EMPLOYMENT ACT

SOME COMMONLY ASKED QUESTIONS ON CALCULATION OF SALARY

The Employment Act covers all employees except those employed in a managerial and executive position, seaman, domestic worker and employees of statutory board or the government.

Calculation of Salary BASIC Rate vs GROSS Rate

1. What is Basic rate of pay?
Basic rate of pay is the total amount of money (including wage adjustments and increments) which an employee is entitled to under his contract of service but does not include overtime payment; bonus payment or annual wage supplement (AWS), any sum paid to the employee to reimburse him for special expenses incurred by him in the course of his employment, productivity incentive payment; and any allowance however described.

2.

What is the Basic rate of pay used for?

The Basic rate of pay is used to calculate pay for work on rest days, work on public holidays and overtime work. For a monthly-rated employee who works on a rest day or a public holiday, the Basic rate of pay for 1 day is calculated as follows: _____12 X Monthly Basic rate of pay____ 52 X Average No. of days an employee is required to work in a week For a monthly-rated employee who performs overtime work, the hourly Basic rate of pay is calculated as follows: 12 X Monthly Basic rate of pay 52 X 44

3.

What is Gross rate of pay?

The Gross rate of pay is the total amount of money including allowances which an employee is entitled to under his contract of service, but does not include overtime payments, bonus payments or annual wage supplements (AWS), any sum paid to the employee to reimburse him for special expenses incurred by him in the course of his employment, productivity incentive payments and travelling, food or housing allowances.

4.

What is Gross rate of pay used for?

The Gross rate of pay is used to calculate payment of salary in lieu of notice of termination, deduction of pay for absence from work, paid holidays, paid annual leave, paid sick leave and paid maternity benefits. For a monthly-rated employee, the Gross rate of pay for 1 day is calculated as follows: ____12 X Monthly Gross rate of pay____ 52 X Average No. of days an employee is required to work in a week

5.

What is "Productivity incentive payment"?

"Productivity incentive payment" means a variable payment, whether made annually or otherwise, to an employee as a reward for an improvement in that employee's performance or an increase in the employee's productivity or contribution to the employer's business, trade or undertaking.

6.

Can certain allowances such as shift and attendance allowances be considered as Productivity incentive payments and be excluded from the Gross rate of pay?
If the payment of the allowance incorporates features of an incentive scheme which fall within the definition of a Productivity incentive payment, it could be excluded from gross rate of pay. Shift and attendance allowances are paid to employees for carrying out shift duties and keeping good attendance respectively. They do not fall within the definition of a Productivity incentive payment and are considered part of Gross rate of pay.

7. If a company operates on rotating shifts with different rates of shift allowance, how should the allowance be computed in working out an employees Gross rate of pay when he goes on annual leave?
Employers may consider using any of the following methods: (a) Standardise the rate by working out a simple average as shown in the example below: 1st shift - no allowance 2nd shift - $5 3rd shift - $10, Average allowance per shift: 0+5+10 = $5 3 Hence, when an employee goes on leave, he is to be paid shift allowance of $5 for each day of his leave, irrespective of the shift on which he is rostered to work. (b) Continue to pay the allowance as though the employee has worked for the day. Using the same example in 7(a), if the employee goes on leave when he is rostered to work on the 1st shift, he is not paid any shift allowance, but if he goes on leave when he is rostered to work on the 3rd shift, he is paid $10. Companies may also use other methods as long as they are fair and reasonable.

8.

How do I calculate the salary of a monthly- rated employee who has only worked part of the month?
An employee may work an incomplete month if: he commenced employment after the first day of the month; his employment was terminated before the end of the month; he has taken no pay leave during the month; or he has taken leave of absence to perform his national service under the Enlistment Act.

In such cases, the salary payable to him is pro-rated as follows: Monthly Gross Rate of Pay *Number of days which the employee is required to work in that month (includes public holiday if he is entitled to holiday pay but excludes rest days and non-working days) x *Number of days the employee actually worked in that month

*If the number of working hours in any working day is 5 hours or less, regard it as a half-day. If it is more than 5 hours, regard it as one day.

The information provided in this fact sheet is accurate at time of printing and has no legal standing. In any case of doubt, reference should be made to the Employment Act itself. [ MOM lrd 2008 (4 Edition)]
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