the effect that the progressive wage model has both on the policy of internal alignment and external competitiveness.
(c) In order to anticipate the possible adoption of a progressive wage model in the food services and retail industry, companies in these sectors need to start planning for visible career pathways.
Company A is a start-up in high technology urban farming, focusing on the development of cutting-edge vegetable farming methods in land-scarce Singapore. It has successfully developed a multi-tiered farming platform that can produce about 200 tons of green leafy vegetables per week. It is looking to expand its current team of 50 to 150 within the next 2 years. The business mission is to be able to supply 5% of Singapore’s overall consumption of green leafy vegetables in 2 years’ time. Company A is looking for young, entrepreneurial, and creative people with a strong desire to help Singapore achieve its goal of producing 30% of Singapore’s nutritional needs locally by 2030.
Company B is an established company that owns a chain of supermarkets in Singapore. With its island-wide outlets and vast sourcing of its food products from the global market, it has managed to keep its pricing affordable with an international appeal. It has gained 30% of the market share after operating for 20 years. It is a competitive industry with a few large players. Despite the Covid-19 pandemic, Company B has experienced significant growth in its revenue due to the lockdown with people dining at home most of the time. Company B is looking to open more outlets in less matured towns and to gain its market share further to 40% in 3 years’ time.
(a) Evaluate the business strategy for each company and recommend the overall pay level and the pay mix that will support their business strategies.
(b) Discuss THREE (3) factors that must be considered in the annual compensation budgeting process for any ONE (1) of the companies above.
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