Progressive Wage Model: Minimum Wage Laws in Singapore
As an employer, you will inevitably be confronted with the issue of how much to pay your employees. Factors affecting an employee’s salary may include his/her education level, years of work experience as well as performance reviews.
However, you will most definitely have to take into account the presence of any minimum wage laws, if applicable, as they stipulate the minimum amount that you will have to pay your employees in Singapore.
This article will discuss:
What is a Minimum Wage?
A minimum wage is defined as the lowest amount of remuneration that you, as an employer, have to pay an employee for work performed in a given period. It is not the wage that employees may think they are entitled to based on their work performance or the market rate for their role. A minimum wage is mandated by law.
An advantage of having a minimum wage is that employees can be protected against exploitation and unduly low pay. When employees are assured of receiving a minimum wage, they are more likely to remain at their current jobs. This in turn benefits employers as turnover rates decrease, and disruptions to work are minimised. Employers also do not have to spend more resources and effort to hire replacement workers.
Does Singapore have Minimum Wage Laws?
Generally, the Ministry of Manpower (MOM) does not prescribe minimum wages for all employees in Singapore. The MOM has stated that wages are best determined by market demand and supply for labour. Employees should thus be paid based on their skills, capabilities and competencies.
However, Singapore adopts the Progressive Wage Model (PWM), which prescribes minimum wages for certain economic sectors.
What is the Progressive Wage Model (PWM)?
The PWM prescribes a minimum wage to be paid to employees in specific economic sectors. The “wage” referred to by the PWM is the basic monthly salary. It is a figure that the employee receives without factoring in bonuses, overtime pay or any other extra compensation.
The PWM further mandates that the minimum wage to be paid under it is to be raised as employees upgrade their skills and increase productivity. In certain sectors, wages had stagnated due to widespread practices of hiring cheap labour. The PWM thus allows low-wage workers to enjoy a decent living wage and salary growth.
Employers can also stand to benefit from the PWM as workers become incentivised to upgrade their skills and increase their productivity, which potentially leads to increased business profits.
Who is Covered Under the Progressive Wage Model?
Singaporeans and Singapore Permanent Residents (PRs) working in the cleaning and security sectors, as well as in landscape companies on NParks’ Landscape Company Register, are currently covered under the PWM.
By March 2023, the PWM will be expanded to cover workers in more sectors such as retail, food services and waste management. Drivers and administrative assistants, regardless of which sector they work in, will be covered under the PWM by March 2023 as well.
The PWM applies not just to full-time employees, but also part-time and temporary employees. The wages of part-time employees will be pro-rated based on the basic PWM wage paid to a full-time employee with a similar job scope. This means that they will receive basic PWM wages that have been adjusted proportionately based on the number of hours they have worked relative to a full-time employee.
What is the Minimum Wage Under the Progressive Wage Model in Singapore?
The minimum wage for each sector under the PWM is not standardised, and there may be different wage ladders for different categories of jobs within each sector. The minimum wage amount for each sector also increases over time.
For example, general cleaners who work at office and commercial sites, as well as in F&B establishments, must be paid a minimum basic salary of $1,274 while general cleaners working in conservancies (e.g. town councils) will have to be paid at least $1,486, from 1 July 2021 to 30 June 2022.
From 1 July 2022 to 30 June 2023, however, the former category of general cleaners will have to be paid a minimum basic salary of $1,312 and the latter, $1,530.
Additionally, the minimum wage will also increase as employees undergo training and take on roles that require higher-value skills. To illustrate, from 1 July 2021 to 30 June 2022, cleaners in conservancies start off as general cleaners with a minimum basic salary of $1,486.
However, as they get promoted to refuse collectors, their minimum basic salary rises to $1,698. This amount increases to $1,910 if they become supervisors, and further increases to $2,016 if they become truck drivers.
Furthermore, a PWM Bonus of at least 2 weeks of basic monthly salary is payable to eligible employees on top of their wages. Employees may be eligible for this bonus if they are employed in the cleaning and landscape sectors, and have worked for the same business for at least 12 months. For eligible part-time employees, this bonus will also be pro-rated.
What are Some Other Obligations of Employers Under the Progressive Wage Model?
Under the PWM, employees will have to meet certain training requirements for upgrading their skills and increasing their productivity. When they have met these training requirements, they will also have to be paid a higher wage.
Employers like yourself will have to ensure that employees are able to meet the PWM training requirements, such as by sending your employees to various courses to obtain certain qualifications. You may tap on the Workfare Skills Support to subsidise training costs for your Singaporean employees.
What are the Consequences of Not Abiding by the Progressive Wage Model?
Failure to comply with the PWM, such as by not paying the minimum wage or bonuses under the PWM to eligible employees, can constitute a breach of the licensing conditions that businesses need to adhere to in order to operate in sectors covered by the PWM.
If you are found to have committed such breaches, you may receive warning letters or even be fined. (The maximum fine for breaches of licensing conditions in the cleaning sector is $5,000, for example.) In severe cases, you also risk having your licence suspended or revoked.
Other Minimum Wage Requirements that Employers Should be Aware of
Apart from the PWM, there is also another requirement that you ought to take note of when determining an employee’s salary. In Singapore, firms that hire foreign workers are to pay their Singaporean and Permanent Resident employees a Local Qualifying Salary (LQS) of at least $1,400 a month for full-timers and $9 an hour for part-timers.
The government has reiterated that the LQS is not a minimum wage. Rather, it is a threshold imposed on firms to prevent resident employees from being hired on token salaries to provide the employer with access to foreign workers.
To sum up, Singapore adopts a PWM as opposed to a traditional minimum wage policy to uplift low-wage employees in certain sectors, such as cleaning and security. As the PWM continues to expand to cover more sectors, more employees will be able to benefit from increased wages. Businesses will also stand to benefit from the employees’ increased productivity as they undergo training required by the PWM and become more skilled.
For sectors covered by the PWM, compliance with the PWM is mandatory. It is important that employers comply with all requirements to ensure that their business licences will not be revoked.
Apart from such minimum wage obligations, employers will also face other employment law obligations regarding paid leave, overtime compensation, working hours and so on. It is therefore recommended that you hire an employment lawyer if you need help understanding your employment obligations.
A lawyer who is well versed in employment law can help ensure that your business complies with your obligations under the PWM as well as other employment laws in Singapore.
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