Annual Wage Supplement: Compulsory or not?

It’s the time of the year when the pace in the office slows down and the mood turns festive. But besides that, people also look forward to receiving their bonuses.

Annual Wage Supplement

Among the bonuses is a component called the 13th month payout, otherwise known as the Annual Wage Supplement.

The perennial issue out there has been that the Annual Wage Supplement (AWS) is not compulsory.

In actual fact, the AWS is not compulsory and it really depends on what is in your employment contract with the company, or the collective agreement which your company may have with the union.

And if business results are exceptionally poor for the year, your employer may negotiate for a lower amount of AWS to be paid out to employees.

So why is not compulsory for all employees?

Annual Wage Supplement

The reason, according to a Human Resource expert, Adrian Tan, if the AWS were to be made compulsory,  “business cost will go up especially over that specific period of the year.”

“For companies that are not paying AWS (and due to that provide higher basic pay), it would be a massive hit on payroll cost. Multiply that by the number of headcount within the organisation, the payout could be massive.” – Adrian Tan

Making AWS will definitely make business cost go up, but what would that mean for workers?

It can be detrimental: companies would look to cut costs elsewhere, for example, giving a lower base pay or pass more of that salary into an allowance component, and even at an extreme, attempts to cull headcounts before payout period.

So since it’s not compulsory, should the AWS be made compulsory?

Tan thinks it would help to even the playing field since there are companies that provide a higher base to compensate for the lack of AWS, but there are also those that don’t.

“And from the workers’ perspective, the AWS would be helpful financially.”

So, as with all things, there are pros and cons to it. Would we then want the AWS to be made compulsory for all workers?





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