C&B Special: Paying what they’re worth
A survey last year shed light on some uneasy sentiments when it comes to the notion of pay structures between local and foreign employees in Singapore.
According to the eFinancialCareers survey of more than 1,000 finance professionals in Singapore, over two thirds (69%) of local finance professionals believe their international peers are working on extravagant expatriate benefits packages.
However, the research also found that 83% of overseas finance professionals in Singapore claim they have never been employed on expat terms.
Making divisions worse, 62% of Singaporean financial services professionals believe that expat packages result in “friction in the office”.
“Morale is affected as Singaporeans perceive that foreigners have higher total compensation while performing the same tasks as them,” Christina Ng, executive director of LMA Recruitment in Singapore says. “This invites gossip and office politics.”
With both locals and foreigners espousing different viewpoints on this issue, what is the actual reality when it comes to this controversial topic?
Understanding the perceptions
Christine Wright, Managing Director of Hays in Asia, says its experience suggests Singaporeans do not have a negative perception of foreigners’ salaries.
“Compensation and benefits’ teams at most large companies tend to structure remuneration so that all employees at each level are evenly paid,” she explains.
“For example, bank employees don’t generally perceive that foreign Vice Presidents are on higher salaries than local Vice Presidents.”
However, Wright concedes there may be a negative reception from locals who are holding more junior positions.
“These employees might feel that the next level up is too heavily occupied by foreigners,” she says.
“Local employees working in local firms might also think that foreign workers in foreign companies are on expatriate packages.”
Nevertheless, Wright stresses the fact remains that over the past five years, expatriate packages have become very rare in Singapore.
“In some specialised industries such as in Oil and Gas, expat packages still exist. However, on the whole, they are less common than they once were,” she adds.
Joanne Chua, Account Director with Robert Walters Singapore, believes the perception that foreigners earn much more than locals stems from a time long past.
“Presently, unless the foreign professional is a senior director-level transferred across by their company, most enter Singapore on local packages or local-plus packages. Local-plus packages offer some form of housing allowance to the individual, on top of salary,” she says.
Locals vs expats: Fact or myth?
So, to get to the crux of the matter, do organisations in Singapore explicitly structure wages differently for locals and foreigners?
Chua is keen to draw the line under this notion.
“This is definitely not true,” she declares.
“Any mature organisation would have pay structures pegged to size, skillsets and the grading of job, not on the basis of nationality.”
According to Wright, most companies will still hire expatriates, but they will be considered equally with local candidates, and they will be offered a local package only.
“In general, the days of lofty packages are gone,” she reaffirms.
“Multinational corporations will often categorically state that foreign workers are not paid differently to local workers.”
Rather, she argues that in today’s landscape, skill sets and experience are the only factors that drive compensation.
“Expat packages were used many years ago to attract foreign workers with specific skills, but today, Singapore is known internationally as a good place to live and work in. Therefore, companies no longer need to entice expats with generous packages,” Wright elaborates.
Rakesh Rana, Senior HR Business Partner and Talent Acquisition Leader – Asia-Pacific at Murex, says the organisation treats all of its hires as local candidates and believes in maintaining internal equity.
He affirms that Murex does not consider nationalities as a factor in its pay structure.
“Our salary is standard for all employees it doesn’t vary for nationality types,” he declares.
“The only difference which employees have is the CPF contribution for permanent residents and citizens. Employment Pass holders are not entitled for the pension fund.”
Rather, he says the company has a standard salary structure which consists of base salary and benefits.
“The salaries are structured based on the job level of the employee; however the employee benefits are standard,” he explains.
“We follow the standard market philosophy to match, lead and lag the market.”
Patrick Fiat, Chief Experience Officer of Royal Plaza on Scotts, says the hotel participates in salary surveys to ensure that the wages of talents are fair and competitive.
“For executive positions, the salary structure is based on salary surveys and reviewed on a yearly basis,” he explains.
“For junior positions, the salary structure is based on the Collective Agreement, which is negotiated every three years.”
He also makes it clear the organisation does not formulate its pay packages for employees according to locals or foreigners.
“This is not in practice at Royal Plaza on Scotts,” he says.
Wright emphasises that nationality isn’t of importance to employers and that Hays has not seen any changes in pay, whether upwards or downwards, due to a candidate’s country of origin.
