Pros and Cons for Annual Wage Supplement (AWS)

December is the time of the year when employees are excited to receive the 13th month pay (Annual Wage Supplement) and the variable bonus (Annual Variable Component) which is computed by the Public Service Division of Singapore. However, it is important to note that giving 13th month bonus is not compulsory but a privilege which is incorporated in the employee’s contract or collective agreement. It is not mandated by Singaporean law. An employer can also negotiate the amount he will give to his workers if the yearly profit is low. If the owner decides to pay AWS despite the situation, he needs to cut down other expenses or avail a Singapore business loan.

Annual Wage Supplement (AWS) is not compulsory because of the following reasons.

  1. The high operational cost will become higher during the month of December. Additional fund is necessary to pay the 13th month pay if the annual income is just average.


  1. The company is already paying a higher basic monthly compensation. Paying another month of salary on top of December pay would mean a massive amount of money from the buffer.

The downside of not paying the 13th month pay is detrimental to workers. When companies fail to give this additional pay, employees become resentful and unproductive. To combat these possible scenarios, owners must find ways to save money for AWS. Small companies sometimes applied for a Singapore business loan to meet the expense. However, the decision who will receive full amount of 13th month pay remains on the employer’s hand. Active employees with high performance usually get it in full. Employees on probation and recently-resigned are given lesser amount which is calculated based on number of months they work in the company.

Another financial reward that workers expect in December is the Variable Bonus or Annual Variable Component (AVC). This type of compensation varies in forms and amount. Technically, it is given to reward selected workers contribution to company’s success during the year. Those who receive bonus have exemplary performances during the fiscal year.

Forms of variable reward:

  • Year-end bonus
  • Profit sharing
  • Deferred compensation
  • Holiday bonus
  • All-expenses paid travel incentive

Bonus which is given anytime of the year excites and retains employees. The opportunity to earn extra money is a great motivating force on top of monthly compensation and other benefits. Cash incentive in time of Christmas holiday is a wonderful way to appreciate the efforts and dedication of employees all year round. Seeing their happy faces is enough to compensate the cost of giving them bonus, even if it entails business owners to get a Singapore business loan.