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Terminating Services of an Employee in Singapore? Any Points to Note, Care to Take?

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Terminating services of an employee in Singapore Company? any specific points to note, care to take?

Employee laws and regulations formalize the relationship structure between employers and employees and protect their rights from employment up to contract termination. These laws vary in different countries, especially in terms of employee termination. Some countries impose strict rules on employee termination, while other countries are lenient toward it.

In Singapore, companies can terminate an employee due to several reasons. These reasons can be underperformance, misbehavior, breach of employment contract, or changes in company needs. Upon employee termination, should Singapore companies take special actions, consider certain legalities, and compensate the employee?

This guide will tackle what the employment contract has to do with employee termination and some reminders when terminating an employee in Singapore.

What Does the Employment Contract State in Terms of Employee Termination in Singapore?

Basically, the employment contract will serve as your primary guide at the time of employee termination. So if you are terminating an employee you should first refer to the employment contract of the specific employee. In such a case, the employment contract states that:

  • Anything specify what must be provided to the employee.
  • Any compensation required to be given the employee.
  • As per the Singapore regulations - The company has no legal liability to provide any lump sum, specific amount of salary, and the like to the employee. The company only has to pay the salary of the employee until the last date of his or her employment.
  • Retirement benefits are not mandatory as they are being taken care of by the Central Provident Fund (CPF).
  • A written notice must include the date when it is given and its period, which must range from one to three months.

What Factors Should Employers Always Consider When Terminating an Employee in Singapore?

Always consider the following factors when terminating an employee:

  • Terminating employees who are taking maternity or paternity leave is considered illegal.
  • Do not terminate an employee based on his or her race, sex or gender orientation, religious affiliation, or any other personal preferences.
  • Do not terminate an employee at the time of his or her illness, injury, or hospitalization.
  • Issuance of a reasonable notice, which must be documented in the employment contract, is expected from you at the time of employee termination.
    • Typically, any notice over one month is deemed reasonable.
    • If the employee holds a senior level position, the notice must range from two to three months.
  • If you are terminating an employee due to underperformance or misbehavior, ensure that you have documented his or her mistakes or unpleasant attitude in the workplace. This documentation must be done before you issue the letter of termination. In case you need to discuss these reasons with the employee, then it will be much easier for the both of you to understand these issues.
Terminating service - Factors for terminating employee in singapore

What If the Terminated Employee Is a Foreigner?

You must notify IRAS if you are terminating a foreign employee with a work permit. You are also required to withhold last month salary of the employee. Then ask the employee to go to IRAS and get fast track assessment. After this the employee is required to make payment of taxes and get a tax clearance certificate. Once IRAS has finished the assessment, a tax clearance certificate will be issued. This certificate confirms that all taxes have been paid, and you can release the withhold sapary payment due to the employee.

This procedure may take around 10-21 days. However, if there are outstanding tax liabilities against the employee, IRAS may present a stop order certificate.

In Conclusion

Before you finally decide to terminate an employee, contemplate why employee termination would be the best option first. Your decision, and your specific reasons behind it, will be the basis for establishing a strong case for employee termination. Contrarily, an illegitimate or unreasonable employee termination can pose risks to you and to your entire business.

Nevertheless, employee termination in Singapore is not that complicated. You just have to consider a few factors, such as right timing, sound judgment, a reasonable notice period, and necessary documentation. For guidance, refer to the employment contract you have provided your employee with.

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