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Guide to Terminating Employees in Singapore

Are you looking to terminate services of an employee? Refer to this guide for the same.

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

Table of Contents

Overview
Legal Provisions
Terminating Contract
Employer Initiated
Employee Initiated
Natural Termination
Guidelines
Summing Up

The cessation of an employment relationship or termination of a job may be done by the employer or employee by terminating the employment contract mutually signed between them. However, the termination of employment implies some legal obligations on the part of both the employer and the employee. Any termination must comply with the terms and conditions set out in the employment contract. Before either party decides to terminate the employment relationship, it is important to take into account the following considerations:

Terms and conditions under which employees can be terminated, including due consideration to the questions like who can terminate employment? when can a termination be initiated? what types of termination necessitate notification, termination payments, etc.
Duties, obligations, rights, and responsibilities of employers and employees terminating employment
Dos and Donts of the terminating an employee in Singapore.

This guide will help you understand Singapore's basic rules and regulations governing termination and retrenchment of employees. The guide is only for general information and is not intended to replace professional advice.

Legislation Governing Employment Termination

Singapore's Employment Act is the principal statute governing job termination. Every employment contract must contain a termination clause setting out the rights, duties, obligations and responsibilities regarding the termination of employment of both employers and employees.

Scope of the legislation

Guidelines on termination of employment as stipulated in the Employment Act apply to those employees who are protected by the Act. Please note that all employees except Public servants, Seafarers, and Domestic workers are protected by the Employment Act. For employees not covered by the Employment Act, their employment termination guidelines will be drawn up according to company policy and what is mutually agreed upon at the time of employment between both parties. These guidelines, as common practice in Singapore, generally correspond to the stipulations in the Employment Act.

Terminating Employment Contracts

An employer or employee may terminate an employment contract by giving notice or salary in lieu of notice; or by giving neither of them, as the case may be. In some cases, employment contracts automatically come to an end or terminate naturally; therefore, the notice periods do not apply.

The following table illustrates the circumstances under which a contract might be terminated.

Employer initiated termination	Employee initiated termination	Natural Termination
Unsatisfactory Probation Breach of contract by employee Employee dismissal on the grounds of misconduct Employee dismissal on grounds other than misconduct Employee transfer Employee retirement Employee retrenchment	Resignation Breach of contract by the employer Retirement	Expiry of fixed-term contract End of probationary period Death of either party

Employer Initiated termination

Terminating Employees - Unsatisfactory Probation

Unsatisfactory Probation

In Singapore, most employees begin their work on a probationary period (usually 3-6 months) and are appointed as permanent employees when the probation is successfully completed. However, the employer is legally allowed to terminate the job by giving notice (usually 1-2 weeks or as is mentioned in the employment contract) or by agreeing to pay salary in lieu of notice before the probationary period ends.

Terminating Employees - Breach of Contract

Breach of Contract by Employee

The employer reserve all the rights to terminate the employment contract if the contract has been violated by the employee.
A contract shall be breached if the employee is absent from work for more than two consecutive working days without the permission of the employer or without notification to the employer of such absence.
In case of breach of employment contract, the employer retains the right to terminate the contract without notifying the employee or paying the salary in lieu of notice.

Employees’ Dismissal on the grounds of Misconduct

The employment act is not applicable to the following as they are covered by other regulations:

Terminating Employees - Dismissal on the grounds of Misconduct

Misconduct is said to have occurred when an employee fails to fulfil his employment conditions. The employment contract usually spells out acts that amount to misconduct. Some common examples include unauthorized ownership of corporate property, abusive or insubordinate behaviour, negligence that creates safety and security concerns, etc.
In case an employee is found guilty of misconduct, the employer shall have every right to terminate the employment contract without notice or paying salary in lieu of written notice.
The degree of misconduct that amounts to dismissal from job is not stated by the law.

Employees’ Dismissal on Grounds other than Misconduct

Terminating Employees - Dismissal on Grounds other than Misconduct

There are some common situations in which an employer may have recourse to dismissal of his / her employee. Decisions on such dismissals should, however, be taken after careful consideration and after sufficient warnings have been given to the employees concerned. Likely reasons for the dismissal of employees include:
- Bad job performance.
- Illness or inability of the employee to the extent that it affects his/her the day to day performance negatively.
- Incompatibility with other employees to the extent that affects the social relations in the workplace, etc.
The employer should either provide the employee with due notice or pay salary instead of notice.

Transfer of Employees

The employment act is not applicable to the following as they are covered by other regulations:

Terminating Employees - Transfer

Transfers happen when there are mergers in the businesses, take-overs of companies, selling of parts or whole of a corporation or as a result of the creation of a subsidiary.
A current employer who plans to move his employees to another employer, or to a subsidiary company, affiliated business, or an unrelated company, reserve the right to terminate the employment contracts of the concerned employees.
All employers who intend to transfer employees must notify employees of such a transfer. The employers are also responsible for updating employees on terms of relocation and ensuring that new terms and conditions of employment for the concerned employees are no less favourable than current terms.
Any dispute or discrepancy between the employees who have been transferred and the new employer may be referred to the Labor Commissioner.

Retirement of Employees

Terminating Employees - Retirement

In Singapore, the retirement age of an employee is 62 years. Employers are authorized to initiate the termination of employees who are close to retirement age by giving an advance notice to the employee, as mentioned in the contract.
Under the recent Retirement and Re-employment Act, employers are now expected to propose a re-employment to qualifying workers of 62 years of age up to 65 years of age.
Please note that the law in Singapore does not require a compulsory retirement. It does not ban an employee from continuing work beyond the statutory retirement age.
Unless specified in the employment contract, the Employment Act does not compel an employer to pay retirement benefits to the employee.

Retrenchment of Employees

Terminating Employees - Retrenchment

The employment act is not applicable to the following as they are covered by other regulations:

Retrenchment means termination of employment because the position of an employee is or is likely to become redundant to the employer.
Retrenchments usually occurs when a corporation decides to close or sell a portion of its business or undergoes a major restructuring.
All Singapore employers are advised to handle retrenchments responsibly. If the company is unionised, it is especially important to consult with the Union.

Retrenchment notice:
- Companies must issue a retrenchment notice to their employees.
- The duration of the notification should be in line with mutually agreed contractual terms.
- In the absence of a notice period previously agreed, the provisions of the Employment Act (as set out in this Article) shall apply.
- Companies are required to inform the Ministry of Manpower by faxing the duly completed form.
Retrenchment benefits:
- An employee who has worked in a company for at least three years should be compensated for certain retrenchment benefits if he / she is being retrenched.
- The Employment Act does not specify the nature or amount of those benefits and leaves. These may be specified in the employment contract that is signed between the Employer and the employee. The standard practice that is followed in Singapore is to pay 2 weeks to a month salary per year of service.
- Any with less than three years of service in a Singapore Company is not entitled to benefits under the Employment Act. However, depending on its financial situation, the company can offer an ex-gratia payment.
- Contributions from the Central Provident Fund (CPF) do not apply to retrenchment benefits and ex gratia payments.
- Retrenchment payments to offset job losses are not taxable. However, payments for other purposes may also be included by the employers when paying out retrenchment benefits, such as salary in place of notice and past service gratuities. These are considered service payments and constitute employment gains or profits, and thus are liable to tax under the Singapore Income Tax Act. Regardless of whether payments made to retrenched employees are to be treated as compensation or not is largely a matter of fact and will be determined by the Singapore’s Inland Revenue Authority.
Alternatives to retrenchment: Companies are urged to resort to retrenchments as a least preferred option and instead take the following alternatives:
- Making work-weeks shorter– the reduction should not exceed 2 days per week and should be implemented for a period, not that must not exceed two months
- temporary lay-offs – Employees should be paid half of the gross pay by the employer during the lay-off period
- Flexible arrangements for work
- Reassign employees to alternative work areas within the company

Terminations Initiated by Employees

Terminating Employees - Resignation

Resignation

In case of resignation by an employee from the Singapore company, his/her employment contract is terminated. An employee who is on probation has the right to resign before the term of probation ends.
Employees can resign by giving a formal notice or paying salary in lieu of this notification.
The time period of notice should be as per the terms of the contract. In case of the absence of such terms, the rules and regulations of the Employment Act (as outlined in the article below) will apply.
An employer can not withhold the resignation of an employee.

