Overtime Laws: Is It Time for Reform?

In celebration of Labour Day, and appreciation of all the hard work of people in Singapore, here’s a hot policy take.

When I was studying employment law in university, two things surprised me about the Employment Act and its overtime laws:

1. How good its protections were. Perhaps this shouldn't be too surprising, considering that it was passed in 1968, the same year as our first General Election after independence.

2. The number of open loopholes that exist today to get around those protections.

Back in those idealistic days, I thought surely these loopholes would be closed in an election cycle or two. However, despite overwork being a major and very tangible issue in Singapore, overtime laws have not been considered as an avenue for reform.

Perhaps because the Employment Act is so old, we have unconsciously accepted the permanence of the cracks we fall through. We may have forgotten that overtime laws are actually things that can be improved through the democratic process. 

So, I think it is time we talk about it.

The Employment Act covers overtime under its Part 4 protections, where those covered are protected from unpaid overtime. Overtime pay must instead be higher than regular pay, at 1.5x the rate of regular pay.

What constitutes overtime depends on your working arrangement, which may differ from company to company. 

These working arrangements must all stay within an average of 44 hours per week; anything above that is overtime. Subject to exemptions, overtime is also capped at 72 hours a month.

The first loophole is the exclusion criteria in the Employment Act itself. Domestic Workers, Seafarers, Statutory Board Employees and Civil Servants are not covered under the Employment Act.

For now, we put aside the issue of Domestic Workers and Seafarers, as the nature of their work environments blends work time and off-time in a strange mix that is not comprehensible in the same legislation meant for most other workers. 

Subsequent legislation to protect them in other ways should exist for sure, but that is a separate conversation. 

What is not justified by that rationale is the exclusion of Statutory Board Employees and Civil Servants.

After all, many of such government employees do work that is not qualitatively different from that done by private sector employees.

One explanation is that the government back in 1968 was simply looking to protect its own operational efficiency in that critical period of nation-building.

The other rationale we were taught in university was that because these groups were employed by the government, they would surely be protected by internal regulations equal to or greater than the Employment Act.

However, looking at the cultures of overtime in some government bodies, this may not be the case.

The most infamous example would be MOE teachers (who are classified as civil servants) having to extend their hours into CCA, event planning, take-home marking and after-hours communication with parents.

The second loophole is that workmen (doing manual labour) with basic salaries more than $4500 per month and non-workmen with basic salaries more than $2600 per month are also excluded from the Part 4 overtime protections. 

Given that Singapore is a rather expensive late-stage service economy, this means the majority of Singaporeans tend to be excluded from these protections. As median salaries rise, this issue will only get worse.

The third loophole is that job roles classified as managers or executives are excluded from Part 4 overtime protections.

To the government’s credit, MOM has come out to clarify that the classification needs to be substantive and not just in name only, and can include:

• Employees with executive and supervisory functions, or
• Professionals with tertiary education and specialised knowledge or skills
  

However, these are still worded quite vaguely with a lot of room for interpretation. To be fair, this might be necessary given that the operations between companies sometimes differ so much that a strict line is hard to draw.

However, given that many job descriptions have always been ill-formed and multi-faceted, it also not hard for an ill-intentioned employer to slap an “manager” or “executive” onto someone’s job title and make arguments (however superfluous) that their role includes some supervisory aspect or some specialised knowledge. 

This explains the rising prevalence of junior “sales executives”. The increasing tertiary education levels of Singaporeans do not help here either.

If things ever go to court, a judge might decide otherwise. However, for most working adults, the rules around this exclusion are so vague that we simply accept that the job title exclusion effectively deprives us of any right to claim overtime from our employers.

In a strange twist of fate, the original legislation that was meant to create a cost disincentive for overtime, ironically created an entire culture of overtime in Work Permit and S-Pass heavy industries. 

In the manufacturing, construction, and marine industries, basic salaries are very low but become quite respectable after overtime hours have been baked in. The nature of foreign workers being far away from their families, and the pay disparity between an hour worked in Singapore versus an hour worked in their home countries, makes them uniquely suited for overtime work. 

It is not uncommon for such workers to regularly exceed the maximum 72 hours of overtime for many months on end, and HR collaborates with them to “hide” this money from the government by classifying it as various allowances. 

For S-Pass workers, whose work pass is premised on a minimum salary threshold, the practice is sometimes to “bake in” unpaid overtime into their basic salary so that the minimum salary threshold can be met.

