Guide to Employment Contracts in Singapore + Key Elements

An employment contract in Singapore is a formal agreement that specifies the conditions of the employment relationship once the applicant joins a company.

Normally, a contract stating the agreement must be signed by both employee and the employer.

Typically, a written employment contract contains all the information that both the employee and the employer should be aware of before the start of the employment relationship.

The rights and obligations of both parties are usually included in these details.

Written contracts are detailed legal documents that set forth the specifics of the employment arrangement.

A formal employment contract may not always be issued by an employer, and this is also common. The applicant may, however, still receive textual information about the employment. Even though it appears more casual or informal, this type of document might still act as a contract if one is not given formally.

WHO DOES THE SG EMPLOYMENT ACT APPLY TO?

In general, parties are allowed to contract in whatever way they see fit as long as they abide by the Employment Act and certain restrictions. 

Not all employees are covered under the Singapore Employment Act. Instead, it only applies to “workers” as that term is used in the Act. The following specifically isn’t covered by the Employment Act:

• Managerial and executive positions are those in which a person has direct authority over or influence over decisions regarding the hiring, firing, promotions, transfers, rewards, or disciplinary actions of other employees. They may also have primary responsibility for the management and operation of the company. 
• It also applies to professionals who perform duties equivalent to or similar to those of managers or executives and who have completed postsecondary education in addition to their specialised knowledge or abilities. