This country-specific Q&A provides an overview to employment and labour law in Singapore.
It will cover termination of employment, procedures, protection for workers, compensation as well as insight and opinion on the most common difficulties employers face and any upcoming legal changes planned..
This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, what reasons are lawful in the jurisdiction?
The employer generally does not need to provide a reason if it terminates the employment relationship with notice or salary in lieu.
Any such termination should be conducted in accordance with the employment agreement and the Employment Act (Cap. 91) (“EA”), if it applies.
However, there is some authority that an employer may not terminate a fixed term contract by notice or salary in lieu of notice.
Introduction to Singapore Employment Law
By way of background, the EA is Singapore’s main employment legislation and covers all employees except the following:
- Managers or executives with a basic monthly salary of more than S$4,500;
- Domestic workers; and
- Statutory board employees or civil servants.
Part IV of the EA, which sets out rest days, hours of work and other conditions of service, only applies to the following categories of employees:
- Workmen (doing manual labour) with a basic monthly salary not exceeding S$4,500; and
- Employees who are not workmen but are covered by the EA with a basic monthly salary not exceeding S$2,500.
Part IV of the EA does not cover all managers or executives, regardless of their salaries.
Other statutes and the common law may also apply in various situations. Finally, the Ministry of Manpower (“MOM”), together with its tripartite partners, the National Trades Union Congress (“NTUC”) and the Singapore National Employers Federation (“SNEF”), has issued various employment guidelines and advisories. While these guidelines and advisories are not legally binding, MOM may take steps against employers who do not comply with certain guidelines or advisories.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
An employer with at least 10 employees must notify the Ministry of Manpower within 5 days of the employee receiving notification of his/her retrenchment if 5 or more employees are retrenched within any 6-month period beginning 1 January 2017. A failure to notify within the required period is an offence and the employer may be liable on conviction to penalties, including a fine not exceeding S$5,000 and to other potential penalties.
The Ministry of Manpower and the Tripartite Alliance for Fair and Progressive Employment Practices (“TAFEP”) (see the Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment (the “Tripartite Retrenchment Guidelines”)) have also advised employers to carry out the following before retrenching:
- Research government assistance schemes to support the restructuring;
- Obtain employment facilitation for employees;
- Consider available alternatives such as redeployment, temporary layoffs (subject to some mandatory conditions), implementing a shorter work week;
- Take a long term view of manpower needs;
- Consult with the relevant trade unions if employees are unionised;
- Not discriminate against employees and make selections based on objective factors such as the ability to contribute to the company’s future business needs;
- Treat affected employees with dignity and respect; and
- Consider having a longer retrenchment notice period (i.e. in excess of that provided for under the EA) for all affected employees.
If employers still wish to implement their retrenchment exercise, they are advised to communicate their intentions early to their employees and before public notice of the retrenchment is given.
Other additional considerations include whether employees should be given retrenchment benefits. In this regard, employers should refer to prevailing norms on the provision and quantum of retrenchment benefits.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
In a business sale, there are generally three potential outcomes for an employee’s employment.
First, under the EA, subject to conditions, it may be possible for the seller (outgoing employer) to automatically transfer the employees employed by the business to the buyer (the incoming employer).
Second, the affected employees may be transferred to the buyer by the seller terminating the services of the affected employees and buyer hiring the same employees.
Third, where the seller chooses not to transfer the affected employees, it would typically terminate their employment before the business sale. In this regard, please refer to our response in question 2 for more details on retrenchment exercises.
Should the employers wish to transfer foreign employees to the buyer, it would be important for the employers to consider if their work passes can be transferred to the buyer, or if the buyer can obtain fresh work passes for these employees.
What, if any, is the minimum notice period to terminate employment?
There are no minimum notice periods to terminate employment. Any termination by notice should be in accordance with the employment agreement.
For employees covered by the EA who enter into the employment agreement after 1 April 2016, their employment agreements must state the notice period. In the absence of agreement between the employer and EA employee, the following notice periods will apply:
Length of employment Notice period Less than 26 weeks 1 day 26 weeks or more but less than 2 years 1 week 2 years or more but less than 5 years 2 weeks 5 years or more 4 weeks
Where the EA does not apply, and in the absence of an express termination notice clause, the common law generally requires that reasonable notice be given before terminating the employment relationship. What is reasonable is determined on the facts of the case.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Yes, it is generally possible although much would depend on the terms of the employment agreement. It would be advisable for the employer to clearly set out its right to pay salary in lieu of notice in the employment agreement.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to stay at home and not participate in any work?
There is no prescribed right for the employer to require the worker to be put on garden leave. Employment agreements may specifically provide for this issue, but if this is not set out in the employment agreement, employers may generally put an employee on garden leave if the employee continues to be paid his or her entitlements and salary.
