21 April, 2016
Effective 1 April 2016, several changes to Singapore’s labour and employment law have been made that have the potential to generate increased awareness among employees as to their employment terms, salary and benefits.
These new regulations will hopefully further serve to minimise disputes in the workplace. Among the many revisions include increased administrative requirements, which will compel businesses to issue itemised payslips to all employees; provide employees with written key employment terms; and keep detailed employment records for each employee.
We had a chance to speak with Shook Lin & Bok’s Labour and Employment team about these new requirements, the legal ramifications for non-compliance on businesses, and the impact these changes will have on both employees and employers.
Conventus Law: Under the new law, what specifically needs to be itemised on the payslips?
Shook Lin & Bok: From 1 April 2016, all employers will be required to issue itemised payslips at least once a month (at the time payment is made to the employee or within three working days of payment) to employees covered under the Employment Act (the “EA”).
Payslips must include certain prescribed items, unless such items are not applicable to a particular employee. The rules allow employers to issue a consolidated payslip if payments are made more than once a month, and this consolidated payslip must contain details of all payments made since the last payslip.
The items prescribed to be set out in a payslip are as follows:
1. Full name of employer
2. Full name of employee
3. Date of payment. If the payslip consolidates multiple payments, it must contain all the dates on which payments were made.
4. Basic salary. For workers who are hired on an hourly, daily or piece-rated basis, their payslips must include the basic pay rate and the total number of hours or days worked or pieces produced.
5. Start and end dates of the salary period
6. Allowances paid for the salary period, such as:
a. All fixed allowances e.g. transport
b. All ad-hoc allowances e.g. one-off uniform allowance
7. Any other additional payment for each salary period, such as:
a. Bonuses
b. Rest day pay
c. Public holiday pay
8. Deductions made for each salary period, such as:
a. All fixed deductions e.g. employee’s CPF contribution
b. All ad-hoc deductions e.g. deductions for no-pay leave, absence from work
9. Overtime hours worked
10. Overtime pay
11. Start and end dates of overtime payment period (if different from item 5 start and end dates of the salary period)
12. Net salary paid in total
CL: Is there a format that should be followed in drafting the pay slip? If no, how should employers proceed to ensure that they are in compliance with the law?
SLB: There is no prescribed format for a payslip. Payslips can be in soft or hard copy, and employers must be able to produce them at the request of the Ministry of Manpower (“MOM”).
That said, the MOM has produced a Guide to Written Key Employment Terms (KETs) and Itemised Payslips which sets out payslip requirements and contains a payslip template and payslip sample. In addition, blank payslip forms in English, Malay, Mandarin and Tamil can also be downloaded from the MOM’s website. Employers may use these forms as guidance to ensure compliance with the law.
CL: As of this year, any employee hired after 1 April 2016 who will be employed for at least 14 continuous days must receive written key employment terms within 14 days of beginning their employment. Which terms must be disclosed?
SLB: Certain terms of an employment relationship have been identified and prescribed as Key Employment Terms (“KETs”). From 1 April 2016, all new employees covered by the EA must receive KETs within 14 days of employment.
The following items must be included in the KETs, unless an item is not applicable:
1. Full name of employer
2. Full name of employee
3. Job title, main duties and responsibilities
4. Start date of employment
5. Duration of employment (if employee is on fixed-term contract)
6. Working arrangements, such as:
a. Daily working hours (e.g. 8.30am – 6pm)
b. Number of working days per week (e.g. six)
c. Rest day (e.g. Saturday)
7. Salary period
8. Basic salary. For hourly, daily or piece-rated workers, employers should also indicate the basic rate of pay.
9. Fixed allowances
10. Fixed deductions
11. Overtime payment period (if different from item 7 salary period)
12. Overtime rate of pay
13. Other salary-related components, such as:
a. Bonuses
b. Incentives
14. Type of leave, such as:
a. Annual leave
b. Outpatient sick leave
c. Hospitalisation leave
d. Maternity leave
e. Childcare leave
15. Other medical benefits, such as:
a. Insurance
b. Medical benefits
c. Dental benefits
16. Probation period
17. Notice period
Employers can issue KETs to employees in either soft or hard copy formats and they can also be handwritten.
Common KETs such as leave policies, medical benefits, etc. can be provided in the company’s employee handbook or website, so long as the information is easily accessible to employees.
CL: What may happen if an employer fails to provide the requisite written terms?
SLB: Currently, any breach of the EA is a criminal offence. Such breaches range from the failure to maintain employment records, which is mostly administrative, to more serious offences like non-payment of salaries.
Under the new administrative penalty framework, which will come into effect from 1 April 2016, the MOM may treat less severe breaches as non-criminal infringements which will attract an administrative penalty instead. For a start, four breaches will be covered under this administrative penalty framework:
a. Failure to issue itemised payslips;
b. Failure to issue KETs in writing;
c. Failure to maintain detailed employment records; and
d. Provision of inaccurate information to the Commissioner for Labour or inspecting officers without the intent to defraud and mislead.
Other breaches of the EA which relate to provisions safeguarding employment standards will remain criminal offences.
The introduction of this new framework means that employers who fail to provide the requisite KETs will be guilty of a civil offence and may be imposed with a financial penalty, but they will not have a criminal record.
Implementation of this framework will be facilitated by ‘authorised officers’ who can direct employers to rectify their breaches or impose penalties of $100 to $200 per employee or occurrence. Non-compliance with these directions will then become a criminal offence.
These changes are to ensure that employers who commit administrative breaches will be penalised proportionately, and to prevent companies, especially small and medium-sized enterprises, from being penalised too heavily. The Ministry has expressed that from April 2016 to end March 2017, it will take a light touch enforcement approach, and place its focus on educating smaller employers on how to comply with the KETs and payslip requirements instead of punishing errant employers. Nonetheless, companies should take steps to implement these changes as soon as possible to avoid incurring administrative penalties.
CL: As of 1 April 2016, employers are required to keep detailed employment records for up to two years. What is the purpose behind this new requirement?
SLB: Under this new requirement, employers are required to keep two categories of records: employee records and salary records, which contain the same items as itemised payslips. Employers must also ensure that any employee record relating to an employee or a former employee is readily accessible to that employee or former employee during the record retention period.
The requirement to keep detailed employment records was introduced in tandem with the requirements to issue written KETs and itemised payslips, as discussed above. Together, these requirements are meant to raise employees’ awareness of their salary components and main employment terms and benefits, and ensure proper documentation which will help to facilitate the resolution of any future salary dispute.
CL: Is this new change for the benefit of the employee, the employer, or the government, and how does it benefit that party?
SLB: This new change benefits both the employee and the employer. The keeping of detailed employment records, which includes items in the new itemised payslips, will on the one hand allow employees to better understand their regular salary components, as well as employment terms and benefits. On the other hand, it will help employers to prevent misunderstandings and minimise disputes with their employees.
See more at Conventus Law