In a landmark judgment released 1 November 2017, the High Court has ruled that the basic salary stated in the In-Principle Approval for a Work Permit (IPA) “would constitute prima facie evidence” of the correct basic salary rate, unless the employer can prove otherwise.

The bar for proving otherwise was also set very high. This is because:

(a) the legislative intent behind the IPA was for prospective employees to be informed of the terms of employment; that being the case, it cannot be that the basic salary stated in the IPA is not indeed the applicable basic salary, for then the legislative intent would be frustrated.

(b) various parts of the subsidiary legislation under the Employment of Foreign Manpower Act speak of employers’ responsibility to pay the basic salary as declared in the application for a Work Permit that had been submitted by the employer or his agent (see footnote 1), and provide a clear mechanism if the employer wishes to adjust downwards the basic salary as declared in the application for an IPA (see footnote 2).

The judge said these provisions must mean that the basic salary as declared by the employer to the Ministry of Manpower when applying for a Work Permit for the worker, and subsequently reflected in the IPA, should be considered “factual”, at least until the clear mechanism is fulfilled.

In this case, Liu Huaixi v Haniffa Pte Ltd, (High Court reference 2017 SGHC270), the Chinese worker had claimed that he was underpaid through the nearly two years he worked for Haniffa Pte Ltd. In 2016, before the Assistant Commissioner for Labour, he had argued that his rightful basic salary should be $1,100 per month, as stated in his IPA, with overtime pay computed accordingly. The employer countered that there had been an oral contract made before he came to Singapore, wherein his total salary would be $1,300 a month, comprising $680 basic salary, $200 housing allowance and the balance, being for overtime.

(In an earlier case — Monteverde v VGO Corp Ltd 2013 SGHC280 — the High Court had already ruled that overtime pay cannot be a fixed amount, and so this part of the employer’s defence was already problematic.)

However, the Assistant Commissioner for Labour ruled against Liu. Liu then appealed to the High Court with the help of a pro-bono lawyer from TSMP Law Corporation.

In this High Court decision, Justice Lee Seiu Kin found for the worker on the central issue of basic pay and the significance of the IPA.

The judge ruled that “Given the statutory intent of the IPA, the court would take as factual an employer’s declaration of the basic monthly salary in the IPA because he must be presumed to be truthful when he made the declaration.” (para 31).

“In the present case, for the respondent (employer) to succeed, it would need to produce evidence that the sum stated in the IPA to be the basic salary did not correctly reflect the sum declared in the application for the work permit.”

The judge continues: “Indeed, I would go so far as to state that even if there was a written contract of employment which provides for a monthly basic salary of less than the sum stated in the IPA, the burden would lie on the employer to show why the IPA figure does not reflect the true salary. For example, the employer may adduce evidence to prove that the sum stated in the IPA is different from the amount declared by him in the application for the work permit and somehow an error had been made in the IPA by MOM. Or the employer can admit that he had made a false declaration in the work permit application, thereby attracting other consequences for himself….”

The bottom line is this: “Given the statutory framework of the IPA, the amount stated in it would constitute prima facie evidence of the basic monthly salary of the employee.”

The judge also awarded costs in Liu’s favour.

TWC2 is pleased that at last there is clarity on this issue. We see hundreds of cases a year of salary disputes, with many revolving around employer claims that a lower basic salary applied. Up to this point, many workers have failed to get satisfaction from the ministry’s tribunal — i.e. hearings before Assistant Commissioners for Labour, colloquially known as “Labour Courts”. In the same way, Liu Huaixi also failed to get satisfaction and had to appeal to the High Court.

Assistant Commissioners for Labour no longer hear salary disputes. Since earlier this year, such disputes are heard at Employment Claims Tribunals (ECT), which operate under the umbrella of the State Courts. We expect that this ruling will inform all future decisions of ECTs.

John Gee, head of research at TWC2 told the Straits Times, “The IPA letter should be the new standard when there is no written contract.”

 

Footnote 1

Section 4 of Part III of the Fourth Schedule of the Employment of Foreign Manpower (Work Passes) regulations states:

4.  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 but subject to any other written law, pay the foreign employee not less than —

(a) the amount declared as the fixed monthly salary in the work pass application submitted to the Controller in relation to the foreign employee; or

(b) if the amount of fixed monthly salary is at any time subsequently revised in accordance with paragraph 6A of Part IV, the last revised amount.

Such payment must be made not later than 7 days after the end of each salary period, which shall be agreed between the employer and the employee and which in no case shall exceed one month.

—

Footnote 2

Section 6A of Part IV of the Fourth Schedule of the Employment of Foreign Manpower (Work Passes) regulations states:

6A.—(1)  The employer shall not —

(a) reduce the foreign employee’s basic monthly salary or fixed monthly allowances to an amount less than that declared as such in the work pass application submitted to the Controller in relation to the foreign employee; or

(b) increase the amount of fixed monthly deductions to more than that declared as such in the work pass application submitted to the Controller in relation to the foreign employee, except with the foreign employee’s prior written agreement.

(2)  Before implementing such reduction or increase, as the case may be, the employer shall inform the Controller in writing of the proposed reduction or increase, as the case may be.