I refer to the letters by Ms Angeline Koh (Condo managing agents should pass on JSS payouts to clients, June 27) and the Association of Strata Managers (Managing agents have also been affected by Covid-19 pandemic, July 2).
For the commercial management corporations, or MCSTs, of shops and offices, it is true that the managing agent is the legal employer of site employees such as managers and facilities or administrative officers.
But in the case of residential condominiums, the traditional practice is for the MCST to retain the hiring and firing rights, as well as the determination of annual increments and bonuses of the employees, although the managing agent would usually insist (although not always successfully) that these employees be put under its payroll for administrative convenience.
Consequently, in such a situation, the legal employer of these site employees is technically still the managing agent, but the financial and moral employer is the MCST, which retains the management prerogatives as stated above.
To remove the ambiguity and the recurrent dispute whenever the Government rolls out some wage support scheme, many MCSTs put these site employees directly under their employment.
In the process, they get to save a huge amount on goods and services tax (GST) charges.
That is in contrast with when such employees are under the payroll of the managing agent. In this case, the employees' salaries, bonuses and Central Provident Fund (CPF) contributions are subject to the 7 per cent GST charge, because they are billed by the managing agent to the MCST as part of their service and not paid directly by the MCST to the CPF Board.
With the GST expected to rise to 9 per cent in the near future, this cost is going to increase the maintenance fund contributions further.
And with the current recession as a result of the Covid-19 crisis, many condominium owners may be facing difficulties in paying their contributions promptly.
By reducing the costs of managing the estate, the MCST would be able to help their members weather the crisis better.
Founding President (Retired)
Association of Management Corporations in Singapore