Implications Of COVID-19 On Employers In Singapore.

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 as economic activity resumes in phases after the “circuit-breaker” period.

 

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.

 

Employers who have resumed business operations after the “circuit-breaker” period are expected to implement Enhanced Safe Management Measures issued by the tripartite partners, which comprise the MOM, the National Trades Union Congress and the Singapore National Employers Federation. Some of the EnhancedSafe Management Measures include:

 

• (a)  Adopting work-from-home arrangements as the default mode of working
  From 28 September 2020, employees may return to the workplace provided that employers ensure that:

  •   employees whose jobs can be performed from home shall continue to do so for at least half their working time;

  •   no more than half of employees who are able to work from home are at the workplace at any point in time; and

  •   the start of working hours are staggered to spread out staff across time and place, and reduces possible congregation of employees at all common spaces at or near the workplace.

    Work-from-home measures should also be implemented in a sustainable manner that enables employees to maintain work-life harmony while continuing to meet business needs.

• (b)  Implementing shift or split team arrangements

  Where possible, employers must split employees at workplace premises into teams, with each team restricted to one worksite wherever possible. No employee should work in more than one team or worksite. There should also be no cross-deployment or interaction between employees in different shifts, teams or worksites, even outside of work.

• (c)  Ensuring safe distancing measures at the workplace Employers should ensure that:

  •   employees adhere to the permissible group size based on prevailing guidelines on social gatherings at the workplace, including during meals or breaks;

  •   physical meetings between employees or with suppliers / contractors are minimised and virtual meetings are conducted as much as possible;

  •   if physical interaction cannot be avoided, precautions are taken to ensure clear physical spacing of at least one metre through physical means and demarcation of safe physical distances (at least one metre apart) using visual indicators; and

  • all onsite personnel, including employees, visitors, suppliers and contractors, wear a mask and other necessary personal protective equipment at all times at the workplace, except during activities that require masks to be removed. Masks will have to be worn immediately after such activity is completed.

 

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 22 October 2020) and Advisory on Safe Management Measures for workers on employer-provided transportation issued on 10 April 2020 (updated on 26 June 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.

 

Annex A of the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (the “Tripartite Advisory”) (updated on 17 October 2020) includes 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 after the “circuit-breaker” period of 7 April 2020 to 1 June 2020, employers should be guided by the Updated Advisory on Salary and Leave Arrangements issued by the MOM on 9 June 2020 (updated on 13 September 2020). As detailed in the aforementioned Advisory, the MOM strongly recommends that employers 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 positions and business prospects.

 

Under the Employment (Returns on Salary Reduction Measures) Notification 2020 which came into force on 29 May 2020, employers who employ ten or more employees are required to notify the MOM online within seven days of implementing any of the following cost-saving 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; and

• Reduction of an employee’s gross rate of pay, but not a reduction or withholding of a wage increment.

   

Employers considering temporary wage cuts should abide by the key principles and recommendations set out in the National Wages Council (“NWC”) 2020/2021 Supplementary Guidelines (which was issued on 16 October 2020 and which is applicable from 1 November 2020 to 30 June 2021). We set out below some of these key principles and recommendations:

 

(a) For employers that have adopted the Flexible Wage System (“FWS”), the variable component of an employee’s total wage package on an annual basis should comprise:

 

• 30% for rank-and-file employees (where 10% is the monthly variable component and 20% is the annual variable component, inclusive of the annual wage supplement);

• 40% for middle management; and

• 50% for senior management.

 

2. (b)  Employers that have not adopted the FWS may consider cutting wages to the extent needed to minimise retrenchments and to keep the business going. Such employers should implement the FWS immediately by treating any wage cuts as adjustments to a new variable component, in line with the foregoing FWS principles.

3. (c)  Employers should also consider varying wage cuts to take into account the ability to cope with such cuts at different salary tiers. Management should lead by example and take earlier and deeper cuts to their wages to effect the desired extent of cost saving.

4. (d)  Employers that are implementing a policy of wage reduction should instead consider implement a wage freeze for low-wage workers earning a basic monthly wage of up to $1,400. If wage reduction is necessary, employers ought to avoid a situation where employees fall below a basic monthly wage of $1,400 after wage adjustments.

5. (e)  Wage cuts should be restored in tandem with business recovery. Employers should have regular reviews, in discussion with the unions (if applicable), so as to restore cuts to wages in a timely manner.

 

In the event that retrenchment is inevitable despite having considered or implemented the necessary cost-saving measures, employers should abide by the Tripartite Advisory and refer to the checklist set out in Annex B thereto as a guide on conducting retrenchment responsibly.

