Foreign employee in Singapore challenges practice of using a fixed allowance to cover all overtime work
Singapore's High Court has ruled that employers cannot use fixed monthly allowances to absorb or cap overtime pay for foreign workers, clarifying that overtime must be paid based on actual hours worked at the declared rate.
Justice Philip Jeyaretnam allowed an appeal by a work permit holder employed as a packer, who had sought overtime payments from his former employer after leaving the company in August 2023.
The employee, an Indian national on a work permit, had no separate written employment contract. The only documented terms were set out in the In‑Principle Approval Letter (IPA) issued with his work pass.
The IPA recorded a basic monthly salary of S$1,000, fixed monthly allowances of S$200 for "Housing, Amenities and Services," and S$300 under "Others". It also stated that his overtime rate was S$7.87 per hour.
The employer treated the S$300 "Others" allowance as a fixed monthly payment for all overtime, regardless of the number of extra hours worked. If the employee worked 20 hours or 40 hours of overtime, he would still receive only S$300.
High Court's ruling
The case reached the High Court after the Employment Claims Tribunal (ECT) partially allowed the employee's claim for unpaid overtime.
However, the ECT ordered that the overtime payable be offset against the fixed S$300 monthly "Others" allowance, which the employer's payslips had described as "Overtime." This reduced the amount payable from S$5,711.11 to S$3,254.84.
On appeal, the High Court focused on the interaction between the Employment Act and the Employment of Foreign Manpower (Work Passes) Regulations 2012.
Justice Jeyaretnam noted that section 38(4) of the Employment Act "entitles a worker to be paid for the number of hours of extra work they have actually done" and that "an employer cannot introduce a cap on or fixed sum for overtime payment."
The court highlighted the purpose of the IPA within the foreign manpower regime, describing it as containing the key terms of employment submitted to the Controller of Work Passes and serving to inform foreign workers of their salary "in clear terms".
The IPA expressly distinguished between basic salary, fixed monthly allowances, and the rate for overtime payment.
The Regulations define "fixed monthly allowances" as sums that do not vary from month to month, but state that such allowances "shall not include any form of overtime payment".
Justice Jeyaretnam held that the S$300 "Others" allowance, being a non‑variable monthly sum, was a fixed monthly allowance within this definition and therefore could not lawfully include overtime.
By paying only the fixed "Others" allowance and not paying overtime at the declared hourly rate, the employer had, in substance, reduced the employee's rate of overtime pay below the amount declared in the work pass application and reflected in the IPA.
This contravened provisions that prohibit an employer from reducing a foreign employee's "basic monthly salary, fixed monthly allowances, rate for overtime payment or daily basic rate of pay" without the employee's written consent.
The judge found that the Tribunal's approach, which allowed an offset of overtime against the fixed allowance, "ran counter to the Regulations".
While acknowledging that less favourable contractual terms are void only to the extent they conflict with the Employment Act, he held that the offset mechanism did not bring the parties’ arrangement into compliance, because it effectively reduced the overtime rate and wrongly treated a fixed allowance as encompassing overtime.
"In summary, under the Regulations, the fixed monthly allowances payable to a worker shall not include any form of overtime payment," Jeyaretnam concluded. "An employer cannot reduce or cap such amounts by including them in fixed allowances paid to the worker."
The High Court allowed the appeal in full, ordering that the amount payable to the employee as overtime be increased from S$3,254.84 to S$5,711.11.
