In-Principle Approval: uses and abuses 2011 – 2018, part 3

Part 3: Getting around IPAs in salary disputes

Part 2 of this series described the uneven way in which the Ministry of Manpower (MOM) officers and the ministry’s Labour Court [footnote 1] handled salary claims. Sometimes, the In-Principle Approval letter (“IPA”) [footnote 2] was admitted as the basis for adjudicating claims. When that happened, employers who chose to pay at a lower basic salary rate than stated in the IPA would find it hard to contest employees’ claims.

Various strategies were adopted to argue against using the IPA as the basis. Some employers argued that there was an oral contract (at a lower basic salary) preceding or superseding the salary stated in the IPA. But why would employers declare a higher salary (in the work permit application, and thus in the IPA) than they were prepared to pay?

Most of the time, it would be to comply with a new regulation by MOM and the Building and Construction Authority of Singapore that took effect on 1 January 2017. This rule required that at least ten percent of Work Permit holders must be of R1 category. The sweetener for employers was a lower levy rate [footnote 3]. One of the four pathways for a worker to become an R1 worker would involve six years’ construction experience in Singapore and a fixed monthly salary of $1,600 or more. Clearly some employers found the higher salaries difficult to afford even as they wanted to take advantage of the lower levy. They had to find some way to declare a salary of $1,600 on IPAs in order to comply with the rule, and yet not have to pay this amount to workers. We first wrote about this scam in this article: The Everglory scam: Productivity incentive shot to pieces.

The ‘scam’ wasn’t just restricted to Everglory Construction Pte Ltd. Beginning from about 2016, TWC2 came across case after case of a similar nature. And companies weren’t just scamming to get to the 10% quota. TWC2 noticed that several companies declared $1,600 salaries for far more than 10% of their workforce; they must have been keen on the lower levies they could enjoy.

Brazenly disavowing the salary figure in the IPA

A September 2017 article on this website, Employer proclaims he lied to ministry, then gets away with paying less in salary, described the brazen stance taken by a director of a company who gave evidence before the Labour Court. Arguing that there was an oral contract between the company and the employee that had fixed a lower salary than the amount declared in the IPA, the director said in evidence that

There was never any intention to pay the [worker] a monthly salary of $1600

and that this $1600 figure (stated in the IPA) was used in the application for the work permit simply to

increased [sic] the probability of a successful work permit application.

In that particular case, the Labour Court found against the worker, declining to endorse the IPA salary of $1,600. This decision came about even though the Assistant Commissioner of Labour, presiding over the Labour Court, found that the figure of $1600 was submitted “to influence, manipulate and defraud MOM into approving his work permit.” As seen from these words, he was very critical of the employer though in his decision over the salary to be applied, he largely found in the company’s favour.

TWC2 asked MOM on 15 July 2018, nearly a year after the director submitted that statement, whether action had since been taken against him and the company for making a false declaration to MOM. A month later, MOM replied that “enforcement actions were taken against the employer and a financial penalty was imposed on the employer.”

That being such a minimally informative reply, we followed up by asking when enforcement action was taken – might it be only after we wrote the email of 15 July? – and what was the nature and amount of the penalty. We have yet to receive a reply to this follow-up question.

The above was no isolated case. The same article also highlights another salary case where once again, the employer (different from the first) stated in written evidence that

the salary (S$1600.00 per month) stated in the MOM in-principle-approval letter was mainly for application only.

Forged payment vouchers and contracts

A variation of the ‘another oral agreement existed’ defence used by employers to contest workers’ salary claims involved even more brazen behaviour. TWC2 has seen employers present as evidence to the Labour Court documents claimed to be superseding contracts between the company and the employee wherein a salary lower than provided for by the IPA was stated.

Sometimes, the worker would denounce the purported contract as totally false and the signature allegedly his at the end of the document as forged. Other times, the worker would acknowledge that the signature at the end of the contract was real, but one of the intermediate pages (which conveniently contains the salary figure) had been substituted without his knowledge. The substituted page showed a lower salary.

The Labour Court really had no way of ascertaining truth in such circumstances. Consequently, Labour Court decisions were all over the place.

Doctored IPAs

If there’s anything that shows how effective forgery was as a means of enforcing a lower salary, the spate of illicitly altered IPAs that TWC2 saw from 2017 onwards would be it.

There are two main scenarios that would motivate an employer to doctor an IPA.