 

Generally, employers who intend to terminate the employment of employees must do so either by providing notice of termination or payment in lieu of notice. Employers who have at least ten 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 the Singapore’s Budget 2020 Statement, amidst the COVID-19 outbreak, to help enterprises retain local employees (Singapore Citizens or Permanent Residents). Since then, further budgetary measures have been announced to enhance the governmental support under the JSS.

 

As part of the JSS, the Singapore government will co-fund the first S$4,600 of gross monthly wages paid to each local employee until March 2021. Please see Question 6 below for the level and duration of support each employer will receive under the JSS.

 

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 payouts under the JSS (generally, all employers are required to make CPF contributions to their employees who are Singapore Citizens or 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:

   1. (i)  Foreign companies

   2. (ii)  Foreign Government Agencies

   3. (iii)  Foreign Trade Associations/ Foreign Chambers/ Foreign Non-profit Organisations

(iv) Foreign Law Practices

 

8. (h)  Bank Representative Offices/Insurance Representative Officers/Other Financial Representative Offices

   (registered with MAS)

9. (i)  News Bureaus (which are representative offices)

10. (j)  International Organisations

11. (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 March 2021 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. The May 2020 and subsequent JSS payouts will include the wage support for qualifying shareholder- directors. The May 2020 payout will also include back-payment for companies with qualifying shareholder- directors whose wages were excluded from the first JSS payout in Apr 2020.

 

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 17 months (from October 2019 to March 2021) up to a monthly wage cap of S$4,600, as set out below.

 

1. “Circuit-Breaker” period in April and May 2020
   For the months of April and May 2020, the government co-funded 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 on 21 April 2020, where it reiterated that the 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 payouts for those employees.

 

Post “Circuit-Breaker” period till August 2020

 

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

 

Employers allowed to resume operations received 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, aerospace, built environment, tourism, hospitality, conventions and exhibitions sectors, the Singapore government co-funded 75% of the first $4,600 of gross monthly wages per local employee.

2. (b)  Tier 2: For businesses in the food services, retail, arts and entertainment, land transport, marine and offshore sectors, the Singapore government co-funded 50% of the first $4,600 of gross monthly wages per local employee.

3. (c)  Tier 3: For all other businesses, the government co-funded 25% of the first S$4,600 of gross monthly wages paid to each local employee.

4. September 2020 to March 2021

   Under the extended JSS, employers will receive the following base tiers of support:

 

(a) Tier 1:

• For businesses in the aviation, aerospace, tourism, hospitality, conventions and exhibitions sectors, the Singapore government will co-fund 50% of the first $4,600 of gross monthly wages per local employee.

• For businesses in the built environment sector, the Singapore government will also co-fund 50% of the first $4,600 of gross monthly wages per local employee (only for September 2020 to October 2020).

• (b)  Tier 2:

  • For businesses in the built environment sector, the Singapore government will co-fund 30% of the first $4,600 of gross monthly wages per local employee (only for November 2020 to March 2021).

  • For businesses in the food services, retail, arts and entertainment, land transport, marine and offshore sectors, the Singapore government will co-fund 30% of the first $4,600 of gross monthly wages per local employee.

• (c)  Tier 3B: For businesses in the biomedical sciences, precision engineering, electronics, financial services, information and communications technology and media and retail sectors, the Singapore government will co-fund 10% of the first $4,600 of gross monthly wages per local employee (only for September 2020 to December 2020).

• (d) Tier 3A: For all other businesses, the Singapore government will co-fund 10% of the first $4,600 of gross monthly wages per local employee.

 

More information on the specific industries and the Singapore Standard Industrial Classification (“SSIC”) Codes that belong to each tier may be found 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 five main tranches in April 2020, July 2020, October 2020, March 2021 and June 2021. There were also additional payouts in April 2020 and May 2020 to provide cashflow support for firms during the “circuit-breaker” period:

 

 

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

 

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

 

(a) The JSS payouts will be credited to the employers' GIRO bank account used for Income Tax/ Goods and Services Tax (payouts will be titled “Jobs Support Scheme”) or credited to their bank account registered with PayNow Corporate (payouts will be titled “GOVT”).

(b) Otherwise, the JSS payouts will be made by cheque mailed to the employers’ registered business address. 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 payouts payable to them.

 

Employers may also choose to decline JSS payouts by using this form 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.

   

JSS payouts are also not taxable since they are intended to help employers retain their local employees.

 

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, details of the Fortitude Budget can be found here, details of the August 2020 Ministerial Statement can be found here and details of the October 2020 Ministerial Statement can be found here.

 

Conclusion

 

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

 

maeshaan.teo@shooklin.com