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Guide to the Singapore Employment Act

Guide to the Singapore Employment Act

The Singapore Employment Act is the foundation of employment law in Singapore, designed to protect employees’ rights and set out clear guidelines for employers. Whether you are a leader of a large enterprise looking to expand into Singapore or a small entrepreneur aiming to start an SME, you must understand this Act.

It helps ensure legal compliance, fosters a positive workplace, and mitigates potential disputes. For large enterprises, understanding the Employment Act Singapore is essential for smooth operations and maintaining corporate governance standards. For SMEs, its understanding will provide a clear roadmap for establishing fair employment practices under Singaporean law and cultural norms from the start.

Understand the Singapore Employment Act

This guide is your key to understanding the Singapore Employment Act. It aims to provide unambiguous explanations of its key aspects, including its scope, the importance of employment contracts, statutory requirements for wages, benefits, working hours, and leave entitlements.

By understanding these provisions, you can ensure legal compliance and create a supportive and compliant workplace environment, confident in your knowledge of the Act.

Related Read: 10 Best Ways to Build Employee Loyalty

Scope of the Singapore Employment Act

The Singapore Employment Act covers the vast majority of employees working under a contract of service, ensuring their rights are protected and their working conditions are fair. However, not all employees fall under its purview. Businesses of all types must identify which employees are covered to comply appropriately with the law.

Who is Covered Under The Singapore Employment Act

The Singapore Employment Act applies to most employees working under a contract of service, including manual labourers and non-executive employees.

Under Part IV of the Employment Act, employees earning below S$2,600 per month are provided additional protection. This includes regulations concerning rest days, hours of work and overtime, public holidays, annual leave, sick leave, retrenchment benefits, retirement benefits, annual wage supplements, and other variable payments.

Who is Exempt Under The Singapore Employment Act?

  • Managerial and Executive Positions: involves decision-making authority, such as managing other employees or running the business. Employees holding specialised skills/possessing tertiary education are also exempt, for example, lawyers, accountants, dentists, and doctors.
  • Domestic Workers: Individuals employed in household roles.
  • Seamen: Employees working on seafaring vessels.
  • Government Staff: Most government employees are not covered by the Act.

Employment Contracts Under The Singapore Employment Act

Employment contracts are the basis of the employer-employee relationship, defining the terms and conditions of employment in clear, unequivocal terms. In Singapore, it is always best practice to ensure all employment contracts are detailed and well-structured for clear expectations on both sides. This helps prevent misunderstandings and potential disputes, ensuring a smooth working relationship.

Importance of Employment Contracts Under The Singapore Employment Act

An employment contract, also known as an Employment Agreement, Offer Letter, or Appointment Letter, sets out the agreed terms between the employer and the employee. While verbal agreements can be legally binding, written contracts are strongly advised to provide clear, tangible evidence of the employment terms.

Key Clauses in Employment Contracts Under The Singapore Employment Act

Ensure that your employment contract includes the following information:

  • Appointment Position: Clearly defines the job title and the main responsibilities, ensuring both parties have a mutual understanding of the role.
  • Duration of Employment: Specifies whether the employment is permanent or for a fixed term, providing clarity on the employment period.
  • Date of Commencement: States the start date of the employment, marking the beginning of the employee’s tenure.
  • Remuneration Package: Details the salary, bonuses, and other forms of compensation, outlining how and when the employee will be paid.
  • Hours of Work: Defines regular working hours, overtime conditions, and break times to ensure compliance with legal standards.
  • Employee Benefits: Includes benefits such as healthcare, leave entitlements, and retirement plans, highlighting the perks offered by the employer.
  • Probation Clause: Specifies the duration and conditions of the probation period, outlining the criteria for confirmation of employment.
  • Code of Conduct: Outlines expected behaviour and performance standards, setting the tone for workplace culture and ethics.
  • Termination: Details the notice period required for termination by either party and conditions under which termination can occur, ensuring transparency and fairness.

The terms in the employment contract must comply with the minimum standards set by the Employment Act. Be aware that any term less favourable than what is stipulated in the Singapore Employment Act is considered void and unenforceable.

Wages and Bonuses Under The Singapore Employment Act

Wages and bonuses are crucial elements of employee compensation, directly influencing job satisfaction and retention. The Singapore Employment Act provides guidelines to ensure fair and timely payment, fostering a transparent and positive work environment within the unique context of Singapore’s work culture.

Statutory Requirements for Wages

The Singapore Employment Act does not explicitly mandate a minimum wage, allowing salaries to be negotiated between employers and employees. However, it stipulates that wages must be paid at least once a month, within seven days after the end of the salary period. This ensures that employees receive their compensation on time, contributing to their financial stability and morale.

Overtime Pay

  • For employees covered under Part IV of the Employment Act (those earning below S$2,600 per month), overtime work must be compensated at a rate of at least 1.5 times the hourly basic rate of pay.
  • The Act limits working hours to no more than 44 hours per week and not more than 8 hours daily.
  • Employees cannot work for more than 6 continuous hours without a break.
  • Including overtime, the total working hours must not exceed 12 hours per day except under specific conditions such as emergencies or essential national defence work.
  • Shift workers are similarly restricted to 12 hours per day.
  • Employees are entitled to one rest day per week, which is not considered a paid day.

Common Practices for Bonuses

While the Employment Act does not require employers to pay bonuses, it is common practice in Singapore to offer annual bonuses, often referred to as the 13th-month payment. This bonus, usually equivalent to one month’s salary, is usually tied to company performance and individual contributions.

In prosperous times, some employees may receive bonuses that are two to three times their monthly salary. This practice aligns with Singapore’s performance-driven culture, where rewarding high performers is key to maintaining motivation and productivity.

Leave Entitlements Under The Singapore Employment Act

Annual Leave Requirements

Employees who have worked for at least three months are entitled to annual leave, starting at seven days for the first year and increasing by one day each subsequent year. Employers can offer more generous leave, but this must be clearly stated in the employment contract. Even a half-working day of leave is considered a full day’s leave unless otherwise specified.

Sick Leave Entitlements

Employees with at least six months of service are entitled to 14 days of paid outpatient sick leave and 60 days of paid hospitalisation leave per year, inclusive of outpatient sick leave. For shorter tenures:

  • Three to four months: Five days of sick leave and 15 days of hospitalisation leave.
  • Four to five months: Eight days of sick leave and 30 days of hospitalisation leave.
  • Five to six months: 11 days of sick leave and 45 days of hospitalisation leave.
  • Six months or more: 14 days of sick leave and 60 days of hospitalisation leave.

Maternity and Childcare Leave Provisions

Female employees with at least three months of service are entitled to 16 weeks of paid maternity leave. They also receive six days of paid childcare leave per year if they have a child below seven years old and have worked for at least three months.

Public Holidays

Singapore’s diverse cultural landscape is reflected in its public holiday schedule, which includes key holidays for various ethnic and religious groups. Under the Employment Act, employees are entitled to 11 paid public holidays each year:

  • New Year’s Day (January 1st)
  • Chinese New Year (Two days in January or February)
  • Good Friday (March or April)
  • Labour Day (May 1st)
  • Vesak Day (May)
  • Hari Raya Puasa (May or June)
  • National Day (August 9th)
  • Deepavali (October or November)
  • Hari Raya Haji (June or July)
  • Christmas Day (December 25th)

If a public holiday falls on a rest day or a non-working day, the employee is entitled to an extra day off or additional pay in lieu. This ensures that employees can fully benefit from their entitled holidays without loss of pay.

Termination and Retrenchment Under The Singapore Employment Act

Statutory Requirements for Employment Termination

The Singapore Employment Act requires that either party can terminate the employment contract by giving notice or paying salary in lieu of notice. The notice period must be the same for both employer and employee and is typically stipulated in the employment contract.

It is common practice, however, to offer a two-week notice period during probation and one month after confirmation of employment. Termination benefits are not mandatory, but some companies offer severance packages as a goodwill gesture.

Retrenchment Benefits and Procedures

Employees who have served for at least two years are entitled to retrenchment benefits, although the Act does not specify the amount. Common practice involves offering one to three months of salary per year of service. Employers are advised to carry out retrenchment responsibly, providing fair notice and support to affected employees.

Central Provident Fund (CPF) Contributions

The Central Provident Fund (CPF) is a mandatory savings scheme in Singapore aimed at providing for retirement, healthcare, and housing needs. It is applicable to Singapore Citizens and Permanent Residents. CPF contributions are made by both the employer and the employee.

Employer and Employee CPF Contribution Rates

The contribution rates vary based on the employee’s age and ordinary wages. These rates are tiered and decrease as the employee ages.

Employee’s Age (Years) By Employer (% of Wage) By Employee (% of Wage) Total (% of Wage)
55 and below 17 20 37
Above 55 to 60 15 16 31
Above 60 to 65 11.5 10.5 22
Above 65 to 70 9 7.5 16.5
Above 70 7.5 5 12.5

The contribution rates are calculated based on the employee’s ordinary wages, which include their basic salary, allowances, bonuses, and other regular payments.

CPF Accounts

The CPF contributions are allocated to three accounts:

  1. Ordinary Account (OA): This account is primarily for housing. It can be used for down payments, mortgage instalments, and other housing-related expenses. Additionally, it can be used for investment, education, and insurance.
  2. Special Account (SA): This account is mainly for retirement savings. The funds in this account earn a higher interest rate compared to the OA, helping to grow the member’s retirement nest egg.
  3. MediSave Account (MA): This account is for medical expenses and hospitalisation insurance premiums. It helps to cover the costs of healthcare in Singapore.

Non-Statutory Benefits and Perks Under the Singapore Employment Act

In addition to statutory benefits, many companies in Singapore offer a range of non-statutory benefits to ensure their employees are well looked after. These perks help attract and retain talent by enhancing job satisfaction and overall well-being. Some of the common non-statutory benefits include:
Healthcare and Well-Being

Many companies provide medical insurance plans that cover employees and their dependants, typically including personal accident coverage and hospitalisation. This support ensures that employees can manage health-related expenses with greater ease.

Per Diem

For roles that require travel, companies often offer per-day allowances, transportation allowances, or reimburse actual expenses incurred while travelling. The amount varies depending on the destination and duration of travel.

Relocation Packages

When employees relocate from their home country to Singapore, companies commonly provide relocation allowances. These packages may include paid shipping of personal effects, airfare, housing subsidies, utility payments, childcare, and school fee coverage. Employees might also receive temporary accommodation in a serviced apartment or hotel, paid for by the company until they find permanent housing.

Employee Stock Purchase Plans

Some companies offer stock purchase plans, particularly to senior employees, allowing them to buy company shares at a discounted rate. This can foster a sense of ownership and align employee interests with company performance.

Additional Perks

Other perks may include corporate memberships, sponsorship for training/mentoring programmes and educational courses, restaurant discount vouchers, mobile phone plans, gym or club memberships, and organised sporting activities. Companies also often host team parties, outings, and provide staff referral schemes and sabbaticals.

You can read more in our article Good Employee Engagement Practices.

Where to Next With InCorp

Understanding the Singapore Employment Act is crucial for ensuring legal compliance and fostering a positive workplace environment in the modern Singapore workplace. Whether you are a large enterprise or an SME, adhering to these guidelines can help you steer through the complexities of employment law in Singapore.

Ultimately, by implementing fair employment practices, you can comply with the law and enhance employee satisfaction and productivity, ensuring your employees will help your Singapore business flourish.

For more detailed insights on how the Singapore Employment Act applies to your business, contact InCorp today. Our team of experts can provide tailored advice and solutions to help you effectively manage your workforce in Singapore.

FAQs About Singapore Employment Act

  • The Employment Act in Singapore is the primary legislation governing employment practices in the country. It provides a framework for the relationship between employers and employees and covers various aspects such as salary, working hours, overtime, leave entitlements, and termination of employment.
  • In Singapore, the 13th month salary, also known as the Annual Wage Supplement (AWS), is not compulsory by law. However, it is a common practice among many employers.
  • At InCorp Global, we understand the complexities of the Employment Act in Singapore and have industry experts who can help your business stay compliant with guidance and advice.

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About the Author

Shirley Loh

Before her tenure at InCorp, Shirley amassed over 25 years of extensive global and regional experience in the Asia Pacific, holding senior leadership positions across various sectors including Automotive, Oil & Gas, and commercial services. She has been pivotal to the success of numerous organisations, leveraging her expertise to drive corporate growth through strategic change management and HR transformation initiatives. Her profound understanding of the region and vast experience have enabled her to develop innovative HR policies that have significantly transformed and cultivated highly effective employees.

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