Foreign Manpower Salary Payment | Employment Act

Foreign Manpower Salary Payment (as released by MOM)

Can employer pay a fixed monthly allowance to factor the cost of accommodation, meals and other services / amenities in the fixed salary?

Yes, employers may pay a fixed monthly allowance as a regular component of their employees’ salary, which their employees can use to purchase such accommodation, amenities or services of their choosing. These accommodation, meals, amenities or services may be provided by the employer, or by other parties. The fixed monthly allowance may be counted in the fixed monthly salary as long as the amount payable does not vary from month to month.

However, if the accommodation, food, amenities or services are provided as benefits-in-kind (i.e. paid for or provided directly by the employer), then their value cannot be counted in the fixed monthly salary.

Can employer make deductions from foreign employees’ fixed monthly salary for accommodation, food, transport, or other services and amenities?

Yes, deductions can be made in accordance with the rules on deductions in the Employment Act (EA). These rules apply to both local and foreign workers. Deductions can only be made for the actual cost of meals supplied by the employer, at the request of the employee. Accommodation, amenities and services provided must be accepted by the employee and the deduction cannot exceed the value of what is provided.

Employers must be able to account for the purpose of all monies collected from foreign workers (whether covered by the EA or not), including through deductions. MOM will introduce a presumption clause to deem that any monies collected from foreign workers are prohibited payments, collected as consideration for employment, unless they can be accounted for.

For instance, the presumption can be rebutted if the employer proves that the collection was for authorised deductions under the Employment Act or fees that a licensed employment agency may lawfully charge the foreign worker under the Employment Agencies Act.

What is the coverage of the Employment Act for foreign employees for salary deductions?

The Employment Act (EA) covers all local and foreign employees, employed under a contract of service and includes:

  1. workmen earning a basic salary of not more than $4,500;
  2. non-workmen or others earning a basic salary of not more than $2,500; and
  3. junior managers and executives earning a basic salary of not more than $4,500, less provisions in Part IV (not protected for working hours, overtime).

As for salary deductions, Section 27 of the EA that regulates allowable deductions applies to the above employees and the following deductions may be made from the employee’s salary:

  1. Absence from work;
  2. Damage to or loss of goods expressly entrusted to an employee for custody or for loss of money for which an employee is required to account, where the damage or loss is directly attributable to his neglect or default;
  3. Actual cost of meals supplied by the employer at the request of the employee;
  4. House accommodation supplied by the employer, not exceeding 25% of the monthly gross salary;
  5. Any amenities and services supplied by the employer as the Commissioner may authorise, not exceeding 25% of the monthly gross salary;
  6. CPF contribution; and
  7. Recovery of advance payments, loans or adjustments of over payment in monthly installments, not exceeding 25% of the monthly gross salary;
Can payment of “fixed” monthly bonus, commission or overtime be counted or declared as fixed monthly allowance?

No. Bonus, commissions or overtime are not part of the fixed salary component in our salary structure. For such payments, employees are expected to work to earn that much commission or overtime for each month, and if the employees fail to meet the target or the required overtime, the employer would often not pay the “fixed” commissions or overtime. These salary components are therefore variable payments and connect be included in the fixed monthly salary.

Can the Monthly Variable Component (MVC) be counted as part of the fixed monthly salary?

Yes, the MVC is paid on a monthly basis and should not vary from month to month. Hence, it may be counted as part of the fixed monthly salary.

To lower foreign employee’s MVC, do we need to approach and seek MOM’s re-assessment of work pass holders, before doing so?

Yes, you will need to approach MOM to seek re-assessment of your foreign employee’s work pass before any reduction in the fixed monthly salary, whether due to a reduction in the MVC or otherwise.

Who must be issued with Key Employment Terms (KET)

KET must be issued to all employees, employed under a contract of service as follows:

  1. Local employees (Workmen, Non-workmen, and PMEs) covered under the Employment Act;
  2. Foreign employees issued with a Work Permit, S Pass, or Employment Pass, covered under the Employment Act;
  3. Local and foreign employees on part-time employment;
  4. Employed on or after 1 April 2016;
  5. Employed for a contract term of 2 weeks’ continuous service or longer; and
  6. Within 14 days of the employee’s commencement date.
Can the employment contract or the letter of acceptance issued to the employee replace the KET

Yes, if the employment contract or letter of acceptance is issued to the employee in place of the KET, the employer must ensure that the required contents of the KET (where applicable to the employee) are included in the written contract.

However, if the Company does not practice issuing employees with a signed copy of the employment contract, then a copy of the KET to should be issued to employees for their reference.

Can an employee terminate his employment prior/during his NS reservist training, and use the training period to serve as his notice period?

No, an employee cannot give notice of termination while undergoing reservist training and use the training period to serve his notice.

Reservist training cannot be used to offset notice period.

When an employee covered under the Employment Act is serving notice, will the medical or hospitalisation leave (paid or unpaid) taken during the notice period be considered as part of the notice period? Can the employer extend or claim for short notice?

Yes, for employees covered under the Employment Act, sick leave and/or hospitalisation leave taken during the notice period is considered to be part of the notice period.

Employers cannot extend the notice period or claim for short notice.

Can an employee use their earned annual leave to offset their notice period?

An employee is allowed to use their earned annual leave to offset the notice period in order to bring forward their last day of work. In this case:

  1. The employee will be paid up to their last day of work;
  2. Any annual leave days used to offset the notice period will not be paid days;and
  3. After the employee’s last day of work, the employment has ended and the employee can commence work with another employer.
Can an employee use their earned annual leave to apply leave during their notice period?

Yes, the employer has to approve the leave application to allow the employee to go on leave during the notice period. In this case:

  1. The employee will be paid for the full notice period (which includes the annual leave);
  2. The staff will remain as an employee of the Company until the last day of his/her leave;and
  3. The employee cannot seek employment and commence work with a new employer during the approved leave period.

Employers can compel an employee to utilise their annual leave during the notice period, provided the employee agrees to the arrangement.

Is salary in-lieu of notice paid to the employee considered as part of total wages and subject to CPF contributions?

No, CPF contributions is not required for salary in-lieu of notice.

However, CPF contributions are still necessary for all salary earned till your last day of employment.

Conditions and Benefits

Who are the employees affected by the Retirement and Re-employment Act?

The Act requires all employers to re-employ eligible employees who attains the statutory minimum retirement age of 62 years old or contractual retirement age (whichever is higher), on or after 1 January 2012.

What if employees who had attained the statutory retirement age before 1 January 2012 and continue to be employed after January 2012? Are employers obliged to offer re-employment or Employment Assistance Payment (EAP) to these employees?

No. The law does not require employers to offer re-employment or the EAP to employees who had reached the statutory minimum retirement age of 62 years before 1 January 2012.

However, employers are encouraged to adopt the Tripartite Guidelines and continue to employ these employees as long as they are medically fit to continue working.

Are employers required to offer re-employment or EAP to employees who had been employed by the company at age 55 or above?

Employees who are employed at the age of 55 or above are exempted from the Retirement Age Act. However, under the re-employment law, employers are required to offer re-employment or EAP to employees who have completed at least 3 years of service upon reaching the age of 62.

For employees with less than 3 years’ service, and who are not re-employed at the age of 62, employers are encouraged to adopt the Tripartite Guidelines and consider granting an ex-gratia payment, based on employee’s length of service and contributions.

Are part-time employees eligible for re-employment or EAP?

Employers are required to offer re-employment or EAP to part-time employees who are not re-employed. Employers may pro-rate the minimum and maximum EAP amounts in the Tripartite Guidelines according to hours worked by the part-time employee.

In assessing an employee’s eligibility for re-employment, how should an employer assess “satisfactory performance” and “medical fitness to work”?

Satisfactory performance refers to the minimum level of performance the employee is expected to maintain in discharging his duties. In assessing the eligibility, the employer may take into account employee’s performance for the past 2 to 3 years.

As for the medical fitness, it has to be assessed objectively, and in relation to the job requirements. An employee should be considered medically fit to continue working as long as the employee’s health does not affect job performance. Thus, an employee will be deemed medically fit to continue working unless there are evidence to show otherwise.

If an employer continues to employ an employee on the same job and employment terms upon reaching the statutory/ contractual retirement age, can the employer offer a belated re-employment contract, about 6 months later, based on the principles outlined in the Tripartite Guidelines?

An employer who does not make any arrangements to re-employ an employee who has reached age 62, but continue to employ the employee on the same job and employment terms would be considered to have complied with the re-employment obligations.

An employer who did not offer an employee a formal re-employment contract at the onset, could subsequently offer him /her a re-employment contract up to the age 65, based on mutually agreed employment terms and benefits. The re-employment contract should be not less than 1 year at each instance and renewable as long as the employee remains eligible for re-employment, up to the age 65.

Can an employer impose a probation period for employees re-employed on a different job or a qualifying period for leave benefits?

No. Employer should not impose probation period for experienced matured employees, who are re-employed on a different job.

In addition, employers should not require re-employed employees to meet the qualifying period to be eligible for annual leave and sick leave as they were already in service with the company.

Can employees claim for retrenchment benefits or EAP when they are not re-employed up to age 65 due to redundancy (company restructuring, business process improvements, or loss of business contracts)?

Yes, in the event of retrenchment, employee with at least 2 years of continuous service with the employer is eligible for retrenchment benefits. The employers could use the EAP recommended in Tripartite Guidelines as a reference point to determine such payment, unless retrenchment benefits are included in the collective agreement or the employee’s employment contract.

Are employers required to pay EAP to employees who reject the re-employment offer?

No. EAP is provided to help eligible employees who were not offered re-employment to tide through the period when they are looking for alternative employment or undergoing training. Thus, employers are not required to pay EAP if employers have made a reasonable offer of re-employment to their employees.

Is EAP taxable or subject to CPF contributions?

No. EAP is not regarded as income earned and will not be taxable or attract CPF contributions.