Singapore

31 Mar 2010

Minimum statutory terms
Termination of employment

Discrimination and harassment

Occupational health and safety
Regulation of outsourcing and contracting
Industrial relations

Acknowledgment

This Guide was prepared by the Employee Relations – Asia practice of Freehills International Lawyers, with assistance from the following firms:


Hong Kong SAR

Vincent T.K. Cheung, Yap & Co

India

Kochhar & Co

Indonesia

Soemadipradja & Taher

Japan

Anderson Mori & Tomotsune

Korea

Kim & Chang

Malaysia

Azmi & Associates

People’s Republic of China

TransAsia Lawyers

Singapore

Straits Law Practice LLC

Taiwan

Lee & Li

Thailand

Bangkok International Associates

The Philippines

SyCip Salazar Hernandez & Gatmaitan

Vietnam

Frasers Law Company

Key Contacts:

Celia Yuen
Practice Leader
+65 6236 9941
celia.yuen@freehills.com

Lucy Twomey
Senior Legal Associate
+65 6236 9944
lucy.twomey@freehills.com

Note:     This Guide:

  • is current to 31 March 2011;
  • contains general introductory information only, without an assumption of a duty of care by Freehills or the other firms listed;
  • does not contain legal advice; and
  • is not intended to be, nor should it be relied on as, a substitute for legal or other professional advice.

If employers have workplace relations issues or requirements in particular jurisdictions, then Freehills Employee Relations - Asia can assist, working with local counsel.

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Minimum statutory terms

The common law is a significant source of employment law in Singapore.

Employment law in Singapore is also regulated by several statutes, including the:

  • Employment Act
  • Industrial Relations Act
  • Trade Unions Act
  • Trade Disputes Act
  • Work Injury Compensation Act
  • Retirement Age Act
  • Workplace Safety and Health Act, and
  • Employment of Foreign Manpower Act.

Other legislation, such as the Central Provident Fund Act, Children Development Co-Savings Act, Enlistment Act, Holidays Act and Skills Development Levy Act also imposes specific obligations on, or provides assistance to, employers and employees.

In addition, government departments and bodies issue directives, rules and policy statements on the interpretation of the relevant statutes and regulations. Tripartite recommendations and guidelines often outline the position adopted jointly by the representatives of employers, employees/unions and the government.

The Employment Act prescribes minimum terms and conditions of employment and governs rights and obligations in relation to employers and certain employees. A significant (and commonly misunderstood) distinction under Singapore employment law relates to coverage of the Employment Act.

The starting point is that the Employment Act applies to all employees in Singapore. However, there are exclusions, the most significant of which is that the Act largely does not apply to employees in a managerial or executive position (other exclusions being seamen, domestic servants, persons working for a statutory board or the government). The Ministry of Manpower (MOM) takes a broad view of what might be considered a managerial or executive position, indicating on their website that managers and executives are employees with executive or supervisory functions. These functions include the authority to influence or make decisions regarding issues such as recruitment, discipline, termination of employment, or assessment of performance and reward; involvement in the formulation of strategies and policies of the enterprise; or the management and running of the business. According to the MOM, managers and executives also include professionals with tertiary education and specialized knowledge or skills and whose employment terms are comparable to those of managers and executives. Professionals such as lawyers, accountants, dentists, and doctors would generally be deemed as being employed in a managerial or executive position.

A common misconception is that employees are only covered by the Employment Act if they earn less than a particular statutory earnings cap. This is incorrect. All employees are covered by the Act, unless an exception applies (for example, managerial/executive). Of the employees covered by the Act, however, not all will be covered by Part IV of the Act. Part IV of the Act only applies to:

  • employees whose salary does not exceed S$2,000 per month, and
  • employees who are engaged in manual labour and whose salary does not exceed S$4,500 per month).


