While huge budget deficits are forcing some European governments to raise the retirement age as an austerity measure, Singapore’s Public Service Division announced this week, at a time when employment here has reached its highest level since 1991, that guidelines will be implemented next July allowing public sector employees to work beyond 62. The contrast could not be greater. While workers in some countries are held hostage to fiscal fortunes, retiring public servants here can look forward to extending their service on flexible terms.

Neither is the timing for this change precipitous. The Government, private sector employers and unionists have melded minds on the issue of re-employment over the last three years as one means of navigating the challenges posed by a fast-ageing workforce with increasing life expectancy.

The public sector implementation will serve as an example for other employers in putting into practice what the law will require by 2012. Re-employment arrangements are necessarily complex, since different entities have different needs and circumstances.

The tripartite guidelines issued earlier this year have gone as far as they could in codifying general principles and norms. And challenging though drafting the legislation will doubtless be, implementing it will be more challenging. So the public sector, with 124,000 employees on its payroll across 15 ministries and more than 50 statutory boards, and comprising 4 per cent of the labour force, has an important role in showing how the new policy might be implemented.

However instructive the precedent might be, some private sector employers will likely find it difficult to emulate the civil service.

They might have difficulty complying with the letter if not the spirit of the law despite help in the form of several human resource programmes. In particular, 160,000 small and medium-sized enterprises – which as a sector is the biggest employer in the country – will need more help than do multinational companies. Many of them are ill-prepared to meet the impending change. The exercise risks becoming counterproductive if SMEs were to take steps to avoid having to re-employ older employees by not hiring workers even as young as in their 40s.

Another issue is how big a pay cut re-employed workers will have to accept. Flexibility is provided for in the formula, but it will be open to interpretation. Both sides, employers and unions, will have to show goodwill and realism in resolving the issue. In all, a major step has been taken this week to resolve a problem that would otherwise have become intractable.