Variable Wage Components
Annual Wage Supplement
The Annual Wage Supplement (AWS) is commonly known as the 13th month payment. It is a single annual payment to employees that supplements the total amount of annual wage earned by them.
Payment of AWS depends on the contractual agreement between the employer and the employee i.e. whether it is provided for in the employment contract or collective agreement.
If it is not stipulated in the employment contract, AWS payment is subject to negotiation and mutual agreement between the employer and employee, or the trade union representing the employee.
An employer is not allowed to pay an AWS of more than three months' salary if:
- He/she agreed (either by way of an employment contract or collective agreement) to pay an AWS of up to three months' wages before the commencement of the Employment (Amendment) Act 1988 on 16 August 1988.
However, the employer can negotiate with the employee, or the trade union representing the employee, to vary the quantum.
An employer is not allowed to pay an AWS of more than one month's wage if he/she:
- Has not paid any AWS prior to 16 August 1988.
If business results are exceptionally poor for any year, an employer may negotiate with the employees, or the trade union representing the employees, to adjust the AWS downwards.
Bonus is a one-time payment usually paid to employees at the end of the year to reward them for their contributions to the company.
Payment of bonuses is not compulsory. However, it is a contractual obligation for the employer to pay bonus if it is provided for in the employment contract or collective agreement.
A Variable payment is an incentive payment to employees:
- To increase their productivity; or
- As a reward for their contributions.
The amount of variable payment can be based on trading results, productivity or any criteria as agreed upon between employers, employees or trade unions. Variable payments are not compulsory unless such payment is provided for in the employment contract or collective agreement.