Employer work rules
There is no legal requirement in Singapore for an employer to establish work rules. An employer may choose to formulate work rules, company policies, employee handbooks, or similar documents. An employer may choose to incorporate some or all of its company policies into employee contracts of employment, though in doing so the employer should be aware that employee consent may be required in order to amend such policies. For this reason, many employers establish policies or handbooks that are expressed not to form part of the contract of employment, but with which employees are nevertheless required to comply.

Forms of employment
The Singapore common law recognises the ability of parties to agree on contractual arrangements for ongoing/fixed-term and for full-time/part-time or variable arrangements.

For employees covered by the Employment Act (whether or not covered by Part IV), part-time employment is recognised and specifically regulated by the Employment (Part-Time Employees) Regulations. A part-time employee is defined as an employee who is required under their contract of service with an employer to work for less than 35 hours a week.

Probationary period
There are no specific laws governing probationary periods. However, they are common practice in employment contracts. The duration can be agreed by the parties, but usually it varies between one and three months for lower-level employees and between three and six months for managers/executives.

Minimum wage
Singapore does not have a minimum wage provision. While the Ministry of Manpower (MOM) is empowered to prescribe minimum wages in the case of children and young persons under the age of 16 working in particular industries, no such minimum wage is currently prescribed.

Remuneration structure
The National Wages Council (NWC), a body comprised of the government, employers and employee representatives (usually national trade union representatives), issues annual wage guidelines which may be taken into account during wage negotiations between employers and employees.

According to the NWC recommendations, the typical wage structure of a rank and file employee should be:

  • a basic monthly wage (70%)
  • an annual variable component (AVC), otherwise known as bonus (usually performance-based), which may also include the annual wage supplement (AWS), commonly known as the thirteenth month payment (20%), and
  • a monthly variable component (MVC) based on the financial performance of the employer and the performance of the employee (10%).

Higher-level employees usually have a greater proportion of their wages in the form of AVC, though this is not mandatory.


Working hours
Regulations made under the Employment Act contain prescriptions in relation to working hours, overtime, rest periods and public holidays for part-time employees covered by the Employment Act.

Furthermore, Part IV of the Employment Act contains specific restrictions (summarised below) on hours of work, overtime and rest periods in respect of employees falling below the relevant statutory earnings caps. There are no hours of work prescriptions for full-time employees falling outside of Part IV.

Hours of work—According to Part IV of the Employment Act:

An employee may not be required to work more than six consecutive hours without a break, more than eight hours a day or more than 44 hours a week. These limits can be varied by agreement under the contract of employment, for example, the limit of 44 hours may be exceeded in one week if the number of hours worked in every alternate week is less than 44 hours.

However, no employee can be required to work for more than 12 hours a day, for more than 48 hours a week or for more than 88 hours in any continuous period of two weeks, except in the following circumstances:

  • actual or threatened accident
  • performance of work essential to the life of the community
  • work essential for defence or security
  • urgent work to be done to machinery or plant
  • an unforeseeable interruption of work, and
  • work to be performed in any industrial undertaking essential to the economy of Singapore or any of the essential services.

Specific rules are provided for shift workers, who may be required to work up to 12 hours a day, provided that the average number of hours worked over any continuous period of three weeks does not exceed 44 hours per week.

Overtime—For employees covered under Part IV of the Employment Act, any work done in excess of 44 hours (or 48 hours if agreed in accordance with the Act) is considered overtime. The maximum permitted overtime is 72 hours per month, but the MOM can grant extensions to this limit. Overtime hours must be paid at least 150% of the basic hourly rate of pay. In case of work during a rest day at the request of the employer (as opposed to employees themselves requesting to work overtime) the employee is entitled to be paid not less than 200% of the basic rate of pay.

Rest periods—Employees covered under Part IV of the Employment Act are entitled to one whole rest day each week. The rest day may be on Sunday or any other day as fixed by the employer by way of a contract or monthly roster. For shift workers, the rest day may be any continuous period of 30 hours.