For E-Pass dependent industries like IT services, the effect is weaker. But for employees whose home countries’ work culture is overtime-heavy due to poor protections and a hyper-competitive labour market — that work culture may end up imported to Singapore. 

The lack of families in Singapore for some E-Pass holders may deepen this issue. Given that E-Passes are not quota dependent, a workplace with a majority of such employees may also create an entrenched culture of overtime. 

The result is that many foreign labour dependent workplaces have developed work practices and cultures that are unwelcoming to Singaporean workers who don’t embrace the same attitude towards overtime. For Singaporean workers with family obligations, they are put at a further hiring disadvantage.

Before I go on, it must be said that the occasional, and even frequent practice of overtime may be necessary for the economic relevance of a company (and by extension the nation).

Projects sometimes just need to be done, and a good hustle is needed to make things happen. 

This article itself was written over weekends and after work hours. So I can be the first to agree that providing too many restrictions on work may stifle vital projects. 

These restrictions are also increasingly problematic given the fact that we are surrounded by many nearby Asian countries with high unemployment and an increased propensity for overtime. These alternative labour resources are readily provided to employers/clients in the form of both migrant labour and remote outsourced contractors.

There is, however, a difference between productive overtime willingly done out of passion and engagement, and unproductive overtime obligated via an unhealthy work culture. A balance will need to be found, and to do so, we must observe the negative effects of excessive overtime. 

As overtime gets entrenched as a way of doing things, certain industries adopt work practices which are incompatible with Singaporeans, especially those with family commitments.

This may or may not be due to dependency on foreign labour. However, regardless of the origin, it must be recognised that certain industries have adapted to having their employees work long into the night for many weeks on end. 

While it is tolerable for the young and hungry graduate, it becomes an employability issue for mid-career individuals whose health and family may not be able to handle it.

Dating life can be exhausting, time-consuming, and requires the headspace/capacity to care for another human being. These were some reasons singles surveyed in Singapore expressed for not settling down.  

The reality is that romantic partnerships take time, effort, and flexibility. Given the dual-income nature of our society, there is a need for both sides to end their work days/weeks with enough spare capacity to take care of each other and build their relationship. To do so in an overtime-intensive environment is difficult. 

For families with children and/or elderly dependents, some of the pressure can be taken care of by outsourcing the caretaking duty to foreign domestic workers. 

For some, the ethical implications of that might be uncomfortable. To many more, there is an emotional cost to missing out on the care-taking duties for your family members’ first and last years. 

Outside of family, the narrowing of one’s spare time also narrows their experience of the market economy and the wider society. This is especially true for those in inward-facing roles who do not interact with clients or suppliers. 

Shrinking availability of free time due to overtime is also a major burden to skills upgrading and external courses that would have otherwise made up for this lack of experience. 

To the extent that good career moves or the probability of successful entrepreneurship are dependent on the comprehensiveness of one’s experience and skills, excessive overtime creates a real detriment to the individual’s economic interests as well.

On the topic of economic interests, it is important to note that not all overtime is productive.

In some instances, such as peak period or project-based overtime, the overtime is justified because every hour worked in that peak period is several times more valuable than hours worked elsewhere. 

However, in other instances, overtime may result from long unnecessary meetings, bad planning, inefficient work during normal hours or a culture of internal politicking and “not leaving before your boss does”. 

It is not uncommon for business-relevant KPIs to be vague and have poor visibility to management. In such cases, employees often are judged by the length of their hours rather than the effectiveness of their work. This, among many other common organisational habits, creates tendencies towards unproductive overtime. 

Usually, the additional costs for overtime and the view that overtime is “abnormal” make overtime a signifier of poor productivity and bad planning. This would ideally instigate the management to act to resolve the underlying issues.

However, when overtime is unpaid and a culture that accepts or even valorises overtime is entrenched — there is no such instigation, and poor productivity is allowed to fester. 

As a company gets used to such a way of working, attempts to improve business productivity encounter barriers as well. 

For a business operator trying to improve business results, it may be less risky to simply have employees do more free overtime than to overhaul the entire way things are done.

Median salary has been a long-standing factor in HDB affordability. As such, it matters a lot if the median salary is actually based on a 44-hour work week job versus a job that has a 44-hour work week on paper, while it actually runs up to 60 hours after regular unpaid overtime.

