The guide will provide a general introduction to the statutory requirements as per the Singapore Employment Act and common practices that are applicable to employment contracts, wages, and benefits upon hiring employees in Singapore. This guide does not address the specialized industries that involve blue-collar workforce and manual labor.
The purpose of this guide is to give you an idea, as to what your responsibilities are in case you decide to hire employees for your newly incorporated company.
An efficient employee benefit and compensation plan recognizes and rewards the best company employees. Successful employee benefits strategies increase employee retention, raise productivity, and have a positive impact. Matching the benefit packages of bigger companies is very difficult for small-to-mid-size companies (SMEs) in Singapore. Therefore, a small company should offer a benefits package that is competitive with what other SME companies and meets employee needs.
The contract of employment between employer and employee primarily regulates the relationship between them in Singapore. Subject to certain limits and compliance with the Employment Act, parties are free to contract as they choose . The Singapore employment act is not applicable to all the employees: rather, it applies only to the ‘employees’ that are defined as per the Singapore Employment Act. The Singapore employment act does not apply to the following:
Moreover, employees who earn S$2000 per month are provided with additional protection (with regards to Hours of Work, Overtime, Rest Day, Public Holidays, Annual Leave, Sick Leave, Retirement Benefits, Annual Wage Supplement, Retrenchment Benefits, and other payments) which comes under Part IV of the employment act.
Part IV of the employment Act applies to:
The employment contract also known as Appointment Letter, Employment Contract or Offer letter, is a written agreement between the employee and employer which specifies the terms and conditions of employment. In Singapore, it is always advisable to have a written contract signed. Normally, employees that fall in senior management category have the option of negotiating their contracts of employment. A violation one or more of the terms in any employment contract either by the employee or employer is considered a breach of contract. The employment contracts have relevant clauses like:
The terms and conditions mentioned in the employment contract cannot be less favorable than what is mentioned in Singapore Employment Act.
Employee benefits that are mentioned in an employment contract are also referred to as perks or fringe benefits. In addition to their normal salaries, there are various types of compensations provided to employees. Fringe benefits or perks in Singapore employment contract include annual leave, maternity leave, sick leave, incentives & bonuses, healthcare benefits, retirement fund contributions, relocation assistance: housing allowance, childcare benefits, transportation reimbursements, allowance for children’s education etc.
Minimum salary that every employee must be paid is not regulated by the Employment Act. Therefore, there is no minimum requirement of salary and is subject to the agreement / negotiation between the employee and the employer. However, the salary has to be paid within seven days after the end of the salary period at least once in a month. Overtime has to be paid within 14 days of the specified salary period, if applicable. The bonus payment does not come in the domain of Singapore Employment Act.
The amount of salary that an employee gets depends upon the position and skills required. In Singapore, an annual bonus equivalent to at least 1 month’s salary has become a common practice. It is commonly known as 13th-month payment. The exact amount of annual bonus is tied to the employee’s well as the performance of the company. It normally varies from employee to employee as per the company policies. The employment contract in Singapore specifies the details of the annual bonus policy. In Singapore, during good economic times, it is not uncommon for companies to give their employees a yearly bonus of two to three-time of their monthly salary.
Working hours & Overtime of Employees earning below S$2,600/month Hours is regulated under the Singapore Employment Act as under:
The conditions of the Singapore Employment Act that have been mentioned above do not apply to the employees earning above S$ 2,600/month. And it is discretionary to the agreement between the employer and employee. As a general rule, depending on the industry and company policies, office employees in Singapore work from 9am in the morning to 6pm or 7pm in the evening, from Monday through Friday. It is common in Singapore for the employees to work 9 – 10 hours during the weekdays and half days on Saturday. During the working hours, 1 hour of lunch break is allowed which is not counted towards the working hours. So the practice is 9 hours of office time, out of which 1 hour is a break.
In Singapore, keeping in view the multicultural community, public holidays are adjusted so as to accommodate different ethnic communities. Considering the multicultural society of Singapore, public holidays are designed to accommodate many different. The holidays' list include Christmas Day, Labor Day, Vesak Day, National Day, New Year’s Day, Chinese New Year, Good Friday, Hari Raya Puasa, Deepavali, and Hari Raya Haji.
Following rules are mandated under the Singapore Employment Act for employees who are earning less than S$ 2,600/month:
Singapore Employment Act does not enforce any rules regarding public holidays for employees earning above S$ 2,600/month. However, as a general practice, all employees in Singapore are given the same public holiday benefits as have been mentioned above.
