Implications Of Covid-19 On Employers In Singapore.

5 June 2020
 

The rapidly evolving COVID-19 situation around the globe has created uncertainties and business disruptions. Locally, the Government has imposed various measures to manage the outbreak, including declining new work pass applications and implementing workplace closures. This has resulted in many employers facing severe manpower issues.

 

In this note, we intend to address the following issues relevant to employers amidst the COVID-19 outbreak:

 

• Continuing business operations amidst COVID-19
• How an employer may implement cost-cutting measures
• Government assistance to employers, such as the Jobs Support Scheme and tax measures

 

1. How should employers continue business operations in light of COVID-19?

 

Under the Workplace Safety and Health Act (Cap. 354A) of Singapore, every employer has the duty to take, so far as is reasonably practicable, such measures as are necessary to ensure the safety and health of employees at work. In response to the COVID-19 outbreak, various government agencies including the Ministry of Manpower (“MOM”) and Ministry of Health have issued various advisories to prevent the transmission of the disease both within and outside the workplace.

 

On 3 April 2020, the Ministry of Trade and Industry issued a guidance document, announcing that save for essential services (such as food, transportation and healthcare) and their related supply chains and service providers, all other business, social or other activities that cannot be conducted via telecommuting or other means from home shall be suspended from 7 April 2020 to 4 May 2020 (i.e. the “circuit-breaker” period). While entities providing essential services may continue operating at the workplace, they must nonetheless comply with safety measures such as:

 

• Allowing all activities that can be conducted through telecommuting to be done from home; and
• Implementing safe distancing measures to reduce physical interactions, such as staggering workinghours, postponing group events, and implementing shift work and/or split team arrangements.

 

The MOM has also announced that enforcement operations will begin from 7 April 2020 to ensure that only businesses exempted from suspension are operating from workplace premises.

 

On 21 April 2020, the Multi-Ministry taskforce announced that fewer businesses will be allowed to operate during the “circuit-breaker” period which has been extended to 1 June 2020 (inclusive). Operations of less critical consumer services would be suspended and the list of essential services which will be allowed to operate would be updated accordingly. The number of businesses allowed to operate at their work premises would also be further reduced, and employers must put in place effective measures to avoid transmission of COVID-19 at and across workplace premises which remain open. Daily movement of workers in and out of all dormitories will also be prohibited.

 

Employers who resume business operations after the “circuit-breaker” period are expected to implement Safe Management Measures issued by the tripartite partners, which comprise the MOM, the National Trades Union Congress and the Singapore Employers Federation. The Safe Management Measures include, adopting work from home arrangements as the default arrangement and arranging for private transportation for workers staying in dormitories to commute to and from their workplaces, and with no other passengers. More details may be found in the Requirements for Safe Management Measures at the workplace after Circuit Breaker period issued on 9 May 2020 (updated on 1 June 2020) and Advisory on Safe Management Measures for workers on employer-provided transportation issued on 10 April 2020 (updated on 29 May 2020).

 

As the COVID-19 situation is constantly developing and evolving, the MOM and other government agencies have been active in addressing the situation and issuing fresh advisories and guidelines throughout this period. Accordingly, employers should continue monitoring for government announcements.

 

2. How should employers implement cost-cutting measures?

 

Absent a contractual right, employers are not entitled to unilaterally reduce working hours, cut wages, or place employees on unpaid leave.

 

The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (the “Tripartite Advisory”) was updated on 11 March 2020 to include suggested measures to employers on keeping their businesses viable while supporting employees during this period of economic uncertainty. These measures are broadly categorised based on the severity of impact to employees:

 

• Adjustments to work arrangements without wage cuts;
• Adjustments to work arrangements with wage cuts;
• Direct adjustments to wages; and
• No-pay leave

 

While employers may implement different cost-cutting measures tailored to their business needs, employees’ consent should generally be obtained before implementing any such measures that deviate from the terms of the employment contract, be they reducing working hours or salary, or asking employees to go on unpaid leave. Unilaterally imposing such changes may run the risk of employee claims for constructive dismissal.

 

In implementing any cost saving measures during the “circuit-breaker” period of 7 April to 1 June 2020, employers should be guided by the Advisory on Salary and Leave Arrangements during Circuit Breaker issued by the MOM on 6 April 2020 (updated on 25 April 2020). As detailed in this Advisory, the MOM strongly recommends that, during the “circuit-breaker” period, employers ought to utilise the enhanced payouts received under the Jobs Support Scheme (see Question 3 below) to, at minimum, pay employees a baseline salary even if they are assigned no work. The baseline salary may vary across employers due to different financial position and business prospects.

