Labour Law Landscapes: A View from Asia

The labour law landscape across Asia is constantly evolving. Fatim Jumabhoy, a senior associate at Herbert Smith Freehills, takes a look at some recent and upcoming changes across the region, and how they might affect your business

Singapore
Changes to the Employment Act
 
Phase I of the Employment Act review will be in effect from April 1 this year. The new rules require employers to look again at their pool of employees, as both the categories of workers and wage limits for eligibility to the protections of the Employment Act have changed.

  • More for Managers and Executives

The old rules excluded managers and executives from protection under the Employment Act, save that those who earned less than $4,500 per month who had limited protection in relation to the payment of their salary.
Since April 1, managers and executives who earn less than $4500 per month are now covered by the general provisions of the Employment Act; they have protections not only in relation to the payment of their salary, but also in relation to sick leave, annual leave and unfair dismissal.

  • Part IV Extends Its Reach

Part IV of the Employment Act provides additional protection in relation to hours of work, rest days and overtime. Under the old rules, Part IV only applied to workmen who earned less than $4,500 per month and non-workmen who earned less than $2,000 per month. The wage limit for the latter category has increased to $2,500 per month.
Employers with staff who regularly perform overtime will need to take particular note of this change as a larger pool of employees are now entitled to overtime payments. To ease this burden, the government has capped the salary relevant for calculating overtime payments at $2,250 per month.

  • Business Transfers

Under the new rules, staff whose employment is transferred to a new employer will have the terms of any collective agreement honoured for a period of at least 18 months after the transfer. The position under the old rules was that pre-existing collective agreements only bound the new employer until they expired. The additional period of protection is intended to give employees more certainty through the transfer process.

  • Retrenchment Payments?

The amendments have not gone so far as to make retrenchment payments compulsory for any employees. However, under the current rules, Part IV employees with less than three years’ service were not entitled to a retrenchment payment. From the April 1 in 2015 (a year later than other Employment Act amendments), the qualifying period will be reduced to two years.

  • Unlawful Deductions

As of April 1 this year, an organisation that deducts the cost of employer-provided accommodation from an employee’s salary will have to ensure that the deduction does not amount to more than 25% of that worker’s salary. This is a significant change from the previous position, which allowed an employer to deduct up to 50%.

  • Still To Come

Phase II of the Employment Act review is still afoot. It is likely that there will be some significant changes for vulnerable workers, including changes for fixed term employees, contractors and lower paid staff.
 
Fair Consideration Framework

  • Recruitment Requirements

From August 1 this year, employers recruiting foreign staff who require an Employment Pass will have to ensure that they have complied with the Fair Consideration Framework.

Intended to make hiring locals a more attractive proposition, employers are required to ensure that all Singaporeans are considered fairly: all roles must be open to Singaporeans and, prior to making an application for an Employment Pass the relevant role must have been advertised on the Workforce Development Agency’s jobs bank for at least 14 days.

This change comes hand in glove with a change to Employment Pass thresholds: from January 1 this year, employees have had to be earning at least $3,300 per month to qualify for an Employment Pass (up from $3,000 a month previously).

  • Subject to Scrutiny

Employers who comply with the recruitment requirements may still find themselves subject to unwanted attention from the Ministry of Manpower and other government agencies, if the number of Singaporean employees remains below their industry average or if they are the subject of repeated discrimination allegations.

Employers should ensure that recruitment processes are transparent and well-documented, and that there are mechanisms in place to properly deal with discrimination grievances. If investigated, employers may also be asked to provide details as to how (Singaporean) employees are able to progress within the organisation and what plans are in place to develop Singaporean employees to make them more suitable for higher level roles.

  • Exceptions to the Rule

As always, there are exceptions to the Fair Consideration Framework. Employers with less than 24 staff will be exempt from the recruitment requirements, and the rules will also not apply to roles with a salary of more than SGD$12,000 per month. The Government has announced that intra-and inter-company transfers will also be exempt. Although the exact parameters of this have not yet been finalised, it is likely that the transferring employee will need to be a manager or specialist and have been employed by the affiliated company for at least 12 months.
 
