Payment in Cash or Cheque – Approval Required by the DG of Labour?

Know about your legal rights

Image by Irfan Hakim for illustration purposes only

The Employment (Amendment) Act of 2022 makes a number of significant changes to the Employment Act 1955 (EA 1955) that will take effect on the 1st of January 2023. This article will examine the amendments to Section 25A concerning the mode of payment of wages other than through the bank.

What are the changes?

Under Section 25A, the alternative methods of payment of wages besides through a bank are:

  • legal tender; (cash) or
  • cheque

Previously, only domestic servants who wished to be paid in cash or cheque were required to submit a written request to their employer, and the employer would then need to obtain approval from the Director General of Labour (s.25A(2) EA 1955). Per contra, no such approval from the Director General was required for employees (including foreign workers).

The new provision provides that an employer is now required to obtain approval from the Director General for both domestic servants and employees (including foreign workers). Additionally, it is pertinent to note that the Director General may impose any condition as he may deem fit on the approval granted. Once authorised by the Director General, employers are advised that such requests made by domestic servants/employees should not be unreasonably withheld.

Impact & Solutions

How does this affect your company? This provision would be most relied upon by foreign employees or bankrupt employees, those without a bank account and others. Employers are advised to work with these employees in the hiring stage to determine the payment method that works best for them and the company. In light of these changes, employers are urged to be cautious and submit an application in advance to the Director General in order to ensure smooth operations of payroll in the future.

Due to the absence of an audit trail in cash transactions, employers are advised to maintain accurate records such as payslips and payment vouchers. Regarding cheque payments, employers should be aware of the processing timeframe. If payroll is not processed by a given date, workers may not receive their paychecks as contractually expected.