Public holidays
Every employee covered by the Employment Act is entitled to a paid rest day on public holidays. Currently there are 11 gazetted public holidays per year. The employer and employee may agree to substitute another day for any of the prescribed public holidays. An employee who is required to work on a public holiday must be paid an additional day’s salary at the basic rate of pay on top of their gross rate of pay for that day. Special rules apply to part-time employees. No statutory entitlement applies to those employees who are not covered by the Employment Act, however, it is common practice to grant the same public holidays to these employees as well.

Paid annual leave
The statutory entitlement to paid annual leave applies only to employees covered by Part IV of the Employment Act, and to part-time employees whose employment is covered by the Employment Act.

Part IV employees who have served an employer for not less than three months are entitled to seven days paid annual leave during the first 12 months of service and an additional one day of annual leave for every subsequent 12 months of service, up to a maximum of 14 days. Annual leave entitlements may be forfeited if the employee absents themselves from work without the employer’s consent or without reasonable excuse for more than 20% of the working days on which their annual leave entitlement is based.

Part-time employees are entitled to annual leave on a pro-rata basis, calculated in accordance with the legislation.

Other types of leave

Sick leave—For all employees covered by the Employment Act and with at least three months service with the employer, paid sick leave up to 14 days per year must be provided. Where hospitalisation is necessary, the 14 days leave can be extended up to 60 days. Employees not covered by the Employment Act do not have any statutory sick pay entitlement, but many employers choose to grant all of their employees sick leave according to the Employment Act standard.

Maternity leave—The maternity leave provisions in Singapore are complex. A female employee’s entitlement to maternity leave may vary between no legal entitlement at all, up to an entitlement to 16 weeks leave on full pay, depending on her circumstances. Government reimbursement of some maternity leave payments may be available to employers in particular cases, pursuant to the Children Development Co-Savings Act.

Paternity leave—There are no statutory provisions regarding paternity leave. Commonly, limited paternity leave is granted to male employees under employment contracts, collective agreements or company policies.

Childcare leave—Employees (both male and female) who are covered by the Employment Act and who have at least three months service and a child younger than seven years of age are eligible for two days of paid childcare leave each year. In addition, married employees with a child under the age of seven who is a Singapore citizen are entitled to an ‘enhanced’ childcare leave benefit, which extends the entitlement to up to six days paid leave per annum. Government reimbursement of some childcare leave payments may be available to employers in particular cases, pursuant to the Children Development Co-Savings Act.

Infant care leave—Married employees with at least three months service who have a Singapore citizen child under the age of two are also entitled to six days unpaid infant care leave per annum. The paid childcare leave entitlement must be exhausted first.

Military leave—An employer must grant unpaid leave of absence to any employee required to report for national service, mobilised service or voluntary service.

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Termination of employment

Legal requirements
Generally, under the common law, an employer may terminate an employment contract at any time by giving to the employee the required period of notice in writing (see below in ‘Notice periods’).

An employer may also terminate the contract without notice, by way of ‘summary dismissal’ on the grounds of an employee’s misconduct. Whether the summary dismissal is justified depends on the gravity of the misconduct of the employee. In general, it has been held that summary dismissal is justified in instances of: disobedience of instructions, habitual neglect and conduct incompatible with duty or prejudicial to the employer’s business.

Employees covered by the Employment Act whose employment is terminated (whether with or without notice) can lodge an application with the Minister for Manpower on the basis that their dismissal was ‘without just cause or excuse’ (see ‘Remedies’ below). Though this is not further defined in the legislation, the Minister for Manpower would usually have regard to whether or not the employer complied with various MOM guidelines in terminating the employment.

Notice periods
The Employment Act (which only applies to covered employees) provides that the following minimum notice periods apply:

•      one day if the length of service is less than 26 weeks
•      one week if the length of service is between 26 weeks and two years
•      two weeks if the length of service is between two years and five years, and
•      four weeks if the length of service is five years or more.

