Guide To The Singapore Employment Act
The Singapore Employment Act outlines a number of statutory requirements that must be met by employers in relation to their employees. This guide outlines these statutory requirements as well as common practices relating to wages, benefits and employment contracts. Blue collar workers and industries involving manual labour are not covered by this guide.
Companies with an effective employee benefits and compensation plan tend to attract the most high-quality and talented applicants. A comprehensive benefits plan helps to recognise and reward your best employees, and successful strategies raise productivity, decrease turnover and positively impact your business’ overall productivity. Small and medium-sized enterprises (SMEs) can often struggle to match the extent of benefits of other companies, and should instead focus on creating a package that meets the needs of their staff and is competitive with what is offered by other SMEs.
Who does the Act apply to?
The contract of employment is the single largest determiner of the nature of the relationship between the employee and the employer. Subject to complying with the statutory requirements of the Employment Act and with other certain limits, parties are free to contract as they see fit. It is important to note that the Singapore Employment Act does not uniformly apply to all employees, and instead only applies to those “employees” as explicitly defined by the Act. Specifically, the Employment Act does not apply to:
- Domestic workers
- Managerial and executive positions defined as a position in which a person has direct influence over the recruitment, termination, promotion, transfer, reward or discipline of other employees; or their main duties include the overall running and management of the business. It is also applicable to tertiary-educated professionals possessing specialised skills or knowledge carrying out the same or similar responsibilities as executives or managers. Examples include dentists, doctors, accountants and lawyers.
- Most of the government staff
Furthermore, Part IV of the Employment Act provides additional protection for employees earning a wage below SGD 2,000 per month. This specifically concerns “Rest Day, Hours of Work and Overtime, Public Holidays, Annual Leave, Sick Leave, Retrenchment Benefits, Retirement Benefits, Annual Wage Supplement and other variable payment”.
The content and application of an employment contract
Also referred to as an offer letter, appointment letter, employment agreement and other names, an employment contract is the agreement between the employer and the employee that details the terms and conditions of the latter’s employment. Both parties are advised to put this agreement into writing. Some employees – typically only senior management figures – while have the option of negotiating their employment contracts. A breach of any of the terms or articles of the employment contract by either party constitutes breach of contract, which may have civil or criminal repercussions depending on the specific nature of the breach. Most employment contracts will cover the following clauses:
- Nature of appointment position
- Duration of the employment contract, where applicable
- Data of commencement of employment
- Remuneration package
- Hours of work
- Employee benefits
- Probation clause, if applicable
- Code of conduct
In accordance with legislation the terms and conditions of the employment contact cannot be less favourable to the employee than what is stipulated in the Employment Act.
Statutory requirements and common practices of employee salary and benefits
Often referred to as fringe benefits or perks, employee benefits are various types of compensation offered to employees on top of their standard salaries. These can include maternity leave, sick leave, annual leave, performance incentives and other bonuses, relocation assistance, retirement fund contributions, healthcare benefits, housing allowance, children’s education allowance, childcare benefits, reimbursements for transportation costs, et cetera.
Salary and bonus
Statutory requirements: No minimum salary to be paid to every employee is regulated by the Employment Act. In other words – with minor exceptions for specific occupations – Singapore has no minimum salary requirement and all salaries are to be negotiated between employee and employer. However, legislation requires that all salary be paid once a month within seven days of the end of the salaried period, and overtime pay – where applicable – be paid within 14 days of the salaried period. Bonus payments are not required under the Employment Act.
Common practice: The positon and skills held by the employee will be the most influential determiner of the salary paid to them. An annual bonus equivalent to a minimum of at least one month’s salary – also referred to as 13th month payment – is now a common practice in Singapore. The exact value of the bonus will vary from employee to employee as defined by company policies, and will usually tied to the performance of both the employee and the company. The details of the company’s own bonus policy will as standard be defined in the employment contract. During periods of strong economic growth, it is not unusual to see employees receive bonus of two to three times their monthly salary.
Overtime and hours of work
Statutory requirements: The Employment Act only regulates hours of work and overtime for employees on salaries below SGD 2,000 per month. Employees meeting this criterion are statutorily required to work no more than 44 hours per week. The Singapore Ministry of Manpower has strict laws in place regarding hours of work and conditions of overtime. Employees are entitled to work no more than 44 hours per week, or 8 hours per day, and they cannot be made to work for longer than six hours without a break. Including overtime work, employees may not work more than 12 hours per day, except under certain specific circumstances. These include, but are not limited to, an accident or a threat thereof, doing work that is essential to the nation’s defence or security, or unforeseeable circumstances that leads to an interruption of work. This said, shift workers are forbidden by law from working more than 12 hours per day under any circumstances. Employees are entitled to one rest day per week (defined as a non-working day that runs from midnight to midnight). This is not to be considered a paid day. The longest allowable interval between any two rest days is 12 days.
