A Guide to Singapore Employment Act, Employment Contract and Employee Benefits

An effective compensation and employee benefit plan rewards and recognizes the best company employees. Successful employee benefits strategies raise productivity, increase employee retention, and have a positive impact on the bottom line. It is often difficult for small-to-mid-size companies (SMEs) in Singapore to match the benefits package of bigger companies. A small company should offer a benefits package that meets employee needs and is competitive with what other SME companies offer.

The purpose of this article is to provide a general introduction to the statutory requirements as per the Singapore Employment Act and common practices applied to employment contracts, wages, and benefits when hiring employees in Singapore. Furthermore, this article does not address specialized industries involving manual labour and blue collar workforce. The information in this guide is primary targeted for professional services industry.

Who Does Employment Act Apply To?

The relationship between employer and employee in Singapore is regulated largely by the contract of employment between them. Generally parties are free to contract as they choose subject to complying with the Employment Act and certain limits. The Singapore Employment Act does not apply to all employees. Instead, it applies only to "employees" as defined under the Act. Specifically, the Employment Act DOES NOT apply to:

• Managerial & Confidential Positions Such a position is defined as the one where a person has direct authority or influence in the hiring, firing, promotion, transfer, reward or discipline of other employees; or the main duties involve management and running of the business; or the employee has access to classified information relating to terms of employment of other employees, or financial positions, business operations/trade secrets of employer.
• Domestic Workers
• Seamen
• Most of the Government Staff

Furthermore, employees earning below S$1600/month are provided additional protection (concerning "Rest Day, Hours of Work and Overtime, Public Holidays, Annual Leave, Sick Leave, Retrenchment Benefits, Retirement Benefits, Annual Wage Supplement and other variable payment") under Part IV of the Employment Act.

Importance of Employment Contract

Employment Contract is also known as Employment Agreement, Appointment Letter, Offer Letter, etc. It's an agreement between an employee and employer that specifies the terms and conditions of employment. It's always a good idea to have a written employment contract in Singapore. Typically, only senior management employees might have the option of negotiating their employment contracts. A violation of one or more of the terms in an employment contract by either an employee or employer is considered breach of contract. An employment contract in Singapore between an employer and an employee shall include several important clauses including:

• Appointment position
• Duration of employment contract, if applicable
• Date of employment commencement
• Renumeration package
• Hours of work
• Employee benefits
• Probation clause, if applicable
• Code of conduct
• Termination

The agreed upon terms and conditions of employment contract can not be less favorable than as stipulated in the applicable parts of the Singapore Employment Act.

Wages, Bonuses & Benefits - Statutory & Common Practices

Employee benefits are also often called fringe benefits or perks. They are various types of compensations provided to employees in addition to their normal salaries. Employee benefits in Singapore might include sick leave, annual leave, maternity leave, incentives & bonuses, relocation assistance; healthcare benefits, retirement fund contributions, housing allowance, allowance for children's education, childcare benefits, transportation reimbursements, etc.

Salary & Bonus

Statutory Requirement: The Employment Act does not regulate the minimum salary every employee must be paid i.e. there is no minimum salary requirement. It's subject to negotiation and employment agreement between the employer and the employee. However, the salary must be paid at least once a month within 7 days after the end of the salary period. Overtime pay, if applicable, must be paid within 14 days of the stipulated salary period. There is no requirement of bonus payment under the Employment Act of Singapore.

Common Practice: The salary paid to an employee obviously depends on the position and skills required. Annual bonus equivalent to at least 1 months salary, commonly known as 13th month payment, has become a common practice in Singapore. The exact amount of annual bonus can vary from employee to employee as per the company policies and will normally be tied to the employee's performance as well as performance of the company. The details of the annual bonus policy will normally be specified in the employment contract. It's not uncommon to see employees in Singapore receiving annual bonuses of 2-3 times of salary during good economic times.

Hours of Work & Overtime

Statutory Requirement: Hours of Work & Overtime are regulated under the Singapore Employment Act for only those employees that are earning below S$1600/month. The employees that are covered under the Employment Act as above are entitled to work no more than 44 hours per week. Singapore’s Ministry of Manpower has strict and stringent laws regarding hours of work and conditions for working overtime. You, as an employee, are entitled to work not more than eight hours daily, or 44 hours weekly. The Employment Act also deems that you cannot work more than a 6 hour stretch without a break. Inclusive of overtime work, you cannot work more than 12 hours per day except in certain circumstances, including but not limited to an actual or threatened accident, work that is essential to national defence or security, or unforeseeable circumstances which leads to work being interrupted. Shift workers, on the other hand, are not allowed to work more than 12 hours daily under any circumstances. You are entitled to 1 rest day (deemed as a non-working day from midnight to midnight) per week, and is not considered a paid day. The longest possible interval between 2 rest days is 12 days.

