Understanding Employment Act in Singapore.

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Understanding Employment Act in Singapore

One of the many legal requirements that companies in Singapore must comply with is employment-related laws. As a business owner and employer, you have obligations when hiring, supervising, or terminating employees. So how do you know if the actions you are about to take or the provisions in the hiring contract are in accordance with the Singapore Employment Act?

This article will provide you with a general guideline to the key provisions of the Ministry of Manpower’s (MOM) Employment Act and what you need to be aware of when it comes to contracts, wages, and benefits.

Applicability of the Singapore Employment Act

In the Employment Act, the term “employees” does not necessarily include all types of employees. Nonetheless, it covers both local and foreign workers that work full-time, part-time, or temporarily. The act also covers employees regardless of how they are paid — monthly, daily, hourly, or based on piece rates.

However, the Employment Act does not apply to:

  • Civil servants employed in Accounting and Corporate Regulatory Authority (ACRA), Monetary Authority of Singapore (MAS), and other statutory boards
  • Domestic workers
  • Seafarers
  • Manager and executives who carry out supervisory or decision-making functions
  • Professionals with tertiary education and specialised skills such as lawyers, accountants, doctors, and others
  • Independent contractors who carry out services on his/her terms

The terms and conditions of employment for employees not covered by the Employment Act will be based on a mutual contract between the employee and employer.

Also, take note that part-time employees who work less than 35 hours per week are covered by the Employment (Part-Time Employees) Regulations.

Importance of the law

Having labour laws in place serves as an underpin on which Singapore’s economic system is built and ensures its smooth manpower machinery. Well-defined labour laws eliminate unfair employment practices, ensure income equality, and keeps the economy moving with the absence of labour strikes.

As a business owner, you must follow best practices to avoid penalties such as a $5,000 fine, six months imprisonment, or both. For subsequent offenses, the fine increases to $10,000, one-year imprisonment, or both.

Employment contract

An employment contract (also known as an employment agreement, appointment letter, or appointment offer) is a crucial legal document that can be enforced by law. It specifies the terms and conditions of the relationship between the employer and the employee and includes important clauses on:

  • Employee’s scope of work
  • Duration of employment
  • Date of employment commencement
  • Probation clause if there is any
  • Remuneration package
  • Hours of work and overtime pay
  • Employee benefits
  • Code of conduct
  • Termination

It is important to take note that the terms and conditions of the employment contract should not be less favourable than the legal provisions in the Employment Act. Otherwise, the contract ceases to have legal binding between both parties. Additionally, employers are also required by law to issue a Key Employment Terms (KET) in writing to employees.

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Key provisions of the Employment Act

The provisions of the employment act are divided into two: core provisions and Part IV provisions. The core provisions apply to all employees and cover basic regulations such as:

  • Salary
  • Paid leave: annual leave, sick leave, and public holidays
  • Employment records
  • Employment termination

Meanwhile, Part IV provisions only apply to a specific set of employees who have lower levels of protection such as manual labour workers who earn less than SGD 4,500 per month and employees with a basic salary of less than SGD 2,600 per month. Part IV provisions cover regulations on normal working hours, overtime pay, and rest days.

Statutory requirements and common practices

Salary and wages

The statutory requirement for salaries and wages is that they should be paid within 7 days after the end of the salary period. If an employee is entitled to overtime pay, it should be within 14 days of the stipulated salary period. However, there is no requirement for bonus payment nor minimum salary in the Employment Act of Singapore.

The common practice for salaries is that it is based on an employee’s position and skills and subject to negotiation between employer and employee. The majority of companies in Singapore also provide an annual bonus — the 13th-month pay — which can vary according to an employee’s and the company’s performance.

Work hours and overtime

The statutory requirement for work hours and overtime are as follows:

  • Employees are entitled to work not more than 44 hours per week or not more than eight hours per day.
  • Employees cannot work for more than six hours straight without a break.
  • Employees cannot work more than 12 hours per day — inclusive of overtime — except for specific circumstances such as actual or threatened accident, national defence or security, or any unforeseeable circumstances that resulted in interrupted work.
  • Shift employees cannot work more than 12 hours per day under any circumstances.
  • Employees are entitled to a non-working, unpaid rest day per week
  • There should be no more than 12 days interval between two rest days.

The common practice is that the above conditions of the Employment Act do not apply to employees earning more than SGD 2,600 per month and should be freely determined between employee and employers. Generally, the normal working hours in Singapore are from 9 AM to 6-7 PM, from Monday to Friday. Most employees work nine to ten hours on weekdays and half-day during Saturdays.

Public holidays

For employees earning less than SGD 2,600 per month, the statutory requirements for Singapore public holidays are as follows:

  • Employee is entitled to paid holidays during public holidays, whereas specific dates may be substituted to another day if mutually agreed by employer and employee.
  • Public holidays that fall on a Sunday or any rest day will be compensated on the following Monday which will be considered a paid public holiday.
  • If a public holiday falls on a day that is contractually a non-working day, the employee should be compensated with an additional day’s pay or additional day off.

A common practice among Singapore companies is that all employees are given the same public holiday benefits regardless of salary rate.

Annual leave

The statutory requirements for annual leave for employees with salaries less than SGD 2,600 per month are as follows:

  • The employee must have already worked for a minimum of three months with the employer to qualify for annual leave.
  • Although the amount of annual leave is dependent on the employment agreement, it must meet the minimum of seven days during the first year of service and an additional one day for succeeding years.
  • A half-day annual leave is considered a full-day leave unless otherwise stated in the employment contract.
  • An employee’s annual leave may be forfeited in the following cases (unless otherwise stated in the employment contract):
    • Dismissal for misconduct
    • Absenteeism without permission for more than 20% of working days of the month
    • Not using the annual leave within 12 months of every year

A common practice in Singapore companies is to provide an annual leave of around 14 days per year.