“Even when it comes to languages, nationality isn’t the factor,” she says.
“An additional language is a skill that anyone can possess. For example, in Singapore, candidates with both written and spoken Chinese language skills are considered an asset for a company.”
Nevertheless, while Chua, Wright and Fiat vigorously argue that companies in Singapore do not draw up different salary packages for locals and foreigners, the salary packages of Arab, Asian and Western expats in the Persian Gulf region do appear to vary significantly (see: boxout).
FCF: A spanner in the works of pay structures?
With the Singapore Government having implemented the Fair Consideration Framework (FCF) in August last year, has the scheme had an impact on pay structures?
Since August 1 2014, employers have had to advertise job vacancies with the Singapore Workforce Development Agency’s Jobs Bank before submitting any Employment Pass applications.
The Employment Pass is for foreign professionals, managers and executives, with candidates needing to command a salary of at least $3,300 a month and have acceptable qualifications.
According to the Manpower Ministry website, this includes applications for foreign employees who are changing jobs.
The advertisement is required to be open to Singaporeans and must comply with the Tripartite Guidelines on Fair Employment Practices. It has to run for at least 14 calendar days before a company applies for an employment pass.
In addition, when an organisation posts a job advertisement, either the firm or its employment agency should refrain from stating a preference for nationality, age, race, religion, language, gender, or marital or family status.
Wright says Hays has yet to see the FCF have any significant impact on pay structures in organisations.
“The FCF was implemented to help ensure that local workers were considered by employers before they approach foreign workers,” she elaborates.
“It specifically applies to positions that pay less than $144,000 per year.
“The intention was for more local workers to be interviewed and considered for certain roles, but skill sets and experience will always be the main focus for employers when hiring, particularly for more senior positions. This applies to both local and foreign workers.”
From Fiat’s perspective, the FCF also does not impact on Royal Plaza on Scotts’ pay structure as the firm has been practising fair compensation for many years.
Rana explains that since Murex’s hiring philosophy is to bring in talent from local universities, the FCF has not played any role whatsoever in the firm’s pay structures.
Calibrating the foreign-local quota
With the Government having tightened the foreign manpower quota in recent years, Wright says there has been an impact in terms of pay structure not across the board, but only in certain sectors where local and highly-skilled talent is in short supply.
“Ultimately, in these cases, employers still need to look overseas if workloads are to be completed and if Singapore is to remain competitive in the global business environment,” she explains.
“However, it’s now more difficult for foreign candidates to gain work in Singapore, particularly when they are looking to move to the region and are not based here.”
Wright cites banking as one example where foreign owned banks operating in Singapore need to hire expatriates for their parent company’s regulatory reporting team.
“For example, British banks in Singapore still need to report back to the Bank of England and other relevant authorities,” she says.
“These regulations differ to local regulations, and employers usually require candidates who have specific regulatory reporting experience. Many locally based candidates do not have this prior experience, increasing the need for employers to look to foreign candidates.”
Royal Plaza on Scotts has been implementing various initiatives to help the company cope with the current labour crunch by increasing productivity and retaining employees.
The number of work permit holders an organisation can hire is limited by a quota (or dependency ratio ceiling) and subject to a levy.
Fiat says with the aid of automation, employees can now carry out their tasks more effectively within a shorter time.
Being transparent and consistent
So if not citizenship status, what factors should be considered when crafting pay packages?
According to Wright, organisations need to have in place a pay structure that is consistent throughout.
“Problems arise when these structures are modified for certain individuals and not for others,” she says.
“Multinational corporations that have compensation and benefits teams in place are good at ensuring a satisfactory level of consistency.”
Wright explains that in some cases employers may be forced to decline the perfect candidate if their compensation requirements do not fall within the salary bandings for their level, rather than bend the rules for one person and risk upsetting the rest of the workforce.
“A transparent, consistent pay structure will ensure that employees feel fairly treated, and this also helps to promote tenure within an organisation,” she says.
According to the Gulf Business 2015 Salary Survey:
Average Monthly Salary in US$ for an Asian Expatriate Employee in the Gulf
Average Monthly Salary in US$ for an Arab Expatriate Employee in the Gulf
Average Monthly Salary in US$ for a Western Expatriate Employee in the Gulf