Managing Partner Tan Chong Huat and Co-Head of Employment Practice Vernon Voon welcome the latest review of the Employment Act to extend basic employment protections to all professionals, managers and executives in their co-authored opinion piece published in The Business Times

RHTLaw Taylor Wessing Managing Partner & Co-Head of Private Wealth Tan Chong Huat and Employment and Labour Relations Partner Vernon Voon co-authored an opinion piece titled “Who should the core provisions of the Employment Act protect?” published in The Business Times.

The article was first published in The Business Times on 19 February 2018. The same article was also published in the Singapore Law Watch.

Who should the core provisions of the Employment Act protect?

FIFTY years ago, a newly independent Singapore enacted the Employment Act in 1968 partly as a bulwark against concerns of mass unemployment following the planned British withdrawal from Singapore in 1971.

As part of a survival strategy to attract local and foreign investments, the Employment Act was intended to promote worker productivity and economic expansion by outlawing malpractices by both employers and employees.

Today, after decades of strong economic growth, while Singapore’s survival remains a constant concern, the changing employment landscape and workforce profile have been the driving force behind recent amendments to the Employment Act.

For example, in an effort to raise labour standards, the Act was amended in 2015 to require employers to issue itemised pay slips and key employment terms to their employees written clearly.

The latest review of the Employment Act is no exception.

Core provisions

In January, the Ministry of Manpower (MOM) initiated a public consultation exercise to seek feedback on, among other things, whether core provisions in the Act – namely, public holiday and sick leave entitlements, timely payment of salary and allowable deductions, as well as redress for unfair dismissal – should be extended to all employees.

Currently, these core provisions do not apply to professionals, managers and executives (PMEs) earning a monthly salary of more than S$4,500.

Historically, they also do not apply to domestic workers, public servants and seafarers.

The impetus for the current review is likely to have arisen from the significant structural changes in Singapore’s employment landscape.

PMEs currently comprise about 34 per cent of Singapore’s workforce, up from about 26 per cent back in 2001. This upward trajectory is also mirrored in the broader category of PMEs and technicians (PMETs).

According to the MOM’s Labour Force in Singapore 2017 report released on Jan 26 this year, PMETs now form 56 per cent of the country’s workforce. This is up from 49 per cent in 2007.

Two reasons

There are two reasons why the core provisions in the Employment Act should extend to all PMEs irrespective of their basic monthly salary.

Firstly, given the global technological disruption of industries and Singapore’s push towards becoming a digital economy, it is conceivable that more employees may be categorised as PMEs with the creation of new positions that do not fit neatly into the traditional blue collar/white collar construct.

Secondly, as the number of PMEs continues to rise, it is likely that the number of PMEs who earn more than S$4,500 per month will also increase.

In this regard, one indicator is that the median gross monthly salary of the broader category of PMETs in 2016 was already S$5,910, based on a written answer given by Manpower Minister Lim Swee Say in Parliament.

If the core provisions of the Employment Act do not apply to such a significant segment of Singapore’s workforce, the utility of the statute to provide basic terms and working conditions for employees may be questioned.

Moreover, although employment contracts may give employees not covered by the Employment Act access to many of these core provisions, the employment relationship is not inherently equal and the effect of contractual provisions may be disputed.

Statutory intervention

Statutory intervention would therefore more efficiently ensure that the basic entitlements in the core provisions are available to all employees.

One particular area of concern is the entitlement to redress for unfair dismissal under section 14 of the Employment Act.

Currently, PMEs who earn a monthly salary of more than S$4,500 do not have the right to make representations to the Minister for Manpower to be reinstated to their former employment, if they have been dismissed “without just cause or excuse”.

For PMEs who earn a monthly salary of up to S$4,500, they can have recourse to section 14 only if they were unfairly dismissed without notice or salary in lieu of notice, or unfairly dismissed with notice or salary in lieu of notice after having served their employer for at least one year.

In practice, we have observed that PMEs earning more than S$4,500 per month do not have any recourse where the employer has relied on a provision in the employment contract to terminate the PME’s employment, either with notice, or with salary in lieu of notice.

In such terminations, the employer does not typically provide any reason as it is contractually entitled to do so.

However, as the workforce becomes increasingly well-educated, and more and more positions require professional or managerial skills, it is unlikely that the monthly salary threshold of S$4,500 can offer a rational basis as to why some PMEs can have statutory redress for unfair dismissal, while others cannot.

Extending the protection under section 14 of the Employment Act to all PMEs will also ensure that employers need just cause or excuse (for example, bad performance, business downturn or a restructuring) before terminating any employee, whether the employee is a PME or not.

Step in the right direction

The review of the Employment Act is a welcome and refreshing step in the right direction in seeking to extend basic employment protections to all PMEs.

The distinction between PMEs and other employees in terms of basic employment protections should be narrowed, if not eradicated completely, in light of the future digital economy requiring more employees to exercise some professional or managerial ability.

Employers should not see this development as adding to their business costs of compliance.

Rather, they should see that protected and cared-for employees will be motivated from a greater sense of job security to do even better in their jobs, resulting in greater profitability for their employers, and greater job satisfaction for themselves.