The parties may provide in the contract of employment for a notice period longer than the minimum periods prescribed, provided that the length of notice is the same for both employer and employee. Payment in lieu of notice (or part thereof) by either party is allowed.

For employees not covered by the Employment Act, the length of the notice periods for termination and for resignation can be fixed in the contract by agreement between the parties. If no period of notice is fixed, a term of ‘reasonable notice’ will be implied. What is seen as ‘reasonable’ will depend on factors such as the nature of the employment and the length of service the employee has with the employer.

Restrictions on the ability to terminate employment

Dismissal for the following reasons is prohibited:

•      age, if the employee is younger than the prescribed retirement age at the time of the dismissal
•      national service, or
•      trade union activity.

There are also restrictions on dismissing a female employee who has a statutory entitlement to maternity leave. In particular:

•      There is a blanket prohibition on an employer giving notice of termination during absence on statutory maternity leave or on such a day that the notice will expire during the absence on statutory maternity leave.
•      An employee with such a statutory entitlement whose employment is terminated in the period of six months before the birth of her child may complain to the MOM that she was dismissed ‘without sufficient cause’. Potential remedies are reinstatement and compensation.
•      An employee with such a statutory entitlement whose employment is terminated on the grounds of redundancy within a period of three months before the birth of her child is entitled to payment of the maternity benefits which she would have received had her employment not been terminated.

Remedies

Remedies under statutory law—Employees covered by the Employment Act or trade union members (subject to specific exceptions for executive employees) can lodge an application to the Minister for Manpower within one month of the dismissal alleging that their dismissal was ‘without just cause or excuse’. If the Minister for Manpower finds the dismissal was without just cause or excuse, the Minister may order the employer to:

•      reinstate the employee and pay them the wages they would have earned had they not been dismissed, or
•      pay the employee an amount of wages as compensation.
The Minister for Manpower’s decision is final and cannot be challenged in any court.

Remedies under common law—Employees not generally covered by the Employment Act (for example, executives) can only claim for breach of contract before the common law courts. The question will be whether the employer terminated the employment in accordance with the contract and the common law, not whether the termination was ‘fair’, as such. Damages are normally limited to the actual loss in remuneration which the employee could have expected to earn had the employment continued until the end of the contract or to the expiration of the designated notice period or what would be regarded as reasonable notice. In this case there is no right to reinstatement.

Severance payments
There is no statutory entitlement to severance pay upon termination in Singapore, although there may be an entitlement under the employment contract or a collective agreement. Some larger companies pay severance pay on a policy basis in a redundancy situation, even where there is no legal obligation to do so. There are also tripartite guidelines on the payment of retrenchment benefits.

With effect from 1 January 2012, there will be a limited severance payment entitlement under the Retirement and Re-employment Act (RRA). Under this provision, when an employee retires at the statutory retirement age (currently 62), is medically fit and has satisfactory work performance, if the employer is not able to find a suitable vacancy in which to ‘re-employ’ the employee, the employee must pay Employment Assistance Payment (EAP) to the employee.

The RRA does not prescribe the amount of the EAP, however the Tripartite Guidelines on the Re-employment of Older Employees provide guidance. An EAP equal to three months salary, would be consistent with the guidelines subject to a minimum of S$4.500 and a maximum of S$10,000. If the employee has been re-employed for 18 months or more, and there has been a change of circumstances affecting their re-employability, the EAP may be adjusted downwards subject to a minimum of S$3,000 and a maximum of S$7,000.

Specific requirements applicable to redundancy
There are no specific statutory requirements of note applicable to redundancy in Singapore. However, the MOM has issued non-binding guidelines on the implementation of redundancies, which it strongly encourages employers to follow.

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Discrimination and harassment
Singapore does not have specific legislation on employment discrimination and equal opportunity. Only limited protective provisions exist, with certain prohibitions against discrimination on the grounds of age, maternity status and union activity. However, the Tripartite Alliance for Fair Employment Practices (TAFEP), comprising the MOM, unions and employer organisations, has issued non-binding guidelines with the aim of encouraging employers to adopt fair employment practices and promote equal opportunity in recruitment, appraisal, promotion, posting and training.