However, the period of garden leave should not be so long as to render the employee’s skills obsolete. For certainty, it would be advisable for the employer to clearly set out its right to put the employee on garden leave in the employment agreement.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, what are the requirements of that procedure or procedures?
Generally, there is no statutorily-prescribed procedure if the employment is terminated by notice or salary in lieu of notice. It is common for employment agreements to prescribe a termination notice period, and how notice may be given to the employee. In this regard, the employer should ensure that the employee is terminated and given notice (or salary in lieu of notice) in accordance with the employment agreement. Please see our response to question 4 for more details on notice periods.
We also set out some additional considerations:
First, this is subject to any collective agreement, which might require the trade union to be notified/consulted.
Where the termination is a retrenchment, additional requirements may apply. See our response to question 2.
If an employee covered under the EA has committed an act of misconduct, the employer must conduct an inquiry before deciding whether to dismiss an employee.
If the employee is a foreigner holding a work pass, then the employer should cancel his/her work pass and seek tax clearance from the Inland Revenue Authority of Singapore.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
If the employer does not comply with the EA and the employment agreement, the employee may challenge the termination by filing a complaint or claim with the Ministry of Manpower or bringing a civil action before the courts for wrongful dismissal. The normal measure of damages that the employee may recover against the employer for wrongful termination is the amount the employee would have earned during the notice period, less the amount he could reasonably be expected to earn in other employment. Depending on the circumstances of the termination, there may also be reputational consequences on the employer.
How, if at all, are collective agreements relevant to the termination of employment?
Collective agreements are governed by the Industrial Relations Act (Cap. 136). The Act sets out processes for recognising a trade union, and for the employer and recognised trade union to negotiate and adopt a collective agreement.
If the collective agreement was adopted in accordance with the Industrial Relations Act, any termination of a unionised employee’s services must comply with the collective agreement. In particular, collective agreements typically provide for termination and retrenchment benefits and procedures, and may require the trade union to be notified and/or consulted in advance.
Should a trade dispute arise in relation to termination or retrenchment benefits and procedures under a collective agreement, this may be resolved by conciliation by MOM. If the dispute cannot be resolved after conciliation and a deadlock has occurred in negotiations, the trade dispute may be referred to the Industrial Arbitration Court for arbitration. Tripartite mediation of trade disputes involving executive employees may also be available.
Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
There is generally no requirement to obtain the permission of or to inform a third party before being able to validly terminate the employment relationship, unless the termination of the employment relationship is due to retrenchment, or a collective agreement requires the employer to notify and/or consult the trade union in advance. For more details concerning the termination of employment in retrenchment situations, please see our response to question 2.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
The Tripartite Retrenchment Guidelines state that when retrenching, employers should not discriminate against any particular group on the grounds of age, race, gender, religion, marital status and family responsibility, or disability. Although these Guidelines are non-binding, MOM will investigate complaints of discriminatory employment practices, including retrenchments that unfairly target Singaporeans, or which result in Singaporeans being replaced with foreigners. If the complaints are substantiated, the employers may have their work pass privileges curtailed.
The following specific prohibitions against discrimination of certain classes of individuals also apply:
- The Retirement and Re-Employment Act (Cap. 274A) prohibits employers from dismissing any employee below the age of 62 (or the prescribed minimum retirement age) on the ground of age. Employees who feel that they have been unfairly dismissed can write to the Minister of Manpower within 1 month of dismissal. Employers found to have breached this prohibition are guilty of an offence and will be liable on conviction to a fine not exceeding S$5,000 or to imprisonment for a term not exceeding 6 months or to both.
- Employers cannot terminate the services of female employees who are absent due to their maternity leave benefits under the EA or the Child Development Co-Savings Act (Cap. 38A). Such female employees who have served their employer for 3 months or more also cannot be dismissed without sufficient cause or on the ground of redundancy or restructuring where doing so would deprive them of any payment that (but for the termination notice) they would have been entitled to receive as part of their maternity benefits on or before their confinement date.
Breaches of these prohibitions would result in the employer being guilty of an offence and liable on conviction to a fine not exceeding S$5,000 or to imprisonment for a term not exceeding 6 months or to both.
In addition, the following general protections against discrimination and harassment may apply to the employment context:
- The non-binding Fair Consideration Framework and Tripartite Guidelines on Fair Employment Practices contain recommendations intended to prevent discrimination at the workplace.
- The Singapore courts have recognised that the implied duty of mutual trust and confidence between employer and employee may require the employer to redress complaints of discrimination.
