Singapore Government Press Release

Media Relations Division, Ministry of Information, Communications and the Arts,

MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369

Tel: 6837-9666

CLARIFICATION ON AWS PAYMENT BY TRIPARTITE TASKFORCE ON WAGE RESTRUCTURING

The Tripartite Taskforce on Wage Restructuring has received public queries arising from recent media coverage on the Insurance Wage Restructuring Workgroup’s proposed incorporation of the Annual Wage Supplement (AWS, or commonly known as “13th month”) into basic pay. There was some interest over whether this proposal might also apply to other sectors. The Taskforce would like to reiterate its recommendations relating to the AWS, and clarify the context behind the Insurance Workgroup’s proposal.

The AWS is a contractual rather than statutory payment. It is a common wage component in the unionized sector (covering 92% of unionized companies), but not in all companies (only 53% of all companies with 10 or more employees have the AWS). The quantum of the AWS is typically one month’s salary. However, a small percentage of companies including those in the banking, insurance and petroleum sectors pay two to three months salary as an AWS.

The Taskforce recommended in Jan 2004 that it should be left to companies to decide to retain or adjust their AWS. Some companies have converted their AWS into a variable component linked to company and individual performance and to be paid out either monthly (MVC) or annually (AVC). For example, the banking industry has converted one month of its typical two-month AWS partly into MVC and partly into basic salary. In the food manufacturing sector, a large MNC has converted 0.75 month of its existing 1.75-months AWS into a variable performance bonus with an upside payment of 0.75 month (ie, a total of 1.5 months variable bonus in addition to retaining a one-month AWS), payable if the company were to meet its KPIs.

The insurance sector is atypical as most of its companies have a two-month AWS in their wage structure. Since most insurance companies have already built up the MVC to 10% and have a sizeable year-end bonus payment linked to business performance, the Insurance Workgroup on Wage Restructuring has recommended that one or all of its current two-month AWS be incorporated into the basic salary. This recommendation adopted by insurance industry may therefore not be applicable to companies in other sectors which have not built up their variable components in their wage structure.

Companies seeking to restructure their AWS component can approach the Ministry of Manpower for advice and assistance.

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Issued by:

Secretariat, Tripartite Taskforce on Wage Restructuring

4 January 2005