Common Practice: For employees earning above S$1600/month, the above conditions of the Employment Act do no apply and is left to the agreement between the employee and the employer. As a general rule in Singapore, office employees work from Monday through Friday from 9.00am to either 5pm or 6pm, depending on the company policies. It is not uncommon for Singapore employees to work 9-10 hours during the weekdays and half-day on Saturdays.

Public Holidays

Considering Singapore’s multicultural diversity, public holidays are designed to accommodate many different ethnic communities and include New Year's Day, Chinese New Year, Good Friday, Labour Day, Vesak Day, National Day, Hari Raya Puasa, Deepavali, Hari Raya Haji, and Christmas Day.

Statutory Requirement: For employees earning less than S$1600/month, the following minimum rules are mandated under the Employment Act of Singapore. You are entitled to get public holidays off, although they may be substituted by any other day subject to mutual agreement between you and your employer. Should a public holiday fall on a Sunday, or rest day, the following Monday shall be considered a paid holiday. Additionally, if the public holiday falls on a day when you are not contractually required to work, you shall be either compensated with an extra day’s pay or given an extra day off as a substitute.

Common Practice: For employees earning above S$1600/month, the Employment Act does nor enforce any rules regarding public holidays. However, as a common practice in Singapore, all employees are given the same public holidays benefit as above.

Annual Leave

Statutory Requirement: In reference to annual leave, the following statutory compliance as per the Employment Act is applicable for employees earning less than S$1600/month: To qualify for annual leave, you must have served at least 3 months with your employer. The amount of annual leave you receive is dependent on contractual agreement between you and your employer, but is subject to a minimum of seven days during the first year and one extra day for each additional year of service. Annual leave taken even on a half-working day is considered one day’s leave, unless otherwise stated in an employment contract. In the case of dismissal for misconduct, absenteeism from work without permission for more than 20% of working days in the month, or if the leave is not used up within 12 months of every year of continuous service, your annual leave will be forfeited unless specified otherwise in the employment agreement.

Common Practice: As a common practice in Singapore, all employees are given an annual leave around 12-14 days per year, well above the minimum required under the Singapore Employment Act.

Sick Leave

Statutory Requirement: In reference to sick leave, the following statutory compliance as per the Singapore Employment Act is required for employees earning less than S$1600/month: Employee is entitled to 14 days of sick leave per year, and 60 days of hospitalization leave (inclusive of the 14 days) provided the employee has worked for at least 6 months for the company. The employee must produce a medical certificate from the company doctor (if one is appointed), government doctor, or doctor from an approved hospital. The employer must reimburse the medical consultation fee for employees with at least 6 months service.

Common Practice: Sick leave benefits for all company employees in Singapore generally correspond to the minimum requirements of the Employment Act as above.

Health Insurance

Statutory Requirement: There is no statutory requirement to provide private health insurance benefits to employees in Singapore under the Employment Act. Working professionals that are Singapore citizens or permanent residents are automatically provided with a low-cost medical insurance called Medishield - a basic tier of insurance protection for all Singaporeans. As part of making contributions to the employee's retirement fund called CPF, a certain portion of the contribution is automatically allocated to the employer's Medisave account. Medishield insurance scheme helps Medisave account holders and their dependents meet the cost of treatment during old-age or serious illnesses. Medishield premiums are deducted from the Medisave accounts. Medisave account holders can also use their Medisave to pay the premiums for their dependents.

Common Practice: When it comes to healthcare insurance benefits, it really depends on the Singapore employer. Most of the big companies in Singapore offer additional private medical insurance benefits to its employees. Most of the small companies in Singapore however do not offer private medical insurance benefits for its staff. To provide a higher level of healthcare benefits than what's provided under the basic Medshield scheme as well as to provide medical insurance benefits to employment pass holders (foreign employees), employers can offer private healthcare insurance benefits through private insurance companies in Singapore.

