Contract for service, short term contract and employee

There are still many discussions with regards to the SMRT drivers and whether the pay for a job should be the same or different. Let me just share a little on the HR practices with regard to this.

In the case of a contract for service, the workers are employed simply to do a specific job with a specific pay. Period. There is no employer employee relationship, no benefits or difference in pay between one worker and another.

In the case of a short term contract, there is an employer employee relationship, but the pay can be different and the terms and conditions of employment can be different. The main argument in this SMRT driver issue is whether the pay should be the same or different.

Allow me to clarify this. Thereotically, the basic pay for jobs of the same specification is the same. So there should be no quarrel over the job worth. Two persons doing the same job would be paid the same basic pay for that job. In practice this is hardly the case.

The computation of an employee’s pay, assuming new sign ons, will still have to take into consideration many other factors. Qualifications and experience would affect the pay offered if they are relevant. New sign ons could be offered different starting pay because of these factors.

The other factor that is in play in this case is the nationality. Workers come from different countries with different cost of living and could be comfortable with different pay offered. $100 can be a lot in some countries and not enough in others. A simple example is the pay of a similar worker producing Apple Iphones in Indonesia, China or Thailand. Their pay will be different for the same job because of the country they are in. If they are to be paid the same as those in the USA, then there is no advantage to farm out such jobs to lower cost countries. Same job different pay because of different cost of living of a country is only practical.

An added factor to this is that the foreign workers are not working in their own countries and bearing the respective cost of living. They are now in Sin City and have to bear the higher cost of living here. Thus, this point must also be input into the pay to ensure that they are adequately compensated or else it will be meaningless for them to be here. This amount could be the same to all foreign workers here as it is related to the cost of living here.

Employers also have to account for the cost involved in hiring them. And the workers must also take into consideration the amount they have paid to the recruiting agents to be here.

In summary, employers recruit foreign workers for competitive cost advantage. But there are occasions when there is a shortfall of skilled local workers and employers would be willing to pay more to bring in foreign contract workers even at higher pay then locals to complete a job. The final computation of pay for a worker is thus not a simple factor of same job same pay irrespective of nationalities and other factors. The critical issue is that the pay must be fair to the workers and to the employer after taking into consideration all factors, and both parties perceived that it is fair. This is the tricky part of salary administration. It is not QED.