Friday, March 29, 2013

Conversion of sales employees to independent contractors

Someone asked me:
Income insurance agents are having problems with their employer and its union. What are your thoughts on it?

Before I joined NTUC Income in 1977, the sales people were already treated as employees and were eligible for CPF and other employee benefits. 

As employees, they were also allowed to join the trade union. They were able to raise issues to the management through the union. Although difficult at times, these issues could be resolved with goodwill on both sides.

All along, we had treated the commission and bonus earned by them as income, and were subject to CPF contributions and income tax. The incentives given under sales contests were treated as non-income, as they were credited as "points" to be used for the purchase of sales items to be given away to clients. These incentives were relatively small at that time.

I believe that this treatment must have been reviewed with IRAS over the years, and was not aware about any formal objection raised by them.

I understand that the current management of NTUC Income had decided to change the employment status of the sales employees to "independent contractors" following a recent objection raised by IRAS on under-declaration of income which probably referred to the treatment of the sales contest incentives as non-income. 

Even if IRAS were to object to this treatment now, it was possible for the management to start declaring these incentive payments as income, without having to change the status of the sales people as employees. 

I am not aware if there were other reasons to change the status of the sales people and if there were other grievances arising from the change.

I can understand that some of the old timers would probably liked to remain treated as employees, rather than "independent contractors". There are advantages to them of being represented by a trade union who can speak for them collectively and give them a sense of security against unfair dismissal.

I hope that they can resolve the dispute with the management without having to incur the expenses of litigation, which must be a heavy financial burden for them.

1 comment:

yujuan said...

Am behind times, thought their Agents already converted to "independent contractors" when the new CEO took over from Mr. Tan.
The agents have too good a time as employee status for such long time, with CPF, perks and commissions, etc.
Does this conversion means Agents, being self employed now, would adopt a more aggressive sales approach to push sales, throwing morals to the wind to close as many deals as possible.

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