Under Singapore law a company that cannot find work for an employee must pay them a one-off 'employment assistance payment'.
The age up to which workers have this "re-employment" right is now being extended by two years. Under the new rules the employer can also transfer that worker to another employer, with the worker's consent, if it does not have suitable work for the employee, the Ministry of Manpower (MOM) announced.
MOM has also removed an option that allowed employers to cut employees' wages by up to 10% after the age of 60, it said.
"This option was originally intended to help employers with seniority-based wage systems manage costs," MOM said. "Over the years, tripartite efforts have been successful in moving employers away from seniority-based wage systems."
MOM worked with the Singapore National Employers Federation (SNEF) and the National Trade Union Congress on the new law, it said.
Manpower minister Lim Swee Say said: "Over the last decade, the proportion of residents aged 60 and over in our labour force has increased from 5.5% in 2006 to 12% in 2015. As we live longer, we can expect this proportion to continue to grow."
Koh Juan Kiat, executive director of SNEF, said that employers should "make early adjustments to their HR practices to further re-employ workers to age 67". He said "employers can tap on the age management, job redesign and work-life grants to adapt their workplaces and work arrangements to make jobs more suitable for their older employees".
Sam Tan, minister of state for manpower, said: "We thank the tripartite partners for supporting this Bill. Raising the re-employment age from 65 to 67 will help older workers who wish and are able to continue working stay employed. Allowing eligible employees to be re-employed by another employer will also help to provide more options for employers and employees."
Singapore last year announced plans to set up an employment tribunal to hear salary-related disputes from workers.
The new Employment Claims Tribunal (ECT) will be established by April 2017 and will take over from the labour court, which currently adjudicates salary-related claims for workers covered under the Employment Act who earn up to S$4,500 (£2,570) a month.
It will also hear contractual salary-related claims including payment of allowances, bonuses, commissions, salary in lieu of notice and retrenchment benefits, "provided that these are expressed in monetary terms in the contract", Lim said at the time.