Debated in Parliament on 5 Aug 2014.
Mr Zainal Sapari asked the Minister for Manpower whether the Ministry will allow the increase in qualifying salaries for S Pass holders from $2,000 to $2,200 from 1 July 2013 to be met by employers increasing the amount of allowances instead of raising the basic salary.
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Mdm Speaker, we need to raise the minimum qualifying salaries for both S Pass and Employment Pass (EP) from time to time, in large part, to keep pace with local wages. Foreigners who are older and more experienced should have a higher salary threshold to qualify for the S Pass or the EP. This is to ensure that we can provide a level playing field so that foreigners, whether they are at S Pass or EP levels, will not undercut Singaporeans with lower pay. This helps to level the employability playing field for Singaporeans. At the same time, we also need to strike a balance in helping to keep our companies competitive and enabling them to have access to a diverse workforce.
Employers can meet the new thresholds either via the basic salary or via fixed allowances, or any combination of the two, as long as whatever increment is a fixed quantum that does not vary from month to month.
Like what was asked in Mr Zainal Sapari's question, we also hear from employers asking about whether it is possible to allow them to count variable allowances, bonuses and Annual Wage Supplements as part of the qualifying salary. We have not done so because the work pass eligibility has to be based on the consistent calibre of the worker, which should not vary from month to month. It is not practical to have a situation where a worker is eligible for S Pass in one month, and then, in the next month, because his performance is not so good, he does not get as much bonus or add-ons and, therefore, he is not eligible; and therefore, his Pass is revoked, because he has not accrued enough variable commissions or bonuses to qualify. This is why only salary components that are paid on a fixed monthly basis – whether it is basic salary or allowances – may be included in work pass eligibility criteria.
We do encourage employers to look at the approach of having allowances, bonuses, commissions and so on to incentivise higher productivity and better performance. They can still provide that to S Pass and also EP holders to motivate them to attain better performance. They can structure salaries such that S Pass holders commit to deliver a certain minimum level of performance each month and the associated bonus or commissions can be built in as a fixed allowance. Variable allowances can be given in addition for performance that exceeds the minimum level. But for all intents and purposes, in the calculation of salary eligibility for S Pass and EP, we look at the fixed monthly salary.
I thank the Minister for sharing. Given that MOM does not specify how the increase in salary should be effected, would MOM agree that this may create a loophole where employers just increase the allowances instead of basic pay to avoid higher overtime rate and bonus payouts to the foreign workers, making them cheaper relative to hiring a local?
My second supplementary question is whether MOM would consider plugging this loophole to ensure that the cost of hiring a foreigner has parity to hiring a local worker, as
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what Minister just mentioned, to ensure a more level playing field. I have also come across feedback from some of my union members where some employers actually deliberately adjust the basic pay – lower the basic pay – to contain the cost of hiring a foreigner.
Mdm Speaker, we will be quite happy to look into the specifics of this situation. I think what the Member has illustrated is that employers specify a smaller basic component and they specify allowances, which may be regular and, in totality, meet the salary thresholds. But as a result of that, when you calculate OT and so on, you use only the basic quantum to calculate OT and, therefore, making them cheaper.
This is something that we can look at. I cannot recall whether we have a specific composition as to the amount of allowances and basic pay, but I think this is something that we can take a look to see whether it is a loophole that is exploited on a consistent basis and we can explore that further.
PAPERCUTS