 

Under the Employment (Returns on Salary Reduction Measures) Notification 2020 which came into force on 29 May 2020, employers who employ 10 or more employees are required to notify the MOM online within 7 days of implementing any of the following cost-cutting measures:

 

• Reduction of an employee’s working hours which results in a reduction of salary;
• Giving an employee a leave of absence with reduced salary or without salary for an agreed period;
• Reduction of an employee’s gross rate of pay, but not a reduction or withholding of a wage increment.

 

Generally, employers who intend to terminate the employment of employees must do so either by providing notice or payment in lieu of notice. Employers who have at least 10 employees in Singapore and have notified at least five employees of their retrenchment within any six-month period must notify the MOM. This mandatory retrenchment notification must be made within five working days after notifying the fifth employee of retrenchment in any six-month period, and every employee similarly notified thereafter.

 

3. What is the Jobs Support Scheme (“JSS”)?

 

The Singapore government has announced various budgetary measures in light of the COVID-19 situation, including the Jobs Support Scheme (“JSS”).

 

The JSS was first announced on 18 February 2020, during Singapore’s Budget 2020 Statement, amidst the Covid- 19 outbreak, to help enterprises retain local employees (Singapore citizens or Singapore permanent residents). Through budgetary measures announced by the Singapore government in March and April 2020 in view of the growing economic challenges caused by the pandemic, the JSS was enhanced to cover 75% of the first S$4,600 of gross monthly wages across all sectors for April and May 2020, and also extended to cover wages of eligible employees who are also shareholders and directors of the company (shareholder-directors). On 26 May 2020, the Singapore Government further announced the Fortitude Budget, which will, amongst other measures, extend the JSS by one month to cover wages paid in August 2020, provide 75% of wage support to employers that are not yet allowed to resume operations after the “circuit-breaker” period, and increase the level of JSS support to specific sectors more deeply affected by COVID-19.

 

As part of the JSS, Singapore government will co-fund the first S$4,600 of gross monthly wages paid to each local employee for 10 months. Save for the months of April and May 2020 where the co-funding levels are at 75% across all sectors, after May 2020, there will be three levels of co-funding for employers in different sectors (please see Question 6 below).

 

4. Which employers are eligible under the JSS?

 

Generally, all employers who have made Central Provident Fund (“CPF”) contributions for their Singapore Citizen and Permanent Resident employees will qualify for the payout under the JSS (generally, all employers are required to make CPF contributions to their employees who are Singapore Citizens and Permanent Residents).

 

However, the following employers are excluded from the JSS:

 

1. (a)  Local Government Agencies including Organs of State, Ministries and Departments, Statutory Boards
2. (b)  Government and Government-Aided Schools
3. (c)  PA Services and Grassroot Units
4. (d)  High Commissions, Embassies, Trade Offices, Consulate
5. (e)  Unregistered Local/Foreign Entities
6. (f)  Foreign Military Units
7. (g)  Representative offices of:
8. (i)  Foreign companies
9. (ii)  Foreign Government Agencies
10. (iii)  Foreign Trade Associations/ Foreign Chambers/ Foreign Non-profit Organisations
11. (iv)  Foreign Law Practices
12. (h)  Bank Representative Offices/Insurance Representative Officers/Other Financial Representative Offices (registered with MAS)
13. (i)  News Bureaus (which are representative offices)
14. (j)  International Organisations
15. (k)  Entities which pay CPF but are not registered in Singapore

 

5. Which employees are eligible under the JSS?

 

All Singapore Citizen and Permanent Resident employees that are in the eligible employer’s employment at any point during the period of October 2019 to August 2020 will be covered under the JSS.

 

In addition, as announced by the Multi-Ministry taskforce on 21 April 2020, employees of a company (which is registered on or before 20 April 2020) who are also shareholders and directors of the company (shareholder- directors) with Assessable Income of $100,000 or less for Year of Assessment 2019 will also be eligible for JSS payouts.

 

6. How much will employers receive under the JSS?

 

Under the JSS, the Singapore government will co-fund a portion of the local employee’s gross monthly wage for 10 months (paid from October 2019 to August 2020) up to a monthly wage cap of S$4,600, as set out below.

 

A. “Circuit-Breaker” period in April and May 2020

 

For the months of April and May 2020, the government will co-fund 75% of the first S$4,600 of gross monthly

wages paid to each local employee employed by businesses in all sectors.

