Let's talk about higher wages in S'pore's cleaning sector

This article is a summary of an opinion piece that first appeared on the business times.

The Progressive Wage Model (PWM) of my industry , cleaning , is in the news again. This time the adjustments and increments of the wage floor for 2023 to 2028 are a lot steeper than previous years, with basic cleaner wages to reach at least $2420 in 2028.

With basic wages now at $1,312, the increase represents a jump of about 84 per cent over six years, which works out to an annualised increase of about 10 per cent a year. In a sector where labour wages make up to 70 to 80% of total revenue, it is clear that current prices of services will be forced to rise to keep operations sustainable.

In short, the general price of cleaning will increase. But will this cost increase be borne by service providers (cleaning companies) or by the customer of such services (such as the company, building owner or condominium management that engages the cleaning company)?

Who pays more: Customer or Supplier?

First, some observations from the viewpoint of a supplier that provides cleaning services.

I joined the facilities industry four years ago to build a business model that pays more than the PWM to push for greater recognition and dignity for workers doing frontline jobs. Back in 2017, I believed the industry was ripe for professionalism and its good business to treat your workers well.

The current Covid-19 pandemic has clearly proven this to be true.

But what I did not foresee was just how low the general willingness-to-pay for these essential services were.

Take for example the government’s recent guidelines for certain industries to close or to work from home as a default. Many commercial sites chose to pro-rate or flat out stop paying for their cleaning service on the rationale that there were few or no one going into the offices, gyms or shopping malls.

In the end, cleaning service companies and the government- via the Jobs Support Scheme (JSS) - ended up picking the tab to keep frontline workers employed. Such behaviour on the customer side suggests there is an unwillingness to spend more on essential services and a stubborn price ceiling that is thus far impregnable.

I am confident the increments in the PWM will shatter that ceiling.

This is because it will level the cost structure of every service provider, and force a unanimous push for service buyers to pay more. But buyers won’t bear the lion’s share of the cost increase. After all, buyers can always find another supplier willing to bid lower.

So far, the cleaning industry is a highly fragmented one with some 1,500 commercial cleaning businesses that clean areas such as commercial buildings, hawker centres and public area cleaning.

The oversaturation of supply leads to persistent undercutting of prices to win tenders. While having an industry wide PWM to keep up wages will reduce significantly cleaning companies’ tendency to do this, the sheer competitiveness of the market will always lead to some players giving ‘suicide’ pricing in order to win business. Such companies are prepared to shave profit margins razor thin or to zero just to remain in the business. By doing so, they absorb the cost increase, thus lightening the cost burden that should have been equally shared with the customer.

Education of the end consumer (such as the property owner) and service buyer (such as the property manager that engages the cleaning company) on the demerits of cheap sourcing will go a long way in creating a fair share of costs.

Policy Implementation

While the intention of the PWM serves as a mechanism to level the playing field for cleaning , the government must also ensure loopholes are closed to render it to be truly effective.

For instance, more draconian punishments should be given to companies underpaying workers and skirting PWM requirements.

There is a tendency of industry players to cut corners and justify shortcuts by thinking that competitors do these anyway. But this creates a negative and contagious vicious cycle for the entire industry. It is time for that cycle to stop.

My hope is the new updated PWM will ‘clean up’ the industry (pun intended) and create a virtuous cycle of better jobs, better pay, better prospects, and better workers.

One way to effectively police errant manpower companies is this : if a cleaning company bids below an amount lower than  its PWM wage per cleaner for the contract, it would have to open itself to being audited and checked by the Ministry of Manpower. (Cleaning contracts typically have a specific number of cleaner hours required so this can be calculated). This would help weed out errant suppliers. A similar idea was proposed for the security services sector.

Having an anonymous, external whistleblower system would also help ensure that both buyers and cleaning companies adhere to the PWM's intricacies. It is both the customers, service providers and regulators' responsibility to create a whistleblower system that is robust.

If the above can all be achieved, with a close tripartite alliance between union-government and workers to educate buyers about the PWM, I believe we will continue to see better wages for frontline workers, growing in tandem with the rising price for quality service.

And there are benefits to rising prices. Higher wages will likely attract more young workers - increasingly tired of relying on the gig economy - who are looking for a career that offers them a pathway to develop their skills and leadership in contrast to settling for the precarity of gig work.

While there will be some degree of disemployment due to rising costs, the winners of the industry will be employers that truly care for their people  and sustainably pay them well.

Likely, these would also be cleaning employers who differentiate themselves by choosing the path of innovation, rather than fighting a meaningless price war at the expense of their employees.

Outcome-based contracts, rather than purely time-based or manpower based contracts could be a way forward. And technology adoption is key here. For instance, firms that can adopt a hybrid human-robot approach to deliver services will be able to adapt to changing consumption levels of cleaning services whilst coping with a labour shortage climate.

Finally, in the face of all these painful changes, the service buyers must also ask themselves: if cleaning costs are so high, what can I do to clean after myself to avoid paying such high costs?

If the answer leads to taking better care of our desks, our public restrooms, and being more considerate to our cleaners and service providers , the outcome might not be such a bad one after all.

Daniel Thong is the CEO and founder of Nimbus Facility Services

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