Maternity and Childcare Leave

Statutory Requirement: In simplified terms, female employees except for those in managerial and executive positions that have been employed for more than 6 months are eligible for paid maternity leave benefits. Eligible female employees are entitled to a total of 12 weeks leave, in the form of 4 weeks immediately before delivery, and 8 weeks immediately after. Alternatively, you may commence your 12 weeks leave on the day of confinement or within 28 days preceding confinement. Employers are prohibited from dismissing any employees on maternity leave, and are required to pay maternity leave in full should notice of dismissal be given without sufficient cause within 3 months of employees’ confinement. Besides maternity leave, the eligible female employees are entitled to 2 days childcare leave per year, if they have worked for the employer longer than 3 months, and are the parent of a child below 7 years of age.

Common Practice: Maternity and Childcare leave benefits for company employees in Singapore generally correspond to the minimum requirements of the Employment Act as above.

Probation Period

Statutory Requirement: The Employment Act of Singapore does not have any clauses related to the probation period for employees.

Common Practice As a common practice, employees are asked to serve a probation period of six months. The probation period is usually reflected by a shorter termination notice period.

Employment Termination

Statutory Requirement: Either party can terminate the employment contract by giving a written notice or by paying salary in lieu of notice to the other party. There is no statutory requirement on the number of days for the notice period. The notice period depends on what's agreed upon in the employment contract and must be the same for both parties. The employee is allowed to use his/her accrued annual leave to offset the notice period. The employment contract can be terminated by either party without notice if the other party is in willful breach of the contract.

Common Practice: Its common practice in Singapore to provide 2 weeks notice period during probationary period and 1 month notice period following confirmation of appointment. Although under the Employment Act, both sides may give salary in lieu of notice, Singapore courts have held the view that the employee can not terminate the contract by giving his salary in lieu of notice because of the practical difficulties faced by the employer in such a situation.

Retrenchment/Layoffs/Downsizing

Normally a company goes through retrenchment to reduce outgoing money or expenditures or redirects focus in an attempt to become more financially solvent. Implementation may result in positive or negative consequences and this has implications for employees who are retrenched and those who stay on their jobs. Although there are number of other ways (such as hiring freeze, cutting salaries, reducing benefits) to implement the retrenchment process, the most common way utilized by companies is reducing the workforce by way of layoffs.

Statutory Requirement: As per the Singapore Employment Act, the following general rules apply for employee earning less than S$1600/month:

• The company shall pay all salaries and benefits due to the employees on their last day of work.
• The duration of notice shall be as per the employment contract.
• An employee who has been employed in a company for at least three years should be paid some retrenchment benefits if he/she is being retrenched. The Employment Act does not dictate the nature or amount of such benefits and leaves it up-to the mutual agreement between the employee and the employer. An employee who has worked less than three years in a company is not entitled to retrenchment benefits under the Employment Act.

Since retrenchment has negative implications on workforce including loss of skills, energy, morale, commitment, physical and mental health degradation that results from employees withdrawing physically and emotionally, the Ministry of Manpower advises employers to carry out any retrenchment exercise responsibly.

Common Practice: As a common practice, retrenchment benefits in Singapore depend on the size and financial position of the company. A small company might not be able to offer anything above and beyond what is required as per the statutory requirements as listed above. To avoid any conflicts and confusion, it's best to stipulate the specifics of retrenchment benefits in the employment contract.

Central Provident Fund (CPF) Contributions

CPF is a mandatory retirement savings scheme for Singapore citizens and permanent residents.

Statutory Requirement: For employees that are Singapore citizens or permanent residents, the employer is required to make contributions to the CPF fund. Both employee and employer make monthly contributions to the fund. The employer is responsible for sending the monthly payment that includes both the employer's and the employee's portion of the contribution by the 14th of the following month. The employee's portion is then deducted from the salary. The maximum CPF contribution rate for employer and employee is 14.5% and 20% respectively and can be lower depending on certain factors such as employee age, permanent resident status, etc. There is no CPF contribution for foreign employees that are holding employment pass in Singapore.

Common Practice: There is no variation in common practice as opposed to the statutory requirement for CPF contributions.

Education & Training

Statutory Requirement: There are no statutory requirements to provide education and training benefits to Singapore company employees. In general, employers are encouraged by the Ministry of Manpower to provide opportunities for training and development amongst their employees, to improve job competency as well as provide possible career advancement. The Singapore government also has various schemes to help pay part of the cost for training and skills upgrade of employees.

Common Practice: There is no standard practice to offer training and skills upgrade benefits to employees. The benefits offered in this regard will likely depend on the company size, nature of business, and the employee category.