This is a guest post contributed by Ling.
It’s the time of year again where civil servants will receive a big fat bonus comprising an annual variable component as well as a Non-Pensionable Annual Allowance (NPAA).
The NPAA is also known as the 13th month bonus.
Now before we whine about not receiving our 13th month bonus, let’s find out if it’s really a bonus in the first place.
Who coined the term “13th month bonus”?
It was said that when the British moved from weekly wages to monthly wages, the 13th month bonus was created to make up for the extra 4 weeks.
Basically, if you count by weeks, there are 52 weeks a year but we are only paid 12 months. Assuming each month has 4 weeks, we are only paid 48 weeks.
However, this computation only works if we are continued to be paid weekly wages.
Most companies in Singapore generally offer a monthly salary so the 13th month bonus is no longer an issue anymore.
The civil service started practising this custom since mid 70s to bridge the gap between public and private sector employees to enhance the attractiveness of public service careers.
Some companies in the private sector are known to provide up to 6 months of bonus a year to its employees.
It’s not mandated by law
The 13th month bonus is also commonly referred to as the Annual Wage Supplement (AWS).
This payment, which is added to an employee’s total annual salary, is not compulsory.
If it’s not written as part of your employment contract, your employer is not obligated to pay you a 13th month bonus.
For unionised companies, there is a legally binding document called the Collective Agreement that stipulates conditions of employment for employees.
The union helps to negotiate with the employer for better workplace benefits and protection for its workers. This includes an annual wage supplement.
Consider the annual payment package instead
At the end of the day, it’s important to look at the annual salary package instead.
This includes the performance bonus, annual increment/salary adjustment, annual variable component (annual bonus based on company’s performance and economic conditions), other bonuses and the basic monthly salary.
For example, if you’re offered a monthly salary of $4,500 without AWS versus $4,000 with AWS, which option would you pick?
If you choose $4,500 without AWS, the additional $500 per month would amount to $6,000 a year. This exceeds a 13th month payment of $4,000.
Maybe 13th month should be compulsory for low-wage workers
This year, lower-wage workers in the civil service will receive an annual variable component of $1,800 if their earnings are below $1,800.
This is in addition to the 13th month bonus that they will also receive.
However, low-wage workers outside of civil service, may not receive such benefits.
Labour MP Zainal Sapari, whose own father was a low-wage cleaner, called on the Government to make the 13th month bonus mandatory for low-wage workers in the cleaning, security and landscape industry.
He said that “these workers usually do not receive annual increment or 13th month bonus because their employer has to keep costs down.”
In a nutshell
If you’re earning a decent pay, don’t stress over the 13th month bonus and focus on your annual salary package instead.
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