What are the legal risks of unpaid salaries?

Times are tough – but it can get a lot tougher if you skip out on employee wages in Singapore

What are the legal risks of unpaid salaries?

What are the consequences of unpaid salaries in Singapore?

Recently, the Ministry of Manpower (MOM) revealed that several companies have failed to pay salaries during the Circuit Breaker period. They reminded employers that it’s wrong to implement any cost-cutting measures without employee consent.

“While we understand that employers may themselves face difficulties, it is not reasonable to implement extended no-pay leave or other wage-saving measures without engaging or seeking the consent of their employees,” said MOM.

Employee salary has always been covered under the Employment Act, and the current COVID-19 crisis has not changed the laws around it – though missing payments now can lead to additional consequences.

In short, non-payment of salary is an offence. HRD finds out what you risk if you fail to fulfil the responsibility.

READ MORE: COVID-19: How to implement a 'fair' employee pay cut

Paying salary
Under the Act, salary refers to the entire remuneration package, including allowances and any other benefit included in the employment contract. This means if commission is written into the contract, then it is due to be paid.

According to MOM, ‘salary’ does not include:

  • Retrenchment benefits
  • Any accommodation or travelling allowances
  • Pension or CPF contribution paid by the employer
  • Payments for expenses incurred during work
  • Retirement payouts

Based on prevailing labour laws, salary must be paid within seven days after the end of the salary period. Overtime pay, however, must be transacted within 14 days.

If the employee resigned or gets fired and served notice, their final salary must be paid on the last day of employment. If they resigned without notice, their pay must be in within seven days of their last day.

READ MORE: Do late payments always lead to legal trouble?

Consequence #1: Legal charges like fines and warnings
Late payments or unpaid salaries are an offence in Singapore. MOM and the Tripartite Alliance for Dispute Management (TADM) will investigate and decide whether further legal proceedings are necessary.

If found guilty, you can be slapped with warnings and/or fines.

Unpaid salaries are such a touchy issue that employees are advised to immediately file a police report if they were asked to sign salary vouchers without receiving their salary.

However, employees are urged to approach the issue with reason.

“Your employer must pay your salary on time, according to the terms of your employment contract,” MOM advised employees.

“If you are not paid on time, approach your employer to understand if there are reasons for the late payment, and whether the regular payment schedule can be resumed.

“If you do not receive your salary, you can file an employment-related claim at the TADM or approach your union for assistance.”

Consequence #2: Employee legally quits without notice
According to MOM, employees can terminate the employment without serving the notice period in two instances:

  • Failure to pay salary
  • Employer breach or a change in contract terms without consent

Note that employee consent is required, ideally in writing, for all changes in contract terms, including pay cuts.

“Your employer cannot change the terms and conditions of employment without your consent,” MOM advised employees. “If you do not agree to the changes, you should negotiate with your employer for an agreement acceptable to both.

“If there is no agreement, either party may choose to end the contract by serving the notice period.”

READ MORE: Circuit Breaker: MOM warns employers against unfair practices

Consequence #3: MOM blacklist and suspension of privileges
In the past, Manpower Minister Josephine Teo has made clear that for serious cases of failed payments, MOM might follow up to enforce the settlement, including suspension of work pass privileges, or worse, prosecution.

Considering today’s economic crisis, where the government has offered to provide financial support in terms of wage subsides and rebates, MOM warned employers they might lose access to all of the aid.

“MOM will investigate valid complaints and may suspend Jobs Support Scheme or foreign worker levy payouts for these companies until investigations complete,” MOM said. “With the significant support provided by the government, employers are reminded to treat all their employees regardless of nationality, fairly and responsibly.”

To avoid any costs and legal drama, a legal advisor told HRD that communication remains the best solution in tough times.

“If the company’s really not doing well, I don’t think any employee is going to be averse to the fact that they have to take a pay reduction in order for the company to survive,” said the lawyer.

She added that in most instances, salary deductions are ultimately a negotiation process.

If the employee refuses to take the lower salary, employers can follow up with a court order or approach other valid authority.

However, in extreme cases, employers can consider termination, said the lawyer, as most employment contracts allow for termination “at convenience” as long as you observe the notice period or pay in lieu.

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