Volunteer case workers are sometimes confused as to how salaries of work permit holders (other than domestic workers) should be calculated. This is understandable because methods used by employers differ widely, and most times, the chosen method violates the law. Yet, because volunteers may see so many incorrect ways to calculate salaries, they begin to wonder if what they have been taught is wrong, and what employers do is perhaps right. This is compounded by hearing few reports of employers being taken to court for erroneous calculation of salaries.
This note serves to summarise the key points of the law in this regard, with reference to work permit holders. Further down, examples of calculation are provided.
1. In-principle Approval (IPA)
When employers submit an application for a work permit, they have to declare a few key details, and these are then reflected in the In-principle Approval (IPA), the most important part of which looks like this:
Copies of the In-principle Approval are sent to the employer and to the employee (with an additional copy in his native language). As can be seen from the example above, key information about the basic monthly salary, allowances and deductions, are stated. If a Singapore-registered employment agent is involved, his name is also included in the IPA. The Ministry of Manpower (MOM) appears to treat the stated details as binding (TWC2 agrees).
2. Basic monthly salary
Basic monthly salary or basic rate of pay is the salary that has to be paid for normal hours, as governed by Section 7 of Part II of the Employment of Foreign Manpower Regulations (EFMA Reg), which says:
Except where the foreign employee is on no-pay leave outside Singapore, the employer shall, regardless of whether there is actual work for the foreign employee, and subject to any written law, pay the foreign employee no less than the fixed salary amount declared in the application for a Work Permit submitted to the Controller.
3. Gross rate of pay
Here and there in the Employment Act, the term “gross rate of pay” is used. It is defined in Section 2of the Act, and means the basic salary, plus any allowances the employee is entitled to, but excludes food, travelling or housing allowances, bonuses or overtime pay. Thus, for most foreign workers, it would be similar to the basic monthly salary.
4. Hourly rate
To calculate overtime, an hourly rate needs to be determined, based on a formula provided by Section 38(6)(a) of the Employment Act:
Hourly rate = (12 x monthly basic salary) divided by (52 weeks in a year x 44 hours a week)
The hourly rate is only used to determine overtime pay; it is not used for calculating pay for working normal hours.
5. Working hours
Section 38(1) of the Employment Act stipulates that
Except as hereinafter provided, an employee shall not be required under his contract of service to work —
(a) more than 6 consecutive hours without a period of leisure;
(b) more than 8 hours in one day or more than 44 hours in one week:
For (a), a meal break would suffice for the “period of leisiure” so mentioned.This meal break or period of leisure is not included within the 44 hours.
A common problem TWC2 sees is that few workers have written employment contracts, and as a result the normal working hours are not set down anywhere. This can give rise to disputes when calculating salaries.
6. No-pay leave
Although it is not provided for in Section 7 of EFMA Regulations Part II, Section 20A(c) of the Employment Act provides that when an employee of his own volition asks for and is granted no-pay leave, even if he remains in Singapore, the proportionate amount of normal salary is deducted for the days of no-pay leave, based on this formula:
(Number of days he actually worked in the month, divided by number of days he is supposed to work in the month) x (gross rate of pay).
7. Medical leave or sick leave
Payment for medical or sick leave (commonly known as “MC”) is governed by Section 89 of the Employment Act, which sets out a scale of medical leave entitlements, summarised thus:
However, MOM, in a booklet issued to workers in 2011, simplified it thus:
Sick leave pay is to be the same as the gross rate of pay (which as explained above is equivalent to basic pay for the typical worker); this is set down in Section 89(5) of the Employment Act.
8. Annual leave
Section 43 of the Employment Act provides for minimum annual leave. Individual job contracts may be more generous.
Entitlement to annual leave commences when an employee has served at least 3 months. The entitlement is 7 days for the first completed year of service, 8 days for the second completed year of service, with in-between periods pro-rated. When pro-rating, the number of days entitlement is rounded down to the nearest half day; this rule is also laid down by law.
9. Overtime pay
Section 37(2)(c)(ii) of the Employment Act provides that work outside of normal hours (which must not exceed 44 hours a week) should be paid at one-and-a-half times the hourly rate.
10. Rest days
Section 36 of the Employment Act stipulates that there shall be a designated rest day each week. By default it shall be Sunday otherwise otherwise defined.
11. Pay for working on rest day
Sections 37(2) and 37(3) of the Employment Act provides that if the employee asks to work on his weekly rest day, then he is paid the same as normal time (more details below).
If the employer asks him to work, then he is paid twice a normal day’s pay.
However, the reality of migrant worker-employer relationships is such that it can rarely be ascertained who requested for such work. Instead, due recognition should be given to the power that employers wield over employees, especially foreign workers, making it very difficult for workers to decline to show up for work on rest days, if such work is scheduled. Hence, in TWC2’s view, the default presumption should be that work on rest days is at the request of the employer unless unambiguously shown to be otherwise.
Many employers think that on rest days, the pay is based on some multiple of the hourly rate. In actual fact, the law is quite clear that a slightly different formula applies, involving a “basic daily rate” — which is (12 x monthly basic salary) divided by (365 days – 52 rest days). If the employee is requested to work less than half a day, he is paid one day’s basic rate (not pro-rated by the hour). If he is asked to work more than half a day, he is paid two days’ basic rate.
However, it is not unreasonable to use the hourly rate in lieu of the daily rate — the difference will be slight — in which case then the rules should be : If the employee is requested to work less than half a day, he is paid 2 x 4 times the hourly rate (not pro-rated by the hour). If he is asked to work more than half a day, he is paid 2 x 8 times the hourly rate. Strangely, excess hours (or part thereof) after that is rated by law at 1.5 times the hourly rate, not twice or thrice.
12. Public holidays
Public holidays are considered paid holidays, unlike rest days (usually Sunday) which are considered unpaid days. Consequently, the formula for payment for any work requested of an employee on a public holiday is slightly different from a rest day, though many employers treat the two as interchangeable.
Section 88(4) provides that if an employer requests a worker to work on a public holiday, an additional day’s pay shall be given.
For example, if a public holiday falls on a Wednesday which is a normal working day for the worker, then his salary for the month will be topped up by one extra day’s pay. He is not given two extra days’ pay, because the Wednesday is already included in the basic monthly salary. Topping up by one day’s basic pay effectively increases it to two days’ worth of pay.
If a public holiday falls on a rest day (e.g. Sunday), and the worker is asked to work that day, how should it be calculated? It should be treated as work on a rest day. The make-up day (usually the following Monday) should be treated as the equivalent of the public holiday. In other words, should the worker be asked to work the latter day, he gets a top-up of one day’s salary.
For the sake of clarity, Section 88(7) of the Employment Act also says that a day in which the employee is normally expected to work just half a day (e.g. Saturday) should be treated as a full day for purposes of “basic pay”.
As with calculation of pay for work on rest days, it may be more convenient to use 8 x hourly rate as the equivalent of a basic daily rate — the difference is slight.
13. Maximum hours per week
Section 38(5) of the Employment Act stipulates that no employee shall work more than 72 hours a week.
The attached pdf file shows correct salary calculations for four scenarios, based on the above-mentioned principles. It also has one example of a common but incorrect calculation.