Common practice: Individuals earning above SGD 2,000 per month are not covered by the above provisions and their hours of work are determined by the private arrangement between the employer and the employee. Office employees in Singapore work from Monday to Friday from 9am to 6pm or 7pm as a general rule and depending on their specific industry and company policies. However, it is not uncommon for many office workers to put in 9 to 10 hours of work per weekday and to work a half-day on Saturdays.
Singapore’s multicultural society means that public holidays cover the holy days, celebrations and special days of many different religions, ethnicities and cultures. These include New Year’s Day, Chinese New Year, National Day, Deepavali, Christmas Day, Hari Raya Haji, Good Friday, Labour Day, Vesak Day, Hari Raya Puasa and more.
Statutory requirements: Employees earning a salary less than SGD 2,000 per month are subject to certain rules mandated by the Employment Act. Under the Employment Act, the employee is entitled to a paid holiday on public holidays, although the specific dates outlined above may be substituted for any other day by mutual agreement between employer and employee. Where a public holiday falls on a Sunday or the employee’s rest day, the following Monday is to be considered the paid holiday. Furthermore, the employee is to be compensated with an extra day’s pay or an extra day off as substitute where the holiday falls on a day the employee is not contractually obligated to work.
Common practice: Employees earning above SGD 2,000 are not bound by any rules pertaining to public holidays in the Employment Act. That said, all employees are usually given the same public holiday benefits as above as common practice, regardless of income.
Statutory requirements: Employees earning less than SGD 2,000 a month are bound by statutory annual leave requirements provided by the Employment Act. Employees are required to have served three months with the employer to qualify for annual leave, and the amount of leave granted is dependent on the contractual arrangement between the employee and the employer. However, a minimum of seven days of annual leave in the first year, plus one additional day in each additional year of service is required. Annual leave taken on a half working day is still considered to be one day’s leave unless explicitly stated in the employment contract. The employee’s annual leave can be forfeited under a number of circumstances unless otherwise explicitly stated in the employment contract. These circumstances are: dismissal for misconduct, absenteeism from work without the employer’s permission for more than 20 per cent of the working days in a month, or if the leave has not been used within 12 months of every year of continuous service.
Common practice: All employees are given annual leave of about 14 days per year as common practice, above the minimum required by the Employment Act.
Statutory requirements: Employees on a salary less than SGD 2,000 per month have their sick leaves requirements specified in the Employment Act. They are as follows.
- Where the employee has worked for the company for a minimum of six months: The employee is entitled to 14 days of sick leave per year, and 60 days of hospitalisation leave (inclusive of the 14 days of sick leave).
- If the employee has worked for the company for between five and six months: The employee is entitled to 11 days of sick leave per year, and 45 days of hospitalization leave (inclusive of the 11 days of sick leave).
- If the employee has worked for the company for between four and five months: The employee is entitled to 8 days of sick leave per year, and 30 days of hospitalization leave (inclusive of the 8 days of sick leave).
- If the employee has worked for the company for between three and four months: The employee is entitled to 5 days of sick leave per year, and 15 days of hospitalization leave (inclusive of the 5 days of sick leave).
A medical certificate from the company doctor (where the employer retains a company doctor), government doctor, or doctor from an approved hospital must be produced by the employee to claim sick leave.
Common practice: The sick leave benefits provided to all company employees in Singapore regardless of salary generally correspond to the minimum requirements provided by the Employment Act.
Statutory requirements: The Employment Act does not make a statutory requirement that employers provide private health insurance benefits to employers. Working professionals who are Singapore Citizens or Permanent Residents are automatically provided with Medishield – a low-cost medical insurance providing a basic tier of insurance protection for all Singaporeans. A certain portion of all of the Central Provident Fund contributions made is automatically allocated to the employer’s Medisave account. The Medishield Insurance scheme assists Medisave account holders and any dependants in meeting the cost of treatments that arise because of old-age or serious illness. Medishield premiums are deducted from Medisave accounts.
Common practice: The provision and nature of any healthcare insurance benefits is entirely at the discretion of the employer. Most large companies in Singapore offer additional private medical insurance benefits to their employees, while many small and medium-sized enterprises (SMEs) do not offer any such benefits. Employers may wish to offer private healthcare insurance benefits through any of the numerous private insurance companies operating in Singapore. This allows citizens and permanent residents to access a better level of care than would otherwise be offered through the public system, and allows foreign employees working on an Employment Pass to access any form of medical insurance.
Childcare and maternity leave
Statutory requirements: To simplify the contents of the Employment Act, women who have been employed in a business for a period greater than three months may be eligible to receive paid maternity leave benefits. Qualifying female employees may access as much as 16 weeks of maternity leave. Dismissal of any employee on maternity leave is prohibited, and employers shall be required to pay maternity leave in full should a notice of dismissal be given without sufficient cause within three months of the employee’s taking leave. In addition, eligible employees are entitled to six days of childcare leave per year, should they have worked for their employer for longer than three months, and they are the guardian of a child below the age of seven.
Common practice: Company employees generally enjoy the same maternity and childcare benefits as outlined in the minimum requirements of the Employment Act as above.
Statutory requirements: There are no clauses relating to or impacting on an employer’s ability to require a probationary period for employees in the Employment Act.