Harassment may be subject to prosecution under general criminal laws.

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Occupational health and safety
The Workplace Safety and Health Act (WSH Act) was introduced in March 2006 to replace the formerly prescriptive legislative approach with a broader performance-based liability regime, based on general duties of care. The key changes under the WSH Act were:

•      imposing general duties of care on various stakeholders (for example, employers, occupiers, principals and workers)
•      requiring employers, in particular, to proactively identify and mitigate risks and hazards at the workplace, and
•       increasing penalties to reflect the cost of poor safety management.

The WSH Act initially only applied to workplaces deemed a ‘factory’ but the intention was to cover all workplaces in Singapore over time. To this end, in March 2008 new sectors were brought within the WSH Act’s scope (that is, healthcare and veterinary activities; hotels, food and beverage sectors; water supply, sewerage and waste management activities and others). With effect from 1 September 2011, the WSH Act will cover all workplaces in Singapore.


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Regulation of outsourcing and contracting
Outsourcing—Singapore legislation does not prohibit or specifically restrict outsourcing.
Note however that the Employment Act contains some rules with reference to contractors, in particular stating that the principal and the contractor and any subcontractor are jointly liable to pay the salary for work supplied in the execution of the contract that is due to ‘workmen’ (that is, manual labourers) employed by the contractor or the subcontractor, up to a cap of one month’s salary per workman.

Contracting—In general, Singapore employment legislation and employment obligations at common law do not apply to true independent contractors (or self-employed persons). Note that tests apply at common law to determine whether or not a person is a contractor or an employee and the way that the parties characterise the relationship is not determinative.

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Industrial relations

Legislation in brief
Industrial relations are highly peaceful in Singapore. The country has been virtually strike-free for decades. A key feature of Singapore industrial relations is the concept of ‘tripartism’, which refers to workers (through unions), employers (through employer organisations) and the government (through the MOM) working together for the common good.

Freedom of association and representation is guaranteed to all employees in the private sector by law. The main statutes are the Trade Unions Act which provides, inter alia, the formalities for the establishment of a trade union, and the Industrial Relations Act, which sets out specific procedures for the negotiation of collective agreements and the conciliation and arbitration of trade disputes.

Role of trade unions
The major function of trade unions in Singapore is to carry out collective bargaining, negotiate terms for collective agreements and to represent members in resolving industrial disputes. Under the Trade Unions Act, trade unions must register with the Registrar of Trade Unions. Any person above the age of 16 may be a member of a registered trade union (with the exception of certain categories of government employees).

Collective agreements
Under the Industrial Relations Act, collective agreements must be certified by the Industrial Arbitration Court (IAC). In this case, they are binding on the employer (or its successor) and the relevant trade union and its members. The term of the collective agreement cannot be less than two years or more than three years. If a collective agreement is unable to be concluded, the matter is referred to the IAC which makes a determination on the dispute. Prior to referring the matter to the IAC, the parties may refer it for conciliation at the MOM.

Industrial action and disputes
There is no general legal prohibition on industrial action in Singapore. However, once a trade union dispute has been submitted to the IAC, any industrial action in connection with such a dispute becomes prohibited.

The Trade Unions Act allows any registered trade union to commence, promote, organise or finance industrial action (including strikes), provided that majority consent of its members is obtained through a secret ballot and the union rules are not contravened.

The IAC is empowered to resolve trade disputes through arbitration proceedings. In practice the IAC encourages parties to settle disputes through settlement and mediation. If the parties cannot reach an agreement, the IAC can issue orders (known as ‘awards’) which are final and binding and cannot be challenged or appealed against. The awards may cover many aspects of industrial relations, including such matters as wages, bonuses, medical benefits, retirement or retrenchment benefits, hours of work and overtime.

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