Singapore Employment Act

The Employment Act of 1968 is Singapore’s primary labor legislation which governs the relations between the employer and the employees in an organization. The main purpose of the Act is to maintain good employment standards and safeguard working conditions for employees. The Act extends to the entire employment process, starting from the appointment up to an employee’s dismissal or termination.

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Labour laws in Singapore are fair, efficient, and business-friendly. According to The Global Competitiveness Report 2015 – 2016, Singapore ranks #3 in the world for best labour-employer relations. Employment related regulations are an important area of legal compliance requirements that Singapore companies must follow. All businesses, in their capacity as an employer, need to comply with the employment laws when hiring, managing, and terminating employees.

It is important for an employer to decide the terms and conditions of an employment contract in accordance with the provisions of the employment law. This article will explain the key provisions of the Employment Act that an entrepreneur who is setting up a company in Singapore should be aware of.

Applicability of the Act

The Employment Act in Singapore is applicable to all employees irrespective of their nationality. This implies that the Act covers local as well as foreign employees.

The Act is applicable to all employees who the employer appoints by means of an employment contract stating the terms and conditions of employment. The employees covered under the Act include full-time, part-time and temporary employees.

The provisions of the Employment Act are not applicable to an independent contractor who the employer appoints on the basis of a fee to complete a specific assignment for the company. An independent contractor carries out services on his or her own terms. Any contract entered by the employer with the independent contractor forms a client-contractor relationship that is not covered under the scope of this Act.

Furthermore, the Act does not cover the following:

  1. Seamen
  2. Domestic Workers
  3. A person employed in a managerial or executive capacity with a monthly salary exceeding $4,500 and
  4. A person employed by the Statutory Board or Government.

Employees not covered by this Act have to decide the terms and conditions of the employment on a mutual basis with their employer. The provisions of this Act are not applicable to them.

Employment Contract

The Employment Act has a direct effect on the employment contract and the way it is drafted. The Act specifically states that any terms and conditions of the employment contract that are less favorable to the employees in comparison to the relevant provisions of the Act are illegal, and have no legal binding on the parties. Thus, the terms of the employment contract must be in accordance with the legal provisions of the Employment Act. A professional corporate services firm can assist you with drafting a model employment contract that is designed to be in compliance with the Employment Act terms.

The employment contract is an important legal document of a company as it defines the relationship between the employer and the employee. The general principles of contract law in Singapore are applicable to this contract. Like all contracts entered into by parties in Singapore, the employment contract is enforceable by law. Typically, the contract defines details such as employee’s scope of work, salary details, overtime payment, rest days, leaves etc.

From April 1, 2016 employers are required to issue the Key Employment Terms (KET) to employees in writing. This is applicable only to employees employed on or after April 1, 2016.

Key Provisions of the Act

The Employment Act guarantees certain benefits to employees. These benefits include annual paid leaves, sick leaves, maternity benefits, paid public holidays etc. Employers must ensure that they fulfil all such requirements in the Act and also draft the terms of the contract accordingly.

Specifically, employers must be compliant with the following provisions of the Act:

MINIMUM AGE

An employee must be at least 13 years of age to be eligible for employment. However, the age limit differs depending on the employee’s type of work. For instance, an employer cannot engage persons below the age of 16 years in any workplace with hazardous conditions that can be detrimental to the health of the person.

MINIMUM WAGE

With respect to wages, the Act does not prescribe any minimum wage for employees. The wages are applicable according to the agreed terms between the employer and the employee.

HOURS OF WORK

The normal working hours of an employee are 8 hours a day up to a maximum of 44 hours a week. Additionally, no employee should work consecutively for 6 hours a day without any break. An employer must confirm the hours of work in the employment contract.

The work hours do not include break-time for any meals, tea-time or rest.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

REST DAYS

Every employee is entitled to one rest day each week without pay. The rest day must either be Sunday or any other day of the week. If the employer cannot give an entire day for rest to a shift worker the rest day has to be a continuous period of 30 hours.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

PUBLIC HOLIDAYS

Employees are entitled to a total of 11 paid public holidays annually. If specified in the agreement, the employer can substitute the public holiday for another day. If the public holiday falls on any of the rest days, the next working day is considered a paid holiday. However, if the employee works on that day the employer must pay the employee full day’s pay.

ANNUAL LEAVE

An employee is entitled to a paid annual leave if he or she has been working for the employer for at least 3 months. The number of days of annual leaves depend on the years of service completed by the employee in the organization. For instance for 1 year of service, an employee is entitled to 7 days annual paid leaves. For 2 years of service, an employee is entitled to 8 days annual paid leaves. For 8 or more years of service, the employee is entitled to 14 days annual paid leaves. This does not mean that the employer cannot grant any additional leaves to an employee. An employee can avail leaves over and above the statutory limit. However, the employer can deduct the employee’s salary for these leave days.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

SICK LEAVE

An employee is entitled to paid sick leave. However, the employee must fulfil the following conditions:

  1. The employee must have been working for the employer for at least 3 months,
  2. The employee must inform his employer of his absence within a timeline of 48 hours, and
  3. The employee must submit a certificate by a company’s doctor or a government doctor.