Sick leave

The statutory requirement and common practice for sick leave and hospitalisation leave in Singapore are as follows:

Minimum number of months in servicePaid sick leavePaid hospitalisation leave (including sick leave)
35 days15 days
48 days30 days
511 days45 days
6 and more14 days60 days

Upon return to work, the employee is also required to present a medical certificate from an appointed company doctor or any doctor from an approved hospital.

Health insurance

There is no statutory requirement in the MOM employment act as to private health insurance provision. Singapore citizens or Permanent Residents (PRs) are automatic recipients of MediShield — a low-cost basic insurance coverage. A portion of Central Provident Fund (CPF) members’ contributions is automatically put towards their MediSave accounts, allowing employees to meet the cost of their and their dependents’ medical treatments.

A common practice among Singapore companies is that providing additional private medical insurance is at the discretion of the employer. This is common among large enterprises but not so much with smaller companies. Also, bigger companies that employ foreign employees and who hold Employment Pass commonly offer private health insurance benefits as well.

Maternity and childcare leave

The statutory requirements and common practice apply to female employees who have been employed for more than three months. They are eligible for paid maternity leave benefits and the following:

  • Eligible female employees are entitled to a maximum of 16 weeks’ leave.
  • Employers are prohibited from dismissing female employees on maternity leave
  • If employers issue a notice of dismissal without sufficient cause within three months of the leave, employers are required to pay maternity leave in full.
  • Female employees who have rendered more than three months of service and are a parent to a child below seven years old are additionally entitled to six days of childcare leave per year.

Probation period

Although there are no clauses in the Singapore Employment Act on probation periods, the common practice is to ask employees to serve a probation period of three to six months.

Employment termination

There is no statutory requirement on the number of days for the notice period and it will be based on what was agreed upon in the contract which should be the same for employer and employee. Either party can terminate a contract by issuing a written notice or by paying salary instead of a notice. However, if there is a wilful breach of contract involved, the employment contract can be terminated by both parties without notice. Additionally, employees can use accrued annual leave to compensate for the notice period.

A common practice among Singapore companies is to require two weeks’ notice during probation and one month’s notice when officially employed. Also, Singapore courts do not find it practical for employees to give up their salary instead of notice, although the Employment Act has the same requirement for either party.

Retrenchment, layoffs, or downsizing

For employees earning less than SGD 2,600 per month, the statutory requirements are as follows:

  • Employer is required to pay salary and benefits to the employee on their last working day.
  • The notice period will be based on the employment contract.
  • Employee who has rendered service to the company for a minimum of three years are eligible to be paid retrenchment benefits. However, there is no clause on the nature or amount of said benefits in the Employment Act and should be agreed upon mutually by employer and employee.
  • Employee who has worked less than three years are not entitled to retrenchment benefits.

A common practice among Singapore companies is to base retrenchment benefits upon the size and financial status of the company.

Central Provident Fund (CPF) contributions

The statutory requirements and common practice for the mandatory retirement savings scheme are as follows:

  • CPF is required for Singapore citizens and PRs and both employer and employee are required to contribute every month
  • CPF is not required for foreign employees who hold an Employment Pass or Work Permit
  • The maximum CPF contribution rate for employers is at 17% and for employees is at 20%. The rate can be reduced according to age, PR status, and other factors.
  • Employers are required to submit the monthly payment for both employers and employees on the 14th of the next month
  • CPF contributions will be deducted from employees’ salaries

Non-statutory benefits & perks

Companies in Singapore also provide additional non-statutory benefits to employees at their discretion. Some of the most common ones are:

Personal wellbeing

Many companies in Singapore also provide private medical insurance that also covers an employee’s dependents.

Travel allowance

Some employees are paid a per diem amount for travel-related jobs.

Relocation package

Employees who must move with their families to Singapore are sometimes afforded an expat compensation package that includes shipping fees, airfare, housing, utility bills, and childcare and education fees for the children. These packages vary into full expat, semi-expat, or full local terms. If housing is not readily available, employees are also temporarily accommodated in hotels or service apartments paid for by the company.

Employee stock purchase plans (ESPP)

This is a benefit that is usually afforded to senior employees in some Singapore companies.

Other perks include corporate memberships, continuing education, vouchers for leisure activities, gym memberships, telecom plans, company outings, hiring referrals, and many others.

Compliance strategy for employers

To ensure that your employment process and conditions are compliant with the Ministry of Manpower’s Employment Act, there are a few systems you can implement.

Hire a local HR Manager

A Singapore-based Human Resource (HR) manager who has a good command of the local rules and legal compliance can oversee the development of employee wages and benefits, recruitment, training, and performance reviews. They can also manage organisational changes to maintain compliance whenever there are amendments to the law.

Review contracts and templates

One of the many best practices when hiring is to draft standard contracts, offer letters, or employment contracts to protect both employer and employee. It is also recommended to review contracts regularly to ensure that the terms and conditions remain compliant.

Outsource hiring to a trusted firm

Take the entire burden of hiring and ensuring compliance off your shoulder and outsource these tasks to a reliable firm. You can free your staff from drafting labour documents and regular employment compliance audits. Get peace of mind knowing that your employment process is in accordance with Singapore’s Employment Act.

Final words

The Employment Act in Singapore has several provisions that your companies need to comply with when hiring, managing, or terminating employees. To ensure full compliance and avoid penalties, you can partner with a corporate services firm to outsource all aspects of employment. Partnering with Acclime lets you focus on your business while our HR experts take care of ensuring best practices are followed when hiring employees in Singapore.

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