In the 9 July 2018 parliamentary sitting Minister for Manpower Josephine Teo floated the following idea:

MOM is considering the possibility of disallowing downward salary revisions altogether. While this will provide workers with more certainty of their wage for the entire duration of their stay in Singapore, it could also lead to possible early termination of employment even when the worker is willing to accept a lower wage.

She was replying to a question by MP Louis Ng who asked about degradation of salary terms for Work Permit holders to less favourable terms than stated in the In-Principle Approval for a Work Permit (IPA). The full question and reply can be seen below.

Minister of State Zaqy Mohamad said something similar on Facebook. He wrote, “We are watching salary disputes involving IPA salary reductions closely. The option for salary reduction was originally intended to give [foreign workers] an opportunity to continue employment, in instances where their performance does not meet what is expected.”

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TWC2’s position on this matter:

TWC2 would welcome a move to ban downward revisions in salary (from the salary level declared in the IPA) for the term of the work permit. We believe the pros far outweigh the cons.

There are two huge advantages that will spring from such a move.

The first is that it would simplify the law and clarify permitted practice regarding salaries for work permit holders. It would reduce scope for disputes to arise which in turn should reduce the workload at MOM, TADM and ECT in trying to deal with these disputes.

Secondly, as for situations where an employee turns out to be performing below expectations, giving the employer the option of lowering salary is too easy a way out. The employer should be incentivised (through having to continue paying the IPA salary for the remaining period of the Work Permit) to re-look at his own company’s staff training and motivational elements. Nudging employers in this direction, rather than giving them the easy option of cutting salaries, would also be in alignment with Singapore’s aim to improve productivity.

In any case, under-performance is such a unilateral, subjective claim that even if employers were allowed to use this reason for reducing salaries, there is no way to monitor if this claim is abused for mere cost-cutting purposes. The large number of cases that TWC2 has seen over the years wherein employers have been paying less than IPA-specified salaries strongly suggests that cost-cutting or profit-padding is the more important driver of such behaviour than any rigourous system of measuring performance.

We can anticipate that there may be the occasional instance when despite re-training and motivational incentives, a particular employee shows no improvement in his work. Then, instead of choosing to keep the worker on and paying him the IPA salary, the employer may choose to terminate the employment, as permitted by the Employment Act. TWC2 does not argue for closing this option. Instead, we suggest that administrative measures should be put in place to keep abuse in check, and to mitigate the impact on the worker who very likely would have paid huge amounts in recruitment costs.

There are many possible ways to do so, for example:

(a) Not allow an employer to replace the worker he has fired (Worker A) until the natural expiry date of Worker A’s original Work Permit has been reached, i.e. temporarily reduce the employer’s quota.

(b) Keep a count of premature terminations of Work Permits by employers and if he is seen to be prematurely terminating more than, say, 5% or 10% of his foreign workforce prematurely within a calendar year, MOM can put the employer on suspension, disallowing him from hiring any new foreign worker for 12 months. There is already a similar framework for FDWs: 3 terminations in a year and employer may not be allowed any new hires — it’s a good system to build on.

(c) Give a worker who is prematurely terminated up to two months on Special Pass to try for a change of employer. At the same time, the employer should remain responsible for the upkeep and maintenance of this worker till he gets a transfer job or is repatriated. The costs involved in upkeep and maintenance for up to two months will also serve as a disincentive against being too trigger-happy about firing employees on the excuse of underperformance.

TWC2 also urges MOM to take this opportunity to eliminate another related kind of abuse — deductions. There should be tighter oversight over Work Permit applications to ensure that deductions proposed by the employer do not fall foul of Sections 30(2), 30(3) and 32(1) of the Employment Act. TWC2 has seen many IPAs where the deductions would, in a month with no overtime pay, exceed the permitted maximums. We have also seen quite arbitrary deductions for housing and amenities, in violation of Section 30(2)’s requirement that it should not exceed the actual value of the housing or amenities supplied.

No IPA should be approved where the deductions, in the absence of extra earnings from overtime, exceed the maximums allowed by the Employment Act.

 

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Parliamentary sitting, 9 July 2018

Question for written answer by Louis Ng Kok Kwang:

To ask the Minister for Manpower in each of the past three years (a) how many employers have informed the Ministry in writing of modifications to the salary terms for a Work Permit holder to less favourable terms than declared and stated in their in-principle approval letter; (b) how many employers have been fined for not having done so; (c) how many notices of salary reduction have been issued to workers; and (d) on what grounds does the Ministry determine whether a salary reduction can be allowed.

Reply by Minister for Manpower Josephine Teo:

1. When applying for Work Permits (WPs), employers are required to declare key salary terms, including the basic and fixed monthly salary, offered to prospective Work Permit Holders (WPHs). Since 2011, these terms have been reflected in the In-Principle Approval (IPA) letter, which is available in the WPHs’ native languages, and must be sent by the employer to the worker in his home country prior to the worker’s departure to Singapore. This ensures that the worker is fully aware and accepts the terms of conditions before leaving his home country.

2. In some cases, employers may discover that the WPH’s performance falls below what is expected, and thus cannot justify paying the agreed salary. Instead of terminating the WPH’s contract, MOM allows employers to revise the salary downwards, provided they have obtained the worker’s written agreement and have notified MOM of the revision. In the past three years, MOM was notified of salary reductions affecting less than 2 percent of non-domestic WPHs per year.

3. We have taken action against employers who reduced salaries without informing MOM or obtaining the WPH’s written consent. In the first half of 2018, a total of $105,000 in Administrative Financial Penalties were imposed on 17 errant employers.

4. Notwithstanding these safeguards, we have been monitoring salary disputes involving IPA salary reduction. The proportion of WPH salary claims which involve IPA salary reductions was stable at about 7% over the last 3 years, but increased to about 11% in the second half of last year.

5. Since February 2018, when mediating salary disputes, the Tripartite Alliance for Dispute Management (TADM) has insisted that employers provide documented evidence that the worker has consented to any salary reduction. TADM no longer allows for arguments from employers that the worker had provided tacit or verbal consent. In addition, MOM is considering the possibility of disallowing downward salary revisions altogether. While this will provide workers with more certainty of their wage for the entire duration of their stay in Singapore, it could also lead to possible early termination of employment even when the worker is willing to accept a lower wage. We will thus consult with relevant stakeholders to determine the best step forward.