China
Labour Dispatch Regulations

  • The 10% Rule

From March 1, the Provisional Regulations on Labour Dispatch took effect, further clipping employers’ wings in their use of dispatch (agency) labour. The new regulations restrict the number of dispatch workers to no more than 10% of the total employee population. A grace period of two years has been granted to employers who have previously used dispatch labour.

  • Let’s Talk About It

Employers may only hire dispatch labourers if they fall within one of three categories: auxiliary, temporary and substitute workers. Under the new regulations, before a role can be defined as “auxiliary”, an employee consultation process will need to be followed.

  • Equal Pay for Equal Work

Employers must also ensure that any benefits offered to directly hired employees are the same as those afforded to dispatch labourers; the regulations prevent discrimination against dispatch workers.
As it becomes increasingly difficult to satisfy the strict dispatch labour rules, employers will need to look again at their labour strategies, and consider whether it possible to hire directly for particular roles.
 
Malaysia
Personal Data Protection
Malaysia’s Personal Data Protection Act (PDPA) came into force on November 15 last year. Although it is still not clear whether the Act was intended to cover the employment relationship (it applies to “commercial transactions”), prudent employers will already have taken steps to ensure compliance.

  • The Seven Principles

The PDPA establishes seven basic principles covering the collection, storage, use and destruction of personal information. Similar to other jurisdictions, the underlying principle is that of consent: employees should know what information is being held, the purpose it is held for, who else will see it, and how they may access and correct any inaccuracies.

Under the Notice and Choice Principle, advice must be given, in writing, as to whether the supply of data is voluntary or obligatory, and what consequences are attached for not providing the information. This notice must be in both English and Malay.

As the grace period of three months for existing data has now expired, it is important that employers review their data protection processes and ensure that they have clear, consent-based procedures in place for handling personal information.
 
Indonesia
Social Security Reforms
Under new rules, employers in Indonesia are required to enrol their employees into a government social security programme that provides coverage for both health and employment. The initiative is intended to extend the reach of social security benefits among the working population in Indonesia and will incorporate and expand upon the existing Jamsostek scheme.

The rules apply to all employees, including foreigners, who have been employed in Indonesia for at least six months. Employees must be covered by both programmes, and must be registered with both the Badan Penyelenggara Jamain Social (‘BPJS”) of Health and the BPJS of Employment.

  • Staggered Start

The implementation dates for these reforms have been staggered; employees currently covered by Jamsostek had their health coverage transferred to the BPJS of Health from the start of this year. For those employers who have contracted out of Jamsostek by providing company health benefits, that coverage can continue until 2019. New employees, however, have had to be registered with the BPJS of Health since January 1.

Employees must be registered with the BPJS of Employment by July 1 in 2015, when any existing Jamsostek employment benefits will transfer to the BPJS of Employment. The coverage under the BPJS of Employment will be expanded to also include pensions.

  • The Devil in the Detail

It is not yet clear what will happen to employer’s existing schemes, including those which offer greater protections to employees than the BJPS. Larger employers may wish to run parallel schemes, keeping their employer-funded benefits whilst concurrently contributing to the BPJS.

There are also no clear rules as to whether foreigners will be able to withdraw their contributions upon leaving Indonesia.

Although the detail is yet to be fleshed out, employers must start to look at their current social security offerings, including whether they have the right to cancel or vary, and start to make provisions for transferring into the government schemes by the relevant implementation dates. Failure to comply may lead to employers having their business licenses and applications to hire foreigners refused. Employees who are not registered with the BJPS will be unable to obtain certain official documents, including driving licences.
 

About the author
Fatim Jumabhoy is a labour law specialist with a focus on cross border and multi-jurisdiction Asia employment law. Her practice covers a wide range of matters including: employment termination and transfer issues; trade union activity; compensation and benefits; discrimination; redundancies and restructures; drafting and implementing industry and client specific employment contracts; disciplinary and grievance processes; employee handbooks; outsourcing and the use of contractors; and workplace risk management. She regularly acts for multinational corporations with a presence in one or more Asian jurisdictions and has experience acting for clients across the Asia Pacific region.
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