If he wanted to declare the worker as an R1 worker (to meet the new rule or to enjoy a lower monthly levy), he would have to declare at least $1,600 as the fixed monthly salary in the IPA. But if the employer did not want to pay the worker as much, he had to induce the worker to think that the correct salary was a lower figure. Passing the worker an altered IPA stating a lower salary would be the method. Presumably, the employer would be hoping that the employee would never find out that the actual salary figure in the true IPA was higher than the salary paid to him. And so long as no complaint was raised by the worker at MOM, the ministry would never discover that the employer was enjoying the lower levy rate illegitimately.

Secondly, if the employer did not need to classify the worker as an R1, the method is the reverse. Typically, the employer needed to induce the worker to take the job by offering a higher salary (e.g. $800 per month) than what the employer was prepared to pay (e.g. $500 per month). The employer would submit the lower figure ($500) in the work permit application, but then illegally alter the printed IPA to show a higher figure. The prospective employee would think that he would be getting what he asked for, but after starting work he would soon discover that he was only paid $500. Yet, should he go to MOM to lodge a claim, he would find himself in an impossible position. The true IPA, with the $500 figure, could be used as the determining document.

There’s a story on our website, Fraud committed using ministry letterhead, that details a case like the above scenario. The worker had in hand two IPAs: an earlier one that showed a salary of $800; a later one with $500. MOM later confirmed that $500 was the figure submitted officially by the employer.

MOM subsequently took umbrage with our story, saying there was “No information to suggest that there was fraud”. See this article. Frankly, this was a ridiculous position to take when (a) we imaged the doctored IPA on our website and (b) the worker had shown his MOM officer that very same doctored IPA. In reply, we wrote:

the very existence of an unauthorised version indicates that a nefarious scheme was afoot. So, when MOM asserts that no fraud had taken place, we at TWC2 are dumbfounded. We find it very hard to square such an assertion with the existence of a doctored document.” (point 4 in this article)

With MOM keeping its head in sand, is it any surprise that doctored IPAs then bloomed like mushrooms after rain?

A more recent article, More frauds committed using ministry letterhead, detailed three more IPAs that looked to have been illegally altered too.

System defect?

Even as we presented the evidence, we wondered whether it wasn’t so much a question of illegal alteration, but a system defect. Were employers and their agents photoshopping the IPA after issuance or did MOM’s work permit application system allow an employer to go back online and alter the salary after first printing out an IPA, and then reprint the IPA again with the amended salary?

The first would be something that should never be done (it would be illegal); the second was something stemming from a process bug within MOM’s system. It would be unethical, but might not be illegal.

Employment agents we spoke to told us that the latter — go back online, amend the salary and print another IPA — didn’t seem possible, but till now MOM has not explained publicly what safeguards their system has. Like many Singapore ministries, they prefer to be opaque. Bureaucratic opacity has one big advantage: When you screw up, nobody can see you’ve screwed up.

However, what officialdom tends to forget is that opacity does not mean people will think better of you. Opacity simply gives cause for all sorts of speculation that screw-ups are happening all the time behind the veil.

Changes coming

So far at least, MOM has not tried to deny that the ‘More frauds committed using ministry letterhead’ article raised very suspicious cases, unlike their highly defensive (but poorly-grounded) response to the earlier article. In fact, ministry officials reached out to explain that changes were in the works.

Parts 4 and 5 will describe the 2018 changes MOM made.

[1] The “Labour Court” is a colloquial term to mean a hearing before the Commissioner of Assistant Commissioner for Labour. It is an administrative tribunal under the aegis of the Ministry of Manpower.

[2] The IPA process is almost entirely online. When an employer wishes to employ a foreign worker, he or his licensed employment agent logs into MOM’s system to make an application for a work permit for this worker. A host of details, including salary details, has to be provided.
If MOM approves the application, the employer or his agent can then print two versions of the IPA in paper form. One version is for the employer and the other is for the employee. The key details including those items listed above are the same, but there are some details that only show up in the employer’s copy, such as the amount in monthly levy, but not in the employee’s copy. And vice versa.
The employer or his licensed agent is supposed to send the employee’s copy to the prospective worker, so that he has it in hand when arriving at Changi airport. He needs to show it to immigration.

[3] Under the Employment of Foreign Manpower Act, employers of foreign workers in Singapore need to pay the government a monthly levy for each worker employed. The rate varies for many different reasons and classifications, but is generally between $300 to almost $1,000 per worker.