- Employers are required under the Workplace Safety and Health Act (Cap. 354A) to take reasonably practicable measures to ensure workplace safety and health. Breaches of this duty may potentially attract criminal liability as well. In this regard, the Tripartite Advisory on Managing Workplace Harassment issued by TAFEP considers that “harassment and other psychosocial risks should be included in the overall workplace safety and health (WSH) risk management of the organisation”.
- While not specific to the employment context, any employee suffering from harassment has recourse to the remedies provided under the Protection from Harassment Act (Cap. 256A).
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
In addition to the consequences stated above, an employer may be subject to a TAFEP investigation if a complaint is lodged against them. Depending on the outcome of the investigation and the employer’s responses, the matter may be referred to MOM for investigation and action.
Employees may also bring civil claims in the courts against the employer for wrongful dismissal if it can be shown that such discrimination or harassment constitutes a breach of the implied term of mutual trust and confidence. Depending on the court’s findings, the employer may be liable to compensate the employee in damages or reinstate the employee. Reputational consequences may also arise.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Please see our response to question 11.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
There are no special protections against termination of employment in respect of whistleblowers. However, such whistleblowers may bring civil claims in the courts against their employer for wrongful dismissal if it can be shown that their termination constitutes a breach of the implied term of mutual trust and confidence.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
Save for salary in lieu of notice which is discussed above and any amounts that have vested in the employee prior to the termination of the employment relationship, there is no specific financial compensation required under law to terminate the employment relationship. The financial compensation payable would depend on the terms of the employment agreement and prevailing norms.
Where an employee’s service is terminated due to redundancy or reorganisation, the Tripartite Retrenchment Guidelines state that:
“The prevailing norm is to pay a retrenchment benefit varying between 2 weeks to 1 month salary per year of service, depending on the financial position of the company and taking into consideration the industry norm. However, in unionised companies where the quantum of retrenchment benefit is stipulated in the collective agreement, the norm is one month’s salary for each year of service.”
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
Yes, an employer may do so. Employers may in some cases pay an additional sum as an ex gratia payment in exchange for the employee entering into a termination agreement (usually incorporating waivers of rights and liabilities) with the employer.
As regards the limitations that apply, the agreement should not contain terms that breach any laws. This includes the following prohibitions:
- the EA prohibits employers and female employees from contracting out of any right to maternity benefits to the extent that doing so deprives the female employee of that right or removes/reduces the liability of the employer to make the required payments pursuant to such benefits; and
- the Retirement and Re-Employment Act prohibits employers and employees from (a) contracting to exclude or limit the operation of the Act or (b) contracting to preclude any person from making a representation, claim or application under the Act.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Yes, it is possible. However, any restrictive covenant imposed by the employer that acts as a restraint of trade is unlawful and unenforceable unless the employer is able to show that:
- there is a legitimate interest to be protected by the restrictive covenant; and
- the restrictive covenant is reasonable in the interests of the parties and the public.
The restrictive covenant should not be wider than necessary to protect the legitimate interest of the employer.
In determining its enforceability, the courts would consider all the circumstances of the case, including but not limited to the nature of the interests sought to be protected, period of restraint, the geographical restriction, as well as the seniority of the employee in question. The burden of proof is on the employer who is seeking to rely on such restrictive covenants to establish that the restrictive covenants are reasonable.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Yes. The common law protects confidential information. Employers also frequently require their employees to expressly agree to protect their confidential information under the employment agreement.
Are employers obliged to provide references to new employers if these are requested?
It is not a legal requirement that employers provide references to new employers if requested. However, it is customary to do so and courts have recognised that where employers prepare such references, they should do so in a fair and accurate manner.
What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?
Employers often face difficulties in terminations where their termination clauses are absent or insufficiently specific. To mitigate these issues, employers should as a matter of priority review their employment agreements to confirm that these agreements contain termination clauses consistent with their commercial intentions. If amendments need to be made to the employment agreements of existing employees, these can be done via a supplemental agreement or the employment handbook. The risk of challenge by the employee is also higher where the employer chooses to terminate for cause.
Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
The Employment Claims Tribunals (“ECT”) and Tripartite Alliance for Dispute Management (“TADM”) will start functioning in April 2017. These avenues will give employees (including those not under the EA) and employers an alternative expeditious and relatively low-cost method of resolving salary-related disputes, including claims for salary in lieu of notice. Parties having their claims heard by the ECT are not allowed to be legally represented. It is anticipated that these new initiatives will improve accessibility to dispute resolution for both employers and employees.
The ECT may raise the likelihood of challenge by employees, particularly employees who would previously have been deterred by the costs of commencing action in the courts.
Employers should carefully review their employment documents and termination processes to ensure compliance with Singapore laws.