The annoying aspect of unpaid overtime is that it is also unrecorded, so there is no sign of whether income growth is occurring due to improved productivity or an intensification of the average Singaporean’s work week. 

Based on an external survey in 2023, Singapore employees work an average of 8.19 hours of overtime per week, higher than in China.

However, due to there being no government-level tracking, there is a frustrating lack of statistics breaking this down by industry, income level, and by foreigner/local. 

Without good statistics on overtime, we simply cannot move the conversation forward productively, and there is a risk that policies in other areas (especially those that are underwritten by the median salary figures) may become misguided.

Rather than letting unpaid overtime go unnoticed, we could charge overtime pay at a 1x hourly rate for:

➤ Non-workmen employees earning between $2600 and the median salary

➤ Workmen employees earning between $4500 and the median salary

The median salary would then be whatever the Department of Statistics reports every year, providing also an incentive to not inflate this figure. This would cover up the loopholes of exclusion via job title and exclusion via salary requirements. 

There may be arguments that for certain companies, they require employees to be flexible, and the tracking of each overtime hour may be onerous. The response to that would be that such a privilege is reserved for those who pay salaries above the median salary. 

If an employee is drawing more than $10,000 a month working for tech or investment banks, then it is fair to say that their situation is privileged enough not to warrant protection. If one earns below the median salary, however, the risk of excessive unpaid overtime is large enough to justify protections. 

The business community and the government arms representing business interests will likely push back on the increase in costs. 

Then, if a 1x rate is not possible, a 0.5x rate. If that is not possible, then a 0.25x rate.

At some point down the spectrum, there will be a rate where the additional protections to employees and the wider society will justify the additional cost to businesses. 

What is important, however, is that:

➤ There is an incremental cost to each hour of overtime.

Productive and necessary overtime will survive this, but businesses will be incentivised to cut unproductive and unnecessary overtime. This will be good for national productivity. 

➤ There is a payslip record where overtime data can be tracked. 

This nicely brings us to our next proposed solution…

If you’ve ever wondered how the government manages to track income and employment relatively effectively, the answer is the CPF and IRAS. Due to the rather heavy repercussions of misdeclaration to either of these organisations, the data collected through these channels is of relatively good quality.

In fact, you can get a rather close estimate of a statutory board’s number of employees via their annual reports’ declaration on the total cost of Skills Development Levies paid to the CPF.

To track overtime data, overtime pay can be given a relatively small discount (about 5 %) over CPF individual contribution rates or IRAS income tax on basic salary. The claim of this preferential rate would be on a self-declaration basis, but would require uploaded itemised payslips to back it up. 

This, especially when combined with the greater coverage of overtime pay protections mentioned earlier, would give the government a better data pool to determine whether median salaries and income growth are unhealthily driven by overtime.

Upon data analysis, it can also be used to identify if certain industries are practising overtime in excess of 72 hours/month, or if certain industries are likely to become inhospitable for Singaporean Employment due to entrenched overtime practices. These identified industries can then be further targeted with specific policies.

It should be spelt out in legislation that there is a requirement for government bodies and statutory boards to adopt internal regulations that are in substance on par with or superior to the Employment Act.

To be frank, extending the coverage of overtime laws is about as blunt as a policy tool can get. This explains why it’s not the government’s (or the opposition’s) first choice solution when tackling the myriad of overwork phenomena in Singapore.

However, given the inefficacy of these other “bandaid” or “advocacy” solutions in creating meaningful long-term change in the Singaporean work environment—it may be time for a policy that directly “gets the job done”. 

Ultimately this is a political issue, and it falls to whether the political interest of the citizenry necessitates this approach.

The intensity of the political interest of each individual citizen would then very much be determined by how much unpaid overtime they clocked last month.

In my opinion, these reforms are not very radical. Which is perhaps why I thought we would have already gotten to them by now. I hope my writings here can help surface this issue, and we can get it settled sooner rather than later.

In the end, overtime will always be a part and parcel of working life to some degree or another. In a market economy, there will always be stuff that needs to be done, and money for people who are willing to do it—and that is good! 

However, there are healthy and unhealthy ways of dealing with that.

With a system in place, we may see healthier practices, such as overtime for off-in-lieu arrangements, or more initiatives to improve productivity.

Or new unhealthy practices may prop up, like the infamous Chinese 996, where “voluntary overtime” is tied to an employee’s promotion and retention. 

We would not know, but hopefully we can move the conversation forward.