Case Studies

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Keppel Shipyard

Keppel Shipyard and its Performance Wage Model

Keppel Shipyard overhauled its wage structure to a more flexible one. Under the new wage system, salary increments moved away from an entirely seniority-based system. Instead, salary adjustments are now based on two components: Service Increment and Productivity Increment. Wage increments are granted based on the employee’s performance (graded through a performance appraisal exercise). For employees who had reached the ceiling of their salary scales, they would receive only a non-cumulative monthly lump sum payment. Keppel Shipyard had also implemented the Monthly Variable Component (MVC) since 2000.

The bonus was changed to consist of two parts: the Annual Wage Supplement (AWS) of one month’s basic salary, and the Productivity Bonus. The Productivity Bonus is pegged to the company’s business performance. There is also an established formula to peg the total bonuses to be paid.

When implementing the new wage structure, Keppel Shipyard took into consideration a few areas which they could improve on:
  1. The flexible wage system for all employees of the company should be transparent as far as possible;
  2. Clear guidelines on the adjustment of wages according to the company’s performance (i.e. Bonuses, AWS, MVC, Basic etc) should be established; and
  3. The performance evaluation exercise should be objective and employees should be aware of how they could improve their performance. The company wanted, as far as practically feasible, for employees to be constantly updated on their performance so as to improve in their weak areas.