Mastering Variable Wage Components: A Guide to Navigating Salary Structures in Singapore

 

Understanding Monthly Variable Components (MVC) is crucial in effectively managing payroll in Singapore.Because MVCs arenot obligatory unless stipulated in the employment contract and may fluctuate based on company performance and employee achievements, it’s important to use a payroll HRMS system that can handle this dynamic aspect of compensation management.

 

Let’s take a look at the most common types of MVC:

 

·         Annual wage supplement - Often referred to as the “13th month payment,” AWS is an additional annual payment on top of an employee’s total yearly wage. While not mandatory, employers are encouraged to provide AWS as a reward for contributing to the company’s performance. In cases of poor business results, the amount of AWS can be negotiated to a lower sum.

 

·         Bonus payments - Bonuses are one-time payments given to employees as a reward for their contributions to the company, typically offered at the year's end. Like AWS, bonuses are not compulsory unless specified in the employment contract or collective agreement.

 

·         Variable payments - These payments are incentives given to boost productivity or to reward employee contributions. These are also not obligatory unless specified in the contract.

 

Some employers use MVC as a strategy to reduce expenses during economic downturns. MVC works by allocating a portion of the employee’s salary as MVC, which can be reduced during downturns, thus decreasing business costs.

 

Incorporating MVC into employee income

 

An employer cannot unilaterally change an existing contract without the employee's consent. So, if the existing contract does not include an MVC, you cannot add it without the employee's agreement. Instead, you might consider offering future salary increases as MVC or mutually agreeing with your employee on a contract variation to incorporate MVC.

 

When adding MVCs to contracts, it’s crucial to define the triggers for MVC cuts and restorations, such as the need to cut costs due to poor business performance or to preserve jobs.

 

Use Adaptive Pay tostreamline payroll and MVC management.

 

Adaptive Pay simplifies payroll with automated salary calculations, tax filing, and integration with other modules.

 

Widely recognised as the best payroll software in Singapore, our payroll HRMSsystem adheres to CPF, MOM, and IRAS regulations and seamlessly integrates all employee data for effective processing. Here are some of its standout features:

 

·         Automated workflows - Our cloud-based HR and payroll systems enable automatic calculations based on employee records.

·         Customisable payroll processes - Adapt payroll processes and configure individual payroll components to suit your business needs.

·         Accurate CPF, FUND, and SDL calculations - Stay current with changing policies and taxation rates through automatic calculations.

·         Efficient bank giro transfer and file creation - Simplify online bank transfers with streamlined file creation and transfer processes.

·         Third-party app integrations - Enhance system functionality with integrations for apps like Xero and Quickbooks.

·         Streamlined automated tax filing - Easily generate and file IR8A, IR21, IR8S, and Appendix A forms.

·         Easy payslip access for employees - Allow employees to view and download their payslips via an app, email, or web.

·         Pre-payroll acknowledgement feature - Enable employees to report any discrepancies before payroll processing.

 

Empower your business with Adaptive Pay.

 

Adaptive Pay’s cloud-based payroll HRMS system reduces the time and effort involved in payroll processing through integration and automation. It minimises the risk of human error in calculations and empowers employees with self-service features to access their payslip records anytime, anywhere. The system is flexible and constantly updated to accommodate new policies.

 

Adopting Adaptive Pay allows you to streamline your payroll process to ensure accuracy and compliance with Singapore’s wage component regulations, including managing variable components like AWS, bonuses, and MVCs. Book a demo today to see if it suits your requirements.