Breach of Contract by Employer

Terminating Employees - Breach of Contract

If there is a breach in the employment contract by the employer, the employee reserves the right to terminate the employment contract.
A contract is breached if the employer fails to pay the employee's salary within seven days of the due date for the salary or asks the employee to do work that does not fall within the terms of the service contract (this usually refers to an unsafe or risky work).
The employee shall have the right to terminate the contract without notifying the employer or paying salary in place of a formal notice.

Terminating Employees - Retirement

Employee’s Retirement

In Singapore, the age for retirement is 62 years. Employees who are close to the retirement age and who plan to resign from a company's services will initiate their termination the day before their 62nd birthday. Under the new legislation on retirement and re-employment, employers are now required to offer re-employment to eligible employees who are 62 years of age till they reach 65 years.

Natural Termination

Expiry of Fixed Term Contract

Terminating Employees - Fixed Term Contract

A fixed-term contract shall terminate immediately upon the expiry of the contractual terms. There is a notice period to be served in such cases, as the contractual terms have come to an end.
The' Piece Rate Contract ' terminates when a specified project is complete.
On completion of a specified time frame, a' time contract' shall terminate.
If an employer wishes to employ the employee for an extended period of time or for another project, a new contract should be drawn up.

Terminating Employees - Probationary Period

End of Probationary Period

In Singapore, most companies hire new staff with an initial probation period of six months.
Evidently, the employment contract expires at the end of the probationary period.
If the employer decides to offer a permanent job to the recruit who is on probation, a fresh contract of employment must be drawn up.

Terminating Employees - Death of either of the Parties

Death of either of the Parties (Employer or the Employee)

Death of an employee shall terminate the contract automatically.
Death of an employer would result in termination of the contract if he / she was the sole employer.

Termination Guidelines

Terminating Employees - Notice Period

Termination with a Notice Period

Any employer or employee who intends to terminate the contract shall give a notice in writing to the other party.
The period of notice to be given shall be as agreed in terms of the contract at the time of employment.
The precise date on which the notice is given shall be included in the period of notice.
Upon mutual agreement between the two parties, the notice period may be waived off.
Employees who have served the required notice period in full are entitled to Central Provident Fund (CPF) contributions for the notice period salary they receive.

Terminating an Employee When Notice Period is not Mentioned in the Employment Contract

The following shall apply in the absence of a notice period agreed beforehand:

Employment Period	Notice Period
Less than two weeks	One day
26 Weeks – 2 Years	One week
2 – 5 Years	Two weeks
Five Years and Above	Four weeks

Terminating Employees - Paying Salary

Termination by Paying Salary in-lieu of Terminating Notice

Contributions from the Central Provident Fund (CPF) do not apply to salaries that are paid in lieu of notification by either party.

Terminating Employees - During the Notice Period

Employment during the Notice Period

When an employee serves the notice period, both parties are still bound by the contract of employment and have to fulfil their responsibilities properly until the end of the notice period. The employee cannot begin to work with his new employer until the termination from the current job is completed.

Terminating Employees - Annual Leave to Offset

Using Annual Leave to Offset the Terminating Notice Period

The employee does reserve the right to use the annual leave that he is entitled to offset the period of notice. If an employee exercises the above right and brings forward his last working day, he will only be paid until this last working day. The employer is not liable to pay for the annual leave, which was used to offset the remaining notice period.