Like annual leaves, the number of sick leaves an employee is entitled to depend on the years of service completed.

MATERNITY & PARENTAL BENEFITS

Under the Act, a working mother can claim paid maternity leaves and working parents can claim paid child care leaves on fulfilment of certain conditions. To claim such leave, an employee must have completed at least 3 months in service. Additionally, the child for whom the employer provides such benefits must be a Singapore Citizen. These are just a few of the conditions that an employee needs to fulfill.

OVERTIME

The number of hours worked by an employee in a day or a week in excess of the contractual work hours is considered overtime work. The Act states that:

  1. An employer cannot make an employee work for more than 12 hours a day.
  2. The total overtime work in a month cannot exceed 72 hours.
  3. Employers who require their employees to work in excess of the maximum daily hours will have to send an application to the Ministry of Manpower for overtime exemption.

The employer must pay the salary for overtime work within 14 days from the end of the salary period during which the employee performed the work.

The rate for overtime work should not be less than 1.5 times the basic hourly rate of the employee.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

RETIREMENT

According to the Retirement and Re-employment Act, the minimum age for retirement is 62 years. An employer cannot ask any of its employees to retire before that age. Additionally, employees who reach the retirement age can be re-employed up to the age of 65. However, only Singapore citizens and permanent residents are eligible for re-employment.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

RETRENCHMENT

Retrenchment means the involuntary or forced layoff of an employee. The Act states that an employee is entitled to retrenchment benefits only if the employee has been in continuous service with the employer for a period of minimum 2 years. The Act, however, does not specify any concrete retrenchment benefits. The employer and the employee can mutually agree on these benefits at the time of signing the contract.

Note
This provision is applicable only to employees who earn a monthly salary not exceeding $2,500.

TERMINATION

The employment contract must state the way in which either party can terminate the contract. A contract is terminated either by the employer or the employee. If there is no clause in the contract explaining the termination process, the termination provisions of the employment act are applicable.

The contract can be terminated either:

  1. With Notice
  2. Without Notice or
  3. On grounds of misconduct

The parties can terminate the contract on the basis of a written notice. However, both the employer and employee must follow the notice period in the contract. In case the contract does not specify any notice period the notice period of the Act is to be followed. Where either of the parties commits a material breach of any of the contractual terms, the contract can be terminated without any written notice.

Lastly, if any employee is guilty of misconduct (such as theft, dishonesty, or negligence) an inquiry should be held on the matter, pursuant to which the employee can be dismissed. The Act does not prescribe any procedure for an inquiry. However, as a general guideline, the employer must:

  1. Inform the employee of the misconduct,
  2. Ensure that the person hearing the inquiry must not be in a position of bias, and
  3. Give the employee an opportunity to present his case.

The Act states that during the inquiry procedure, the employer can suspend the employee from work for a maximum period of one week. In case the employee feels that he or she has been unfairly dismissed, the employee can appeal to the Ministry of Manpower within one month of the dismissal.

Penalties

Failure to comply with the provisions of the Employment Act attracts a fine of $5,000 or imprisonment of 6 months or both for each violation. In the case of a subsequent offense, the fine is up to $10,000 or imprisonment up to a year or both.

Conclusion

Singapore has long been recognised as one of the best cities for business thanks in part to its non-bureaucratic, business-friendly labour laws. Entrepreneurs appreciate the high degree of transparency and reliability in business, economic and regulatory affairs in Singapore. A stable political structure with parliamentary democracy, a well-established judicial system, and the presence of strong domestic institutions with good corporate governance practices, have made the Singapore business environment very attractive to global investors.

FAQs

The 11 gazetted public holidays for which employers grant paid leaves are:

  1. New Year’s Day
  2. Chinese New Year (2 days)
  3. Hari Raya Puasa
  4. Hari Raya Haji
  5. Good Friday
  6. Labour Day
  7. Vesak Day
  8. National Day
  9. Deepavali
  10. Christmas
An employer can change the terms and conditions in the employment contract only if mutually agreed by both the employer and employee.
You can access the full Employment Act here. The Employment Act in Singapore was amended on April 1, 2014 and April 1, 2016. You can access the amendments to the Act here.

TABLE OF CONTENTS

  1. Applicability of the Act
  2. Employment Contract
  3. Key Provisions of the Act
  4. Penalties
  5. Conclusion
  6. FAQs

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