TL;DR – And that’s OK.
The end of the year provides many reasons to celebrate. There’s Christmas. There’s the ushering of the new year. And for many working people, there’s that extra bit of cash from the “13th month bonus”, or otherwise known as the Annual Wage Supplement (AWS).
According to MOM, The AWS is also called the “13th month payment”. It is a single annual payment on top of an employee’s total annual wage.
AWS is not compulsory. Payment depends on what is in your employment contract or collective agreement. Employers are encouraged to give their employees AWS to reward them for contributing to the company’s performance. Your employer can negotiate a lower amount of AWS if business results are exceptionally poor for the year.
But I don’t get that.
Am I upset about it? Do I think that the laws should change so that it’s compulsory for all companies to give their workers the AWS? No, not really. Here’s why.
“Bonus” already worked into monthly salary
My total pay package is not bad. After some calculations, it seems like my employer has already worked in this AWS into my monthly salary. They take that one month’s worth of salary and split it over 12 months. So rather than just getting the whole sum at the end of the year, I get a little bit throughout the whole year. I like it better that way.
However, I can understand why some people would prefer to have one lump sum at the end of the year. We tend to spend a little bit more at the end of the year and also at the beginning of a new year. And some of us will only stop spending when we see that we don’t have much money left in our bank account. For people like that, it would be helpful to have one lump sum at the end of the year. But because I’m quite disciplined with what I spend, and how much I save each month, I’m fine with not having a lump sum AWS.
Besides, we’re all willing buyers and sellers in this market. When we accept a job offer, most of us would already know upfront if there is 13th month bonus. If there isn’t AWS and I choose to accept the job, it implies that I accept that our package is just the 12 months of salary and whatever incentives, commission or benefits there are. It’s not like someone has cheated me of my money, you know.
Of course, it’s a completely different story if we’re promised AWS but not paid at the end of the year.
Gives employers flexibility
Allowing employers the option of giving or not giving the AWS gives employers flexibility to manage their manpower costs. Mr David Leong, Managing Director of PeopleWorldwide Consulting Private Limited said:
“It is the layer of payout that is purposely made variable to allow for the tightening of the belt.”
So when the economic climate is challenging, and businesses are forced to come up with ways to lower costs, they can do away with the AWS to lower their costs rather than fire people. That way, the pain is spread out across all the workers rather than borne by a few. That makes the pain more manageable. They will not have that option if AWS is compulsory.
Other negative consequences of making AWS compulsory
Mr Leong also warned that making AWS compulsory may give rise to other problems. It may make companies less willing to take on permanent staff. Because companies will see the AWS as increasing their “carrying costs”. He said:
“It will provide a check-mate situation for employers as they would be less inclined to hire permanent staff because of the heavier carrying-costs as a result of legislation. When work engagements become contract instead of permanent job, the ones who suffer are the workers.”
Encourage companies to do the right thing
We don’t think that it’s wise for the government to legislate companies about the AWS. Instead, we think we should encourage the companies to do the right thing – either provide AWS or offer their companies a higher base monthly salary to begin with. Leave it to the companies to choose the option that best suit their operating model. Then trust the market to sort itself out – companies who do right by their workers will get the talent and thus thrive, while companies who try to shortchange their workers will not get the talent and thus fail.
If, however, the market fails, then there might be a stronger case for the government to step in and legislate for compulsory AWS. Until then, we think this current arrangement is good enough.