Additionally it is common practice to allow half-day leave on the eve of specific holidays for the specific employees. (On the eve of Deepavali, to Hindu employees, and on the eve of Hari Raya to Muslim employees). But in practice, this half-day is granted to all employees regardless of race.
The statutory annual leave is outlined in the Singapore Employment Act for employees earning less than SGD 2,600/month as under:
Under the Singapore Employment Act, all employees are given an annual leave of around 14 days per year as a common practice, which is well above the minimum required.
Singapore Employment Act gives out the statutory sick leave entitlements for employees earning less than S$ 2,600/month. These entitlements are mentioned below:
For an employee to claim above mentioned leave entitlements is required to produce a medical certificate from the doctor employed by the company, or a government doctor or doctor from a hospital that is approved by the company.
The sick leave entitlement of all the company employees in Singapore is generally in consonance with the Singapore Employment Act.
Under the Singapore Employment Act, there is no statutory requirement to offer private health insurance or its benefits to employees. Professionals who are Singapore Citizens or permanent residents are entitled to low-cost medical insurance called Medishield. It is a basic tier of insurance protection for all Singaporeans. There is a specific part of the CPF contribution that is allocated to the employee’s Medisave account. Medishield insurance helps the account holders of Medisave and their dependents to meet the cost of medical treatment during the old age or in case of serious illness. The premiums of Medishield are taken from the Medisave accounts.
The benefits of the healthcare depend upon the employer. Large companies in Singapore offer additional private medical health insurance benefits to their employees. Small companies, on the other hand, do not provide any such benefit.
The statutory requirements are as under:
In common practice, the maternity and childcare leave benefits for the employees parallels the minimum requirement of the Singapore employment act as above.
The Singapore Employment Act does not have any clause that pertains to the probation period of the employees.
In common practice, employees are required to serve a probation period for three to six months. The probation period is reflected by a shorter termination notice period.
Employer and employee both can terminate the employment contract by giving a notice or one month's salary. There is no requirement of a minimum time period for the notice. The notice period depends upon the employment agreement. The employees can offset the notice period by utilizing accrued annual leave. If any party commits a willful breach of contract other party can terminate the contract without any notice.
It is a common practice to provide two weeks’ notice period to the employee during the probationary period and one-month to three-months notice period after the confirmation of the employment. Although the Singapore Employment contract allows both employer and employee to give one month's pay in lieu of termination notice, however, Singapore courts have decreed that employee cannot terminate the contract by providing salary in lieu of notice because of the practical problems that can be faced by the employer.
Generally, a company resorts to a process of retrenchment in order to reduce the expenditures or outgoing money or redirects its focus to become financially more stable. The implementation may result in many positive and negative consequences due to its implications on employees that are retrenched and who survive. Though there are other options as well like cutting salaries, reducing benefits, and hiring freeze but the most common way used by most companies is reducing the workforce by layoffs.
The Singapore employment act implies the following rules to the employees earning less than S$2,600 per month:
In common practice, the retrenchment process in Singapore depends upon the financial position and the size of the company. Usually, a small company may not be able to offer anything more than the statutory requirements listed above. To avoid any problems, it is best to decide the retrenchment benefits in the employment contract.
There is a mandatory retirement saving scheme in Singapore called Central Provident Fund for the citizens and permanent residents. Note that this scheme is not applicable to employees on employment pass or work permits.
The employer is required to make contributions to the CPF for employees that are Singapore Citizens or Permanent Residents. Both the employee and employer make the monthly contributions. The employer is responsible for sending the CPF payment that includes the contribution from both employer and employee by the 14th of the following month. The portion of the employee's contribution is later on deducted from his/her salary. The maximum contribution rate of CPF is 20 % for the employer and 16% for the employee. The amount can be lower depending upon certain factors like the age of employee and status of residence etc. There is no CPF contribution for the foreign employees holding the employment pass or the work permit in Singapore.
The common practice is precisely the same as that of the statutory requirement for CPF contributions.
According to the Singapore employment act, there is no statutory requirement as such of providing education and training benefits to the employees of a Singapore company. Only to the extent that, Ministry of Manpower encourages the employer to provide the opportunity of training and development to the Singapore company employees so that they can improve their competency and possible career advancement. The Singapore government also offers various schemes to partially cover the skill up-gradation and training related costs.
There is no practice in common to offer skill up-gradation and training related benefits to the employees. It, however, depends upon the company size, nature of business, company policy and the category of the employee.
Also, companies in some specific industries are required to compulsorily send employees for periodic training. This is guided not by the Employment Act, but by the specific industry regulations.
Certain non-statutory benefits are provided by most companies to their employees in Singapore in order to ensure that they are well looked after. Some of the benefits provided are as under: