Several significant changes related to working hours, pay and benefits expected to take effect in 2014

Introduction

On 14 March 2013, the Singapore Ministry of Manpower (MOM) announced proposed changes to the Employment Act (Chapter 91) of Singapore (the Employment Act) to afford better protection to employees (including professionals, managers and executives) and to raise standards of employment. The Employment Act is Singapore’s main labour law, setting out the basic terms of employment, and shaping the responsibilities and relationships between employers and employees. The proposed changes are the outcome of Phase 1 of the first major Employment Act review since 2008. Due to the complexity of the issues involved, the review will be conducted in two phases. Phase 1, conducted from the second quarter of 2012 to the first quarter of 2013, focused on three main areas, namely:

  • Extending the coverage of the Employment Act;
  • Improving employment standards and benefits for employees; and
  • Reducing rigidity and augmenting flexibility for employers.

Phase 2, expected to commence in the fourth quarter of 2013, will focus on two main areas, namely:

  • Enhancing protection for employees in non-traditional work arrangements, such as contract work, self-employment and outsourcing; and
  • Implementing better mechanisms to facilitate employment dispute resolution between employers and employees.

The MOM is expected to introduce an Employment Act Amendment Bill for the Phase 1 proposed changes in Parliament in the second half of 2013. If passed in Parliament, these changes will likely come into force in the first half of 2014. The key proposed changes for Phase 1 to the Employment Act are set out below.

Extending General Protection to Junior Managers and Executives

In general, the Employment Act protects rank-and-file employees1 in Singapore, that is, the non-executive and non-managerial employees, who are viewed as more vulnerable and in need of protection by the law. The Employment Act currently also offers limited protection, in respect of salary payments,2 to managers and executives who earn up to S$4,500 a month (Junior Executives). The proposed changes to the Employment Act will extend the scope of protection to Junior Executives, to offer general protection such as prohibitions against unfair dismissal, as well as paid public holiday and sick leave benefits, in addition to the existing limited salary protection. MOM expects that about 300,000 Junior Executives will benefit from these changes.

While the proposed changes to the Employment Act seek to extend the scope of protection to Junior Executives, they will also require Junior Executives to serve at least one year with their employers before they are eligible to seek redress against unfair dismissal. This qualifying service period is intended to provide employers with reasonable time to assess the employee’s suitability to the job.

The proposed changes to the Employment Act will also allow employers to grant timeoff in-lieu to Junior Executives who are required to work on public holidays, subject to mutual agreement. The rationale behind these changes is to account for the nature of professional, managerial and executive work, which is generally more outcomesbased and which often includes in-built flexibility arrangements. In the absence of such mutual agreement between employers and employees, the employers are required to grant their employees at least half a day off in-lieu.

Extending Working Hours Protection to More Non-Workmen

Part IV of the Employment Act, which provides for working hours related protection (that is, protection against excessive working hours, the right to rest days and the right to overtime payment), currently applies to non-workmen3 who earn up to S$2,000 a month, and to workmen who earn up to S$4,500 a month. The proposed changes to the Employment Act will increase the salary threshold for non-workmen to S$2,500 a month, in line with a general increase in salary levels, to provide working hours related protection to a larger pool of eligible non-workmen. MOM anticipates these changes will benefit an additional 150,000 employees in Singapore.

However, the salary threshold for nonworkmen will remain constant at S$4,500 a month and the proposed changes will simultaneously cap the amount of overtime payable to non-workmen at the salary level of S$2,250 a month. MOM introduced this cap to help employers manage labour costs.

Issuance of Payslips and Maintenance of Salary Records

At present, the Employment Act requires employers to keep the salary records of workmen only, not for all employees. The proposed changes to the Employment Act will require employers to provide written itemised payslips to, and maintain detailed salary (and other employment) records for, all employees who fall within the scope of the Employment Act. The MOM views these measures as not only protecting employees, but also helping employers in the event of a salary dispute.

Cap on Deductions from Employees’ Salaries

Employees’ salaries are currently protected from any deductions by employers other than those authorised under the Employment Act. The authorised deductions under the Employment Act include deductions for absence from work and for accommodation, amenities and services supplied by the employer. The authorised deductions (other than authorised deductions for absence from work, recovery of advances, loans or overpayments, income tax payable by employee or agreed payments to co-operative societies) are also subject to a cap of 50 percent of an employee’s salary for the applicable salary period.

The proposed changes to the Employment Act seek to impose a new 25 percent sub-cap for authorised deductions for accommodation, amenity and services supplied by the employer (within the existing 50 percent total cap), so as to prevent excessive deductions from employees’ salaries.

Payment of Retrenchment Benefits

Under the current Employment Act regime, an employee who has been employed in a company for at least three years may request retrenchment benefits if he or she is retrenched. An employee who has worked for less than three years in a company is not entitled to retrenchment benefits under the Employment Act. However, this does not prohibit a company from paying an ex-gratia payment at its discretion.

The proposed changes to the Employment Act will reduce the service requirement for retrenchment benefits from three years to two years, in line with shorter employment tenures.

Protection of Unionised Employees Upon Restructuring

Currently, when employees are transferred from one company to another under a restructuring exercise, the collective agreement protects the employment terms of affected unionised employees until it expires. To provide greater certainty for these affected employees, the proposed changes to the Employment Act will require protecting the employment terms of the affected employees’ existing collective agreement for at least 18 months after the transfer, even if the collective agreement is expected to expire before that.

Limiting Employers’ Liability for Sick Leave and Medical Examination Expenses

The Employment Act currently obliges employers to provide paid sick leave and medical examination expenses for their employees. The proposed changes to the Employment Act will specifically exempt employers from having to grant paid sick leave and bear the medical examination expenses of employees for cosmetic consultations and procedures which are not medically necessary. These changes are aimed at maintaining the balance of responsibilities between employers and employees.

Conclusion

The proposed changes to the Employment Act are significant, and we recommend employers take the changes into consideration as they plan their human resources strategies and procedures for 2014, when the changes are expected to come into effect.