Legal Provisions on Payment for Overtime, Rest Day and Public Holiday Work

The Employment Act stipulates the following higher differential rates that an employer is required to pay in cash to an employee for work performed in excess of his contractual working hours: -

• 1.5 times the hourly rate of pay for overtime work;
• 2 days’ salary for work done on a rest day at the employer’s request; and
• An extra day’s salary for work on a public holiday.

These rates of payments are meant to compensate workers for the extra hours worked beyond their normal contractual working hours. The additional costs would also encourage companies to properly schedule their working hours so as to ensure minimum disruption to workers.

While the current legal provisions governing the payment for overtime and work on rest days and public holidays have worked well for most companies, companies which face uneven and seasonal fluctuations in demand due to their nature of operations or seasonal or business cycles, have encountered rigidities and difficulties scheduling their working hours to optimise their manpower resources, and this has hindered productivity improvement. During periods of high demand or peak seasons, companies have no difficulty paying the higher rates for overtime and rest day work. However, when demand is low due to poor market conditions, companies are burdened with excess manpower and are unable to reduce their wage costs through rescheduling of the working hours of the excess manpower. This results in inefficiency and may compel companies to retrench the excess employees during the lull periods only to re-hire new ones when business picks up. To these employers, this would result in the loss of employees with valuable experience and skills. To the employees, this would mean less job security and greater risk of retrenchment. Faced with unpredictable business fluctuation, companies, which face such market conditions, should be allowed to deviate from these provisions of the law so that they can implement flexible work schedules. Implementing such schedules will help achieve cost effectiveness and enhance job security, and these will benefit both the company and employees.

Given the volatile business conditions, the Economic Review Committee (ERC) had recommended that companies should be given exemptions from the statutory provisions on overtime, rest day and public holiday work so that they could adopt flexible work schedules. Exemptions should however be given on the condition that safeguards are put in place and that the benefits and productivity gains derived from the more efficient use of manpower resources would be shared with the employees.

The ERC also recommended that a Tripartite Workgroup be set up to assess the various applications of flexible work schedules and the need to empower the Commissioner for Labour to exempt companies from the statutory provisions in the Employment Act on working hours and the higher rates of overtime work and work on rest days and on public holidays. The Government accepted the recommendations.

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