This adds detail to the Media Statement of 13 April 2020, titled “TWC2 dismayed at suggestion that foreign worker wages be cut by 25%”.

In a video aired on 10 April 2020, (https://www.youtube.com/watch?v=OBEPIbxtXvw), Prime Minister Lee Hsien Loong said, starting from 2 minutes 10 seconds:

2:10 We are paying close attention to the welfare of the foreign workers.

2:14 They came to Singapore to work hard for a living and to provide for their families back home.

2:20 They’ve played an important part building our HDB flats, Changi airport, MRT lines.

2:28 We’ve worked with employers to make sure they’ll be paid their salaries and can remit money home.

2:35 We will provide them with the medical care and treatment that they need.

2:41 If any of the family members watch my video, let me say this to them: We appreciate the work and contributions of their sons, fathers, husbands in Singapore.

2:54 We feel responsible for their wellbeing.

2:58 We will do our best to take care of their health, livelihood and welfare here, and to let them go home safe and sound to you.

3:10 On behalf of all Singaporeans, I wish you well.

(emphasis added by TWC2)

Dissonance

He may not be aware that a few days earlier, the Ministry of Manpower (MOM), in an  Advisory on salary and leave arrangements during Circuit Breaker (https://www.mom.gov.sg/covid-19/advisory-on-salary-and-leave) appeared to be signalling to employers of foreign workers that reducing foreign workers’ salaries would meet with MOM’s blessing.

There is serious dissonance between what the PM said and what MOM is saying.

Paragraphs 16 – 20 of MOM’s Advisory relate to foreign workers. Bear in mind however, that the advisory is specifically for the Circuit-breaker period which currently is set to last for four weeks to 4 May 2020, though there remains the possibility that it may be extended, going by the experience of other countries.

Those paragraphs are written in quite obfuscating language, with several terms (e.g. “maintenance and upkeep”) undefined:

Foreign employees

16. The Government has announced on 6 April 2020 a waiver of the March 2020 Foreign Worker Levy (FWL) due in April to help firms cut costs and improve their cashflow. Employers will also receive a one-off FWL rebate of $750 for each work permit or S Pass holder, for levies paid in 2020. This is to enable employers to preserve their manpower in order to quickly resume operation.

17. Eligible employers can receive the rebate as early as 21 April 2020, if they have PayNow Corporate account. For employers without the PayNow Corporate account, the rebate will be disbursed via cheque from 15 May 2020. Employers are encouraged to sign up for a PayNow Corporate account to receive their rebates faster, by approaching participating banks.

18.In view of the support given to employers, employers should provide salary support, including payment for upkeep and well-being of their more vulnerable foreign employees during this period:

18.1 Foreign employees who continue to work full-time during Circuit Breaker must be paid their prevailing salaries.

18.2 For foreign employees who could not work during Circuit Breaker, employers must continue to be responsible for their maintenance and upkeep and work out mutually agreed salary and leave arrangements with the unions and employees, especially for the low-wage work permit holders who may need more support. For example, employers can ask their foreign employees to consume their leave entitlements.

18.2.1 Where leave entitlements are exhausted, employers should provide salary support for their foreign employees and may apply for FWS to time-bank part of the salaries to cover overtime work after Circuit Breaker.

18.2.2 Employers must treat their foreign employees fairly and responsibly taking into consideration the levy waiver and rebate provided by the Government. For example, for a low-wage work permit holder who is staying at a purpose built dormitory and drawing a basic pay of $600 per month, a responsible employer can pay the foreign employee $450 as salary and also for his food and accommodation during Circuit Breaker. However, the foreign employee would forego his work-related allowances, such as his transport and shift allowances of $400 per month.

19. In view of the levy waiver and rebate, employers of all foreign Work Permit and S Pass holders will no longer receive the daily allowance paid to employers of workers on Quarantine Orders (QO) or Stay-Home Notice (SHN) going forward. For foreign workers on QO or SHN that begins in April, employers will also not be eligible for a further levy waiver incurred in April, since they would already have the levy payable in April waived. For foreign workers on QO or SHN subsequently, they will be eligible for levy waiver.

20. Employers of Employment Pass (EP) holders will not receive the rebate as there is no foreign worker levy. They will continue to receive daily support of $100 for their EP holders on QO or SHN if these workers are unable to telecommute.

“FWS” or “Flexible Work Schedule” is referred to in paragraph 14.2 which says it “which allows ‘time banking’ of additional salary payments to offset overtime payments in the future;” but doesn’t explain further. That mention does however have a hyperlink to another page which returns an error. So, no further intelligence can be gleaned.

There is also paragraph 21 which says,

Notification requirements for cost-saving measures with salary reductions during Circuit Breaker

21. Employers that implement cost-saving measures during the Circuit Breaker between 7 April and 4 May 2020 (inclusive) must notify MOM if the cost-saving measures result in more than 25% reduction in the salaries of their employees and the employer has at least 10 employees.

