4 Effective Ways To Avoid Late Salary Payments

No employee wants to receive their salaries late. Not only does it have downstream impacts on their finances and personal budgeting, it also creates an unhappy and disengaged workplace culture. One instance of late salary payment can cause employees to undermine the reliability of their organisation’s payroll, question their organisation’s financial stability and create a sense of distrust in the long run.

Is there an existing law on salary payments?

Under the Employment Act in Singapore, organisations are mandated to pay their employees’ salaries at least once a month and within 7days after the end of the salary period. Organisations can also pay employees their salaries at shorter intervals such as twice a month or weekly, depending on the nature of work and on a mutually agreed basis with the employee.

However, there are exceptions in terms of overtime, resignation without notice period and other situations.

For overtime pay, it must be paid out to employees within 14 days after the end of the salary period.

What should employees do when they receive the salary payments late?

In case of late payment, employees should check directly with the organisation to understand the situation and if regular salary payments can be expected.

If the organisation is unable to pay employees on time, affected employees will need to first file a claim with the Tripartite Alliance for Dispute Management (TADM). Alternatively they can seek assistance with their respective trade union if they are a member before the case can be heard with TADM.

Should there be an unfortunate case in which the late salary payment case cannot be resolved through mediation, TADM will then proceed to issue a claim referral certificate. At this stage, the case will be referred to the Employment Claims Tribunals (ECT). The affected employee will then have to file the claim directly with the ECT within 4 weeks after the claim referral certificate was issued.

What are the implications of late salary payments?

Late salary payments is an offence under the Employment Act in Singapore. Employers who are found guilty of paying their employees late may risk a fine of SGD3,000 to SGD15,000, jailed for 6 months, or both, if they are a first time offender. For repeat offenders, the penalties are usually doubled.

How can my organisation avoid late salary payments?

Late salary payments is a situation that neither employers nor employees want to be caught in. Here are some tips to avoid falling into the trap of not paying employees on time.

1. Tracking your cash flow

Monitoring cash flow is crucial to understand the financial health of the business. It helps to provide an idea on the incoming and outgoing cash flow, and whether there are sufficient funds to pay employees. Accurate tracking of the organisation’s cash flow can also help to identify areas, such as assets or liabilities, that may be contributing to a negative cash flow. Concurrently, senior management can also utilise cash flow tracking to monitor employees’ performance and productivity levels. This helps to facilitate human capital management, whereby senior leaders may not want to increase employee headcount if business outputs are not justified with the increase in headcount or employee salaries.

2. Communicate early to your employees

If there is a strong business case to pay employees their salaries late, it is best to communicate it to employees as soon as possible. This is to provide employees with ample time to make necessary arrangements for their personal finances, such as monthly bills, rent, children’s allowances or household expenses. When communicating with employees, it is best to be upfront and transparent. State the reason behind the delayed salary payments, steps that the organisation is taking to address and rectify the issue, and the expected salary disbursement date. This helps to reassure disgruntled employees that the organisation still has the employees’ interest at heart.

3. Review payroll processes periodically

The key step to prevent late salary payments is to take measures to continuously improve existing payroll processes. This can be done by reviewing internal processes from time to time. Periodic payroll process reviews help to identify bottlenecks within the existing operating process. If cash flow was the main problem, take measures to mitigate the organisation’s short-time and long-term financial strategy. If payroll calculations errors resulted in delayed salary payments, consider investing in a payroll software to automate the calculation process or outsource to a third-party vendor. By resolving issues or bottlenecks periodically, this helps to minimise the chances of delays to payroll processing and result in late salary disbursements.

4. Engage a payroll partner

The easiest way to prevent late salary disbursements is to outsource the entire payroll or parts of the payroll process to a payroll partner. A reliable payroll partner will be able to leverage on their expertise to ensure timely and accurate payroll regardless of the complexities. Given the ever-changing labour laws and legislations, an external payroll partner will be able to keep up with the ongoing changes. This reduces the likelihood of payroll errors, and ensures adherence to payroll processing timelines.