5 Things to Know About the Annual Wage Supplement in Singapore
Every year, Singaporean employees look forward to the Annual Wage Supplement (AWS), which is a single annual payment paid to employees in addition to their annual salary. It is normally paid at the end of the year, making it a useful sum for Christmas and New Year spending, as well as for supplies for the new school year.
The AWS, also known as “13th month pay”, is common practice in Singapore as well as in neighbouring Malaysia. It was first proposed in 1972 to the civil service to close the growing pay gap with the private sector, but it is now practiced by both the public and private sector.
Here are five things you need to know about AWS in Singapore.
The Annual Wage Supplement Is Not Compulsory
Although it’s very common in Singaporean businesses, AWS is actually not mandated by any employment laws. Unless it is part of the employment contract or union agreement, there’s no legal right to AWS.
Nevertheless, even if there’s no mention of AWS in the employment contract, many employers do pay out AWS since many employees expect it. The only exception is for employees on probation who are generally not entitled to AWS.
The Annual Wage Supplement Can Be Reduced
Even though AWS is normally calculated as a sum equivalent to one month’s salary, employers can negotiate a lower amount of AWS if the business has performed exceptionally poorly during the year.
The Annual Wage Supplement Is Separate from Performance Bonuses
Normally, AWS is a separate payment from bonuses based on performance. The amount of AWS remains fairly constant, while performance bonuses increase or decrease depend on the company’s financial performance and individual employee contribution. Furthermore, bonuses can be paid at any time, not just at the end of the year.
Together, AWS and bonuses make up the variable component of an employee’s wages.
The Annual Wage Supplement Is Subject to CPF and Taxes
Under the Central Provident Fund Act 1953, AWS is considered “remuneration in money, including any bonus, due or granted to a person in respect of the person’s employment.” Thus, it attracts CPF contributions.
Similarly, the Inland Revenue Authority of Singapore (IRAS) considers AWS to be taxable like salary and other forms of remuneration.
The Annual Wage Supplement Can Be Prorated
For new joiners who have not worked a full year, their AWS can be prorated according to their length of service. Here’s the formula:
Depending on the company, the salary used in the AWS proration calculation can be based on basic salary or gross salary.
The ‘days worked in the year’ used in the calculation includes off days, but not unpaid leave. Hence, this formula can also be used to calculate AWS for employees that have taken unpaid leave or have returned after a sabbatical.
Get AWS Right with BrioHR
Managing AWS for one employee may be easy, but what about managing two? Or five? Or 500? As the business scales up, simple payroll items on an Excel sheet can get very unwieldy, very fast.
In addition, you will need to run another payroll cycle when paying AWS or any other variable wage components. With HR software that can run multi-cycle payroll like BrioHR, you can run multiple payroll cycles with just a few clicks. Everything is also calculated accurately for you.
With a secure, scalable, user-friendly platform, BrioHR covers the entire employee journey from recruitment to onboarding, payroll and claims, to performance and analytics, and more.
This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
Every year, Singaporean employees look forward to the Annual Wage Supplement (AWS), which is a single annual payment paid to employees in addition to their annual salary. It is normally paid at the end of the year, making it a useful sum for Christmas and New Year spending, as well as for supplies for the new school year.
The AWS, also known as “13th month pay”, is common practice in Singapore as well as in neighbouring Malaysia. It was first proposed in 1972 to the civil service to close the growing pay gap with the private sector, but it is now practiced by both the public and private sector.
Here are five things you need to know about AWS in Singapore.
The Annual Wage Supplement Is Not Compulsory
Although it’s very common in Singaporean businesses, AWS is actually not mandated by any employment laws. Unless it is part of the employment contract or union agreement, there’s no legal right to AWS.
Nevertheless, even if there’s no mention of AWS in the employment contract, many employers do pay out AWS since many employees expect it. The only exception is for employees on probation who are generally not entitled to AWS.
The Annual Wage Supplement Can Be Reduced
Even though AWS is normally calculated as a sum equivalent to one month’s salary, employers can negotiate a lower amount of AWS if the business has performed exceptionally poorly during the year.
The Annual Wage Supplement Is Separate from Performance Bonuses
Normally, AWS is a separate payment from bonuses based on performance. The amount of AWS remains fairly constant, while performance bonuses increase or decrease depend on the company’s financial performance and individual employee contribution. Furthermore, bonuses can be paid at any time, not just at the end of the year.
The Annual Wage Supplement Is Subject to CPF and Taxes
Under the Central Provident Fund Act 1953, AWS is considered “remuneration in money, including any bonus, due or granted to a person in respect of the person’s employment.” Thus, it attracts CPF contributions.
Similarly, the Inland Revenue Authority of Singapore (IRAS) considers AWS to be taxable like salary and other forms of remuneration.
Together, AWS and bonuses make up the variable component of an employee’s wages.
The Annual Wage Supplement Is Subject to CPF and Taxes
Under the Central Provident Fund Act 1953, AWS is considered “remuneration in money, including any bonus, due or granted to a person in respect of the person’s employment.” Thus, it attracts CPF contributions.
Similarly, the Inland Revenue Authority of Singapore (IRAS) considers AWS to be taxable like salary and other forms of remuneration.
The Annual Wage Supplement Can Be Prorated
For new joiners who have not worked a full year, their AWS can be prorated according to their length of service. Here’s the formula:
Depending on the company, the salary used in the AWS proration calculation can be based on basic salary or gross salary.
The ‘days worked in the year’ used in the calculation includes off days, but not unpaid leave. Hence, this formula can also be used to calculate AWS for employees that have taken unpaid leave or have returned after a sabbatical.
Get AWS Right with BrioHR
Managing AWS for one employee may be easy, but what about managing two? Or five? Or 500? As the business scales up, simple payroll items on an Excel sheet can get very unwieldy, very fast.
In addition, you will need to run another payroll cycle when paying AWS or any other variable wage components. With HR software that can run multi-cycle payroll like BrioHR, you can run multiple payroll cycles with just a few clicks. Everything is also calculated accurately for you.
