Action will be taken against employers who misclassify employees as executives to avoid paying overtime, MOM declares

The Ministry of Manpower (MOM) has made a declaration against employers who misclassify employees as executives or managers in order to avoid paying them for overtime work.

In a statement made by Then Yee Thoong, Divisional Director of the Labour Relations and Workplaces Division under the Ministry of Manpower, he stated that an employee is entitled to being paid for overtime work upon meeting two key criteria under the Employment Act of Singapore.

Firstly, the employee must not be employed under a managerial or executive position.

Secondly, the employee’s basic pay must be $4,500 or less if he is a workman, and $2,500 or less if he is a non-workman.

A workman is defined in s.2(1)(a) Employment Act as any person whose nature of work involves manual labour.

He says that if the overtime work is requested by the employer, the rate payable must be at least 11/2 times his hourly basic rate of pay, should the employee be statutorily entitled to overtime pay, as stated in the Fourth Schedule of s.38(6) Employment Act.

He added that overtime payment cannot be substituted with time off.

“The Ministry of Manpower takes a serious view of employers who misclassify employees in order to avoid their statutory obligations, and will take stern action against such errant employers,” he wrote.

The ministry referred to a recent High Court case, in which it was “made clear that a person who holds a supervisory function is not automatically regarded an executive”.

In its decision, the court had taken into account Bangladeshi Hasan Shofiqul’s nature and extent of supervisory powers, which met the criterion stated in s.2(1)(c) Employment Act:

“any person employed partly for manual labour and partly for the purpose of supervising in person any workman in and throughout the performance of his work:”

Subsequently, Hasan was entitled to receive statutory overtime payments from his employer.

However, Then insists that the incidence of misclassification has been consistently low, in relation to other complaints regarding labour law issues.

In 2017, the Tripartite Alliance for Dispute Management (TADM) received about 50 claims from workers who felt that they had been wrongly classified as a manager or executive, and were unlawfully denied statutory entitlements such as overtime pay as a result.

According to Then, this constituted less than 1 per cent of all cases received by TADM.

In about 90 per cent of the 50 claims last year, MOM/TADM found the worker’s complaint to be substantiated and ordered the employers to compensate the workers in question duly.

In Then’s letter, he encouraged employees who have been improperly classified as a manager or executive to come forward to TADM as soon as possible in order to allow a proper assessment to be made.

Then wrote the statement in response to the letters by Mr Cheng Choon Fei (Tactics to avoid paying workers overtime are deceitful; 23 June) and Mr Tan Kar Quan (Overtime pay tied to salary, less to job title; 27 June) in The Straits Times.

Earlier in March, the MOM has announced that amendments to the Employment Act will be made later this year to extend the core protections for employees.

Such provisions include protection against unfair dismissals and late payment of salaries to every employee, regardless of their pay and position within the company.

Currently, the Act only covers employees who earn up to $4,500 a month.

However, managers and executives will continue to be excluded from additional protections such as overtime pay under Part IV of the Act.

This issue will be studied further in future reviews of the Act, concluded the MOM.