MOM is signalling its approval of pay cuts for the lowest-paid workers of Singapore

What bothers us most is 18.2.2 which appears to encourage employers to institute a 25% pay cut for foreign employees.

That paragraph 21 uses the plain words “reduction in the salaries” leaves us confident that that is how paragraph 18.2.2 should be read.

Migrant workers are already earning ridiculously low wages – paragraph 18.2.2 acknowledges this by using an example of $600 per month – and yet MOM suggests a further reduction.

That said, paragraph 18.2 uses expressions such as “mutually agreed salary and leave arrangements”, but given the poor bargaining power of foreign workers, not least because their work passes are linked to specified employers and they do not have the liberty to seek new jobs and change employers at will, any “mutual agreement” obtained from these workers must be suspect. Without the right to alternative employment, they do not have the free will necessary to give meaning to “mutual agreement”.

In such a context, MOM’s words simply allow employers to drive coach and horses through existing terms of employment.

Less scrupulous employers will seize opportunity to make pay cuts permanent

It should also be borne in mind that MOM’s mechanism for lowering salaries of foreign workers is designed for permanent lowering, not for a temporary reduction that 18.2.2 seems to refer to (the Advisory, after all, is specific to the Circuit Breaker period). If employers, eager to take MOM’s suggestion under 18.2.2 to lower salaries, use MOM’s mechanism to implement a reduction, the reduction will be a permanent one that modifies employees’ terms of employment well into the post-Covid period.

MOM, by this Advisory, has thus opened the door to massive abuse.

Equally problematic is the mention in 18.2.2 of this: “a responsible employer can pay … also for his food and accommodation during Circuit Breaker.” Why “can pay”? If the intention of MOM is that employers should pay, then MOM should issue an explicit directive, otherwise it will be widely ignored and employers may make salary deductions to cover the cost of food and accommodation.

Instead of reducing foreign workers’ wages, help employers through the Jobs Support Scheme

Perhaps MOM wants to make it easier for bosses to keep employees on their payroll instead of cancelling work permits. If so, a simple directive that no work permit can be cancelled during a Circuit Breaker period should suffice. Making it so complicated and so open to abuse, as this Advisory does, is bad policy.

Help for employers, if justified, should come from those better off than they are, not from those the bosses can oppress. In other words, it should come from the State.

The foreign worker levy waiver mentioned in paragraph 16 is a good move. But if the government feels that this is insufficient to support employers’ costs through this period then the Jobs Support Scheme (JSS) should be extended to encompass foreign workers. The JSS provides a 25 – 75% payroll support (depending on sector) but is currently limited to resident employees. The JSS was enhanced in the supplementary budget (also called Solidarity Budget) to 75% wage support across all sectors (subject to maximum limits) but is also limited to resident employees.

Not expensive to include Work Permit holders in Jobs Support Scheme

Would it be a very expensive proposition to expand its coverage to Work Permit holders? We do not think so. We can do some back-of-the-envelope estimates thus:

In the supplementary budget,  https://www.singaporebudget.gov.sg/budget_2020/solidarity-budget/solidarity-budget-statement the Minister for Finance announced:

B6. I will therefore enhance the Jobs Support Scheme for the month of April. In this Solidarity Budget, I will raise the wage subsidy for all firms to 75% of gross monthly wages, for the first $4,600 of wages paid in April 2020, for each local employee.

B7. Let me take this opportunity to clarify that for this, and for the earlier Resilience Budget, the wage cap of $4,600 does not mean that workers earning more than $4,600 do not qualify.

(a) Rather, it means that this wage subsidy applies to every one of our over 1.9 million local employees.

(b) But regardless of how much they earn, the maximum subsidy to the firms will be 75% of $4,600 per person, which is $3,450.

(c) The salary limit of $4,600 is based on our median wage level of full-time employed residents.

Now our back-of-the-envelope calculation is like this:

There are 1.9 million local employees as the minister himself said.

  • $4,600 is the median salary for them.
  • Therefore 950,000 of such employees earn more than $4,600 per month, and the enhanced Jobs Support Scheme (EJSS) will pay out $3,450 for each employee.
  • That’s a total of $3.3 billion.

The other 950,000 local employees earn less than $4,600 per month, and we conservatively assume their salaries average $2,500 per month.

  • The EJSS will pay out 75% of those salaries; this works out to $1.8 billion.

So, the total cost to the public purse of supporting jobs of resident employees is $3.3 bil + $1.8 bil = $5.1 billion (roughly).

The above is the estimate cost of EJSS for the month of April 2020.

If we extended EJSS to Work Permit holders, our estimate of extra cost to the treasury, based on the assumption that $600 a month would be the typical salary, would be:

  • 1 million work permit holders x average $600 a month salary x 75% = $400 million.

Adding $400 million to the EJSS bill for April (now about $5.1 billion) is just an increase of 8%.

TWC2 calls on MOM to rescind paragraph 18 of the 6 April 2020 Advisory and its sub-paragraphs, and to declare any salary reduction instituted so far under it to be null and void. Taking wages out of already-lowly paid employees to help bosses is indefensible.