Kairul’s IPA, approved by MOM, shows the salary figures declared by his employer to the authorities.
Kairul (not his real name) recently landed a job as a driver for a construction company. Drivers work very long hours. Typically, they are the first to start work each day, picking up other workers from dormitories, and are the last to finish, after sending all the workers back to their accommodation.
However, for every hour of overtime Kairul will be putting in, he will earn just $2.25.
This is 1.5 times his basic rate of pay which is only $1.50 per hour, as calculated from his basic monthly salary of only $286 — marked as “1” in his IPA that is imaged in the header. “IPA” is explained in detail in Glossary.
In Australia, the minimum wage is A$19.84 per hour [footnote 1]. Currently, the Australian Dollar and Singapore Dollar are almost at parity.
Overtime rate is 1.5 times basic rate (like in Singapore), but in Australia this is only for the first few hours of overtime, e.g. first two or three hours [footnote 2]. Beyond the first two or three hours, overtime rate is twice basic rate. The threshold between 1.5 and 2.0 times basic pay seems to vary depending on contract or union agreements.
So, if Kairul were working in Australia, he would earn at least A$29.76 per overtime hour, instead of S$2.25 in Singapore.
One more thing. The “ordinary hours” in Australia is 38 hours per week, after which the overtime rate kicks in, whereas in Singapore, it is 44 hours per week.
Yet you can see much bigger numbers on Kairul’s IPA. For example, the fixed monthly salary (marked as ‘3’) is stated to be $1,600. Despite the misleading label (“Fixed monthly salary”), this is not what Kairul can expect to earn as a minimum. There are also big deductions such that the final figure (marked as ‘6’) is only $800 a month.
He can work his butt off in overtime, but this will add little to $800 since the overtime rate is abysmally low.
The slasher items
Two items in Kairul’s IPA make a total mockery of law.
The first is marked as ‘2’ in the header image. It is obvious to us, having seen so many similar cases, that the employer needed to declare a fixed monthly salary of $1,600 in order to benefit from a reduced foreign worker levy. But they were obviously also unwilling to pay an overtime rate commensurate with a salary of $1,600. So a basic salary of $286 was put in, and a further $1,314 (marked as ‘2’) was added as padding to inflate it to $1,600.
This way, the employer could expect to enjoy levy savings (out of taxpayers’ pockets) without paying the worker an appropriate salary.
A more detailed explanation of this “trick” (and why $1,600 fixed monthly salary triggers a reduced levy) can be found in our January 2020 article What does “monthly deduction for others” actually mean?
The second slasher item is marked as ‘5’ in the header image. The employer has put in a “Monthly deduction for others” as $450. Together with the deduction for housing, the $1,600 fixed monthly salary is thus halved to only $800.
A detailed discussion about the very dubious nature of “Monthly deduction for others” can also be found in the above-mentioned article. In it, we argued that by allowing employers to insert this deduction, the Ministry of Manpower (MOM) has enabled them to subvert the intent of law.
We argued in the earlier article that MOM needs to establish some kind of floor for the basic salary in such instances where the employer tries to enjoy a levy reduction by padding the fixed monthly salary to $1,600. The completely disproportionate ratio between Kairul’s basic salary and the fixed allowances is like spitting in the face of policy intent, in addition to seriously undermining overtime pay for workers like Kairul.
We also argued there that MOM should eliminate the option of entering a figure of “Monthly deduction for Others” since it only opens the door to abuse.
It’s been a year since we wrote the earlier article. We’ve seen no action from the ministry. It’s pretty embarrassing that a ministry charged with realising and enforcing the social protection intent of labour laws still allows unethical employers to drive trucks through them.
We are not using Kairul’s real name for this article because he is still in the job and there is a risk that he may face penalties from his employer for speaking out.
3. See also the December 2020 article Rezaule’s salary terms a work of art which describes another similar case. That we have written up two examples in a short space of time only goes to show that such salary “tricks” are hardly isolated cases.