Common practice: Employees are generally asked to serve a probation period of between three and six months as common practice. A shorter termination notice period is usually a component of a probation period.
Termination of employment
Statutory requirements: The employment contract can be terminated by either party pending the giving of written notice or the paying of salary in lieu of notice to the other party. No statutory requirement is made on the length of the notice period, and the number of days for the notice period will be stipulated in the employment contract, and must be the same for both parties. The employee may use accrued annual leave to offset the notice period, bringing forward your last day of work and allowing you to start at a new position sooner. In the event of wilful breach of contract, the employment contract may be terminated without notice by either party.
Common practice: Providing a two week notice period (10 working days) during a probationary period and a one month notice period (20 working days) following the confirmation of employment is common practice in Singapore. While the Employment Act does stipulate that both sides are permitted to give salary in lieu of notice, the practical difficulties associated with the employee giving their salary in lieu of notice has meant that the courts have forbidden the employee from taking this course of action.
Downsizing, layoffs and retrenchment
Retrenchment is a process used by companies to become more financially solvent by reducing expenditures or outgoing money. The implementation of this strategy may have positive or negative consequences, and this has implications both for the employees who have stayed with the company and those who were retrenched. The retrenchment process can be implemented in a number of ways, including freezes on hiring or reduction of salaries or benefits, the most common method used is reducing the total size of the workforce through layoffs.
Statutory requirements: The following general rules are provided by the Singapore Employment Act for employees on salaries below SGD 2,000 per month:
- Employees are to receive all benefits and salaries due to them on their last day of work.
- The duration of notice shall be as stipulated in the employment contract.
- An employee with the company for a period longer than three years is to be compensated with some retrenchment benefits. The amount or nature of such benefits is not stipulated in the Employment Act, and is left to the mutual agreement of the employee and employer. An employee with the company for less than three years is not entitled to retrenchment benefits under the Act.
The Ministry of Manpower recommends that employers always carry out retrenchment strategies with the utmost care and responsibility. Retrenchment has negative implications for the workforce’s level of skill, morale, energy and commitment and has been shown to lead to degradation of mental and physical health, as a result of the emotional and physical withdrawal of employees and must be handled delicately.
Common practice: The retrenchment benefits provided by a Singapore company will largely depend on its size and the individual’s position in the company. This means that a small company may not be able to provide its employees with anything beyond the statutorily required minimum as described above. Stipulating the specifics of retrenchment in the employment contract is recommended to avoid confusion and potential conflicts.
Contributions to the Central Provident Fund (CPF)
CPF is a retirement savings scheme for individuals holding either Singaporean citizenship or permanent residency. Contributions to the individual’s funds are mandatory.
Statutory requirements: The employer is required to make contributions to the CPF account of each employee with Singaporean citizenship or permanent residency. Both employer and employee must make monthly contributions. The employer bears the responsibility of sending the monthly payment that includes both their contribution and that of the employee. This must be sent by the 14th of the following month, after which the employee’s portion is deducted from their salary. The maximum CPF contribution rate is 16 per cent for employer and 20 per cent for employees, and can be lowered based on factors such as the employee’s age and permanent residency status amongst others. Foreign employees on an Employment Pass or Work Permit are not required to make CPF contributions, nor are their employers.
Common practice: No variation in common practice is permitted that contrasts with the employee’s and the employer’s statutory requirements.
Training and education
Statutory requirements: Employers are not bound by statutory requirement to provide training or education benefits to their employees. The Ministry of Manpower encourages them to provide opportunities to train and develop their skills to improve their competency and enhance the possibility of career advancement. The Government of Singapore also provides a number of schemes helping to partially cover the cost to employers of training.
Common practice: No standard practice for training and skills upgrading exists. Skills upgrade benefits depend on the nature and size of the business and the nature of the employee’s role.
Non-statutory perks and benefits
Many companies in Singapore provide benefits not explicitly required by the Employment Act, helping to look after their workforce. Common non-statutory benefits include:
- Healthcare, wellbeing and personal benefits – Some larger companies offer medical insurance plans, often extending to dependants and covering personal accident and hospitalisation.
- Per diem – For jobs involving frequent travel, many companies provide a per-day allowance to help offset the costs of transport or personal expenses incurred while travelling. This amount will depend on where the employee travels.
- Relocation packages – Employees who move to Singapore with their families may be provided with an expatriate compensation package helping to cover the costs of relocation. This frequently includes: free or subsidised housing, paid air fare, paid shipping of personal property, payment of utility bills, paid childcare, coverage of school fees and others. Employees frequently come on ‘full expat’, ‘semi expat’ or ‘full local’ terms. It is common practice for employers to accommodate their employees in a hotel or serviced apartment until such time as the employee can find appropriate housing.
- Employee stock purchase plans – Often offered to senior employees, these plans help employees purchase stock in the business.
- Other additional perks – These can include paid corporate memberships, sponsored employee training and education, restaurant discount vouchers, mobile phone plans, gym or club memberships, organised sporting activities, team parties, staff referral programs, sabbaticals and more.