Annual Leave taken During Notice Period

Terminating Employees - Annual Leave taken

Offsetting the notice period with annual leave is different from proceeding on an approved annual leave during the period of the notice. An employee can decide to make use of his annual leave during the notice period, in which case he may earn his paycheck for the entire notice period. However, in such case, there is no instance of the last day of work being brought forward, and until the last day of the notice period, he is considered to be an employee of the Singapore Company. Only after the last day of the notice period can he join the new company. Employees can encash any unused annual leave. Please note that, during the notice period, the employee cannot be forced to go on annual leave.

Terminating Employees - Sick Leave

Sick Leave during Notice Period

During the notice period, any paid or unpaid sick leave taken should be considered as part and parcel of the notice period.

Maternity Leave and Termination

Terminating Employees - Maternity Leave and Termination

An employee should not resign from service while being on maternity leave and use the period of maternity leave as a termination notice.
An employer is not be allowed to dismiss an employee while she is on maternity leave. Failure to comply will result in penalties.
It is mandatory for an employer to pay the maternity benefits to his/her employee to which she is entitled to if:
- within 6 months of an employee's confinement, a notice of dismissal has been given without sufficient cause
- the employee has been retrenched within three months of his/her confinement. (In such a case, in addition to the retrenchment benefits, the employee is entitled to this payment).

Terminating Employees - Childcare / Infant Care Leave

Childcare / Infant Care Leave and Notice Period

In order to offset the time for the notice period, an employee cannot use the childcare / infant care leave to which he / she is entitled.

Terminating Employees - Appeals against Dismissals

Appeals against Dismissals

An employee who deems that his dismissal is unjustified may file a written appeal with the Minister for Manpower within one month of his dismissal.
If the dismissal proves unreasonable, the Minister may either order the employer to reinstate the employee and pay the employee for the period of his dismissal or pay compensation, depending upon the nature of the case.

Rules of Terminating Foreign Employees

Terminating Employees - Rules of Foreign

Cancellation of employment Pass / S Termination:
- The termination of employment of foreign employees on the Employment Pass or S Pass mandates the termination of the Employment Pass / S Pass within seven days of termination of employment.
- On cancellation of work permit, a short-term visit pass of 30 days will be issued.
- If the main pass is cancelled, all other passes associated with the main pass will be cancelled too.
- Unless a valid alternative visa has been issued to the Employment Pass / S Pass holder (as mentioned above), he / she and associated pass holders should not stay in Singapore after the termination of employment.

Tax Clearance
- Employment Pass / S Tax holders who are working for a Singapore employer are required to ensure the tax clearance, once they are terminated from the job. This measure ensures that all taxes have been paid by the concerned individual.
- The employer shall notify the competent authority called the Inland Revenue Authority of Singapore (IRAS) and withhold all payments which are due in the name of the foreign employee from the day on which the employer decides to terminate the job or the day he / she formally informs the employer regarding their intention to cease the employment.
- Once a tax evaluation has been done by the Inland Revenue Authority of Singapore (IRAS) and a tax clearance certificate is issued in the name of concerned individual confirming that all taxes have been paid, the employer may release the payment that the employee is entitled to.

Summing Up

The article has laid out the detailed guideline with respect to the laws and regulations that govern the employer and employee relationship through an employment contract and employment act of Singapore. However, it is very important to understand that terminating employees in Singapore is a tricky affair. This is because, while both parties may have varying reasons for wanting to terminate an employment relationship, it should always be taken into consideration that termination of an employment contract or a summary dismissal of an employee for any charge including misconduct should be done in accordance with the employment contract. Where the contract is silent regarding the specific alleged misconduct in question, potential problems of wrongful dismissal actions or complaints made under s 14 of the Employment Act (EA) may arise. Furthermore, there prevails an uncertainty in the present state of the law of Singapore with respect to an implied duty on employer to not terminate employment contracts in bad faith. Also, the scope of the implied term of trust and confidence with respect to termination of employment poses further snares and traps when an employment relationship sours. Therefore, it would be prudent for employers or employees to obtain legal advice in such contentious circumstances.

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