Variable Components

Monthly Variable Component (MVC)

MVC acts as an “emergency lever” component to help employers bring down wage costs in the case of sudden and severe business or economic setbacks to survive and save jobs. MVC forms part of the monthly basic salary and it shall be included in computing overtime payment and CPF contribution. It is recommended that MVC should form 10% of the monthly basic salary and should be the same for all levels of employees.


Variable Payment

This is a monthly incentive scheme that is built into the salary to enhance the productivity of employees. The reward scheme is not a compulsory component unless specified in the employment contract or collective agreement.



This is not compulsory unless specified in the employment contract or collective agreement. Usually, it is paid once, at the end of the year.


Annual Wage Supplement

Popularly known as the ‘thirteenth month’s salary, this single annual payment is not compulsory, and the employer may negotiate for a lower amount of AWS if the business performance is poor.



The failure to pay salary in accordance with the EA constitutes an offence under the EA. A first-time offender will be liable to a fine of between $3,000 and $15,000 and/or 6 months imprisonment. A subsequent offence will be liable to a fine of between $6,000 and $30,000 and/or 12 months imprisonment.


Calculating Salary

Monthly Basic Rate:

This is the basic wage that an employee is entitled to according to the employment contract and does not include allowances, bonuses, incentives or reimbursements paid to the employee. The basic rate of pay is used to compute the pay for working on a rest day or public holiday and overtime pay. It is computed as follows

12 x monthly basic rate of pay

52 x average number of days an employee is required to work in a week


Monthly Gross Rate

This is the money payable, including allowances, to an employee for one month. But this does not include bonuses, reimbursements, incentives and allowances paid for food, travelling and housing. This is used to compute payment for paid leave/holiday, absence from work, and salary in lieu of notice of termination.


Incomplete Month and wages

A ‘complete month’ for the purpose of salary is defined as any month of a calendar year. The working days of the month exclude rest days and non-working days but include public holidays.


A situation to compute wages for an incomplete month may arise in the following scenario when an employee


Starts work after the first day of the month

Leaves employment before the last day of the month

Takes no-pay leave of one day or more during the month


The formula to calculate salary for an incomplete month is as below:

(Monthly gross rate of pay/ Total number of working days in that month) x Actual days worked


Payment for work done on Public Holidays

All employees covered under the EA are entitled to paid public holidays each year and the employee and employer may mutually agree to substitute a public holiday for any other day. However, if the employee is on an unauthorised leave or on an approved unpaid leave on the day before or after the public holiday, he is not entitled to public holiday pay.


If the situation warrants, the employer may require the employee to work on a public holiday. In that case, the employer must pay an extra day’s salary at the basic rate of pay. If the employee works beyond the normal working hours on a public holiday he must be paid at least 1.5 times his basic rate of pay as overtime payment.


Payment for work done on Rest Days

A rest day can be a Sunday or any other day that is mutually agreed upon. It is an unpaid day. The maximum number of working days between two rest days is 12 days.


If work is done at the employer’s request:


One day’s salary if the employee works for half of the normal daily working hours

Two day’s salary if the employee works more than half of the normal working hours

If work is done at the employee’s request:


Half day’s salary if the employee works for half of the normal daily working hours

One day’s salary if the employee works more than half of the normal working hours

Overtime Payment

An employee covered under the EA is not required to work more than eight hours a day or 44 hours a week. He/She is also not required to work more than 6 consecutive hours without a break and the break cannot be less than 45 minutes.


The employer must pay overtime wages if an employee is required to work beyond the specified hours of work. Such overtime cannot exceed 72 hours in a month, but this excludes work done within normal working hours during rest days or public holidays.


An employee must be paid at least 1.5 times his/her hourly basic rate of pay for all work in excess of the normal hours of work. Overtime payment is applicable to


Workmen earning not more than $4,500 basic monthly salary and

Non-workmen employees earning not more than $2,600 basic monthly salaries

The overtime rate payable for non-workmen will be capped at the salary level of $2,600 or an hourly rate of $13.60/hour.


Paid Leave

Paid Annual Leave

Depending on the period of service with the employer an employee is entitled to paid annual leave, which is 7 days for employees with a period of one year of service. The annual leave entitlement increases by 1 day per year additional year of service thereafter and is capped at a maximum of 14 days for employees whose service exceeds 8 years and above. If the employee does not have adequate annual leave the employer may allow him/her to utilise unpaid leave.


Annual leave can be encashed in the event of termination, resignation or at the employer’s discretion or based on contractual terms between the employer and employee.


Paid Sick Leave

Subject to conditions an employee is entitled to paid sick leave if they have worked for a minimum of 3 months for the employer. The number of paid sick leave days for a new employee is entitled to depend on their service period. The current maximum number of paid sick leave for employees who have worked for a minimum of 6 months is 14 days for outpatient treatment and 60 days for hospitalisation.


The employer is legally obliged to bear the medical consultation fees for an employee who has worked for at least three months. The employer is obliged to bear costs such as medication, ward charges etc, depending on the medical benefits provided for in the employee’s employment contract or the collective agreement signed between the company and the union.


Government Paid Leave Schemes

In order to conjure a pro-family system and to support young families, the government introduced several paid leave schemes, apart from the standard maternity leave (up to 16 weeks). These schemes include childcare leave, extended childcare leave, paternity leave, shared paternal leave and adoption leave. Employers must take note of these paid leave schemes and are obliged to honour such leave applications by their employees.


If you are looking for payroll-related advice, you may contact a MOM-registered employment agency. If there is a need, you may outsource payroll-related matters to service providers like our company.

When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.

Yours Sincerely,
The editorial team at Singapore Secretary Services

For more useful articles and videos, visit the Singapore Secretary Services resource page.
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