With the rollout of the Progressive Wage Model, the costs of hiring security officers and cleaning workers will inevitably be higher in the coming years. Here’s a quick review of what you need to know as a service buyer preparing a contract for FM or managing agent services. 

With the increasing business demand for more value within constrained budgets across all industries, Outcome-based Contracts (OBC) has increasingly gained attention as the way forward for achieving desired quality standards at proportionate costs.

Under an outcome-based contracting model, service buyers pay according to the results delivered by a service provider, rather than the traditional approach of specifying the resources (eg. headcounts, hours, equipment) that are to be supplied.

WHY OBC MATTERS 

By shifting the focus to the desired standard of the work to be performed (the “what”) instead of the manner in which it is to be performed (the “how”), service providers can propose to use innovative solutions that require less resources to produce the required outcomes, by leveraging technology or redesigning work processes.

For managing agent services, OBCs can lead to better solutions that reduce the reliance on manpower, which is important for service buyers in the long-run in view of the Singapore government’s measures to uplift the salaries and working environment of lower-wage workers. 

EXPANSION OF MANDATORY PROGRESSIVE WAGES TO MORE SECTORS

As at end 2021, the Progressive Wage Model (PWM) covers about 85,000 workers in the cleaning, security and landscaping sectors. By 2022, it will become compulsory for firms in the lift and escalator sector to adopt the PWM as well. By March 2023, the Government will also extend the PWM to three more sectors – retail, food services and waste management. The goal is to expand the coverage of progressive wages to 82% of lower-wage local workers in Singapore.

Wages for security workers had stagnated due to the widespread cheap sourcing for their services. The low wages in turn resulted in high turnover and severe manpower crunch in their sector due to the difficulty to attract new entrants.

Thus, on 12 November 2021, the Ministry of Manpower (MOM) further announced a 6-year wage increment schedule that will see the minimum wages of security officers rise over 50% from the current S$1,442 to S$3,530 over the next six years.