 

As Deputy Prime Minister Heng Swee Keat explained in Parliament during the Solidarity Budget Statement, the aim of this strong support is to directly reduce firm’s wage costs to help them retain workers. Accordingly, businesses are expected to continue paying their workers and refrain from putting workers on no-pay leave during this period, or retrenching them. This was again emphasised by the Ministry of Finance in its press release of 21 April 2020, where it reiterated that JSS payouts are intended to offset and protect local employees’ wages and employers who put local employees on mandatory no-pay-leave or retrench them will not be entitled to the enhanced JSS payout for those employees. 

 

B. Post “Circuit-Breaker”

 

Thereafter, employers not yet allowed to resume operations will continue to receive 75% wage support, during the period for which they are not allowed to resume operations, or until August 2020, whichever is earlier.

Employers allowed to resume operations will revert to receiving their base tier of support as set out below, subject to pro-ration for the period during which operations had not resumed:

 

1. (a)  Tier 1: For businesses in the aviation, tourism, hospitality, conventions and exhibitions sectors, the Singapore government will co-fund 75% of the first $4,600 of gross monthly wages per local employee (including the 25% base support) i.e. businesses in the aviation and tourism sector will continue to receive the same level of wage support as provided in April and May 2020.
2. (b)  Tier 1 (only for June 2020 to August 2020 wages): For businesses in the Built Environment sector, the Singapore government will also co-fund 75% of the first $4,600 of gross monthly wages per local employee.
3. (c)  Tier 2: For businesses in the food services, retail, arts and entertainment, land transport, marine and offshore sectors, the Singapore government will co-fund 50% of the first $4,600 of gross monthly wages per local employee (including the 25% base support).
4. (d)  Tier 3: For all other businesses, the government will co-fund 25% of the first S$4,600 of gross monthly wages paid to each local employee.

Businesses can find out if they are eligible for Tier 1 and 2 co-funding/ appeal to benefit from Tier 1 and 2 Funding here.

 

7. How will payments under the JSS be paid out to employers?

 

The JSS payouts to employers will be computed based on CPF contribution data, and will be paid out in three main tranches in April, July and October 2020. There was also an additional payout in May to provide cashflow support for firms during the “circuit-breaker” period:

 

 

Time of payout	Payout description	JSS will cover wages paid in	CPF contributions must be made by
April 20201	1st payout	October to December 2019	14 February 2020
	Additional support for Apr 2020 wages	Apr 2020 (computed based on Oct 2019)
May 2020	Additional support for May 2020 wages	May 2020 (computed based on Nov 2019)	14 February 2020
July 2020	2nd payout	February to April 2020	31 May 2020
	Adjustment for Apr 2020 advance, based on actual Apr 2020 wages2	Computed based on difference between Apr 2020 and Oct 2019 wages
October 2020	3rd payout	May to July 2020	14 September 2020
	Adjustment for May 2020 advance, based on actual May 2020 wages2	Computed based on difference between May 2020 and Nov 2019 wages

 

Employers who have terminated or put some of their employees on no-pay leave will see their Payout 2 and/or Payout 3 adjusted down, based on the actual wages paid from February 2020 onwards.

 

1 The 1st payout was originally to be made in May 2020. However, as announced during the Solidarity Budget Statement, the Singapore government has brought forward the 1st payout date to April 2020 in view of the additional hardship that the “circuit-breaker” period will have on businesses.

 

Payouts will be credited via the following means (in order of priority):

 

1. (a)  The JSS payout will be credited to the employers' GIRO bank account used for Income Tax/Goods and Services Tax
2. (b)  For those without GIRO accounts, the JSS payout will be credited to their bank account registered with PayNow Corporate
3. (c)  Otherwise, the JSS payout will be made by cheque

2 More details on these payout adjustments can be found here.

 

8. How can employers access the JSS?

 

Employers need not apply for the JSS. The Inland Revenue Authority of Singapore will notify eligible employers by post of the tier of support and the amount of JSS payout payable to them.

 

Employers may also choose to decline JSS payouts if they do not require wage support and wish to be excluded from all future JSS payouts.

 

9. Are there any tax measures announced by the government that benefits employers?

 

Tax measures introduced by the government include:

 

• An automatic three-month deferment of corporate income tax payments due in April, May, and June 2020, to instead be paid in July, August, and September 2020 respectively; and
• A corporate income tax rebate of 25% of tax payable, capped at S$15,000, for Year of Assessment 2020.

 

The entire Resilience Budget setting out the various measures the Singapore Government has announced due to the Covid-19 situation can be found here, details of the Solidarity Budget can be found here, and details of the Fortitude Budget can be found here.

 

Conclusion

 

Employers should carefully review their employment contracts and business continuity plans to consider the potential implications that COVID-19 outbreak may have on their rights and obligations. When in doubt, a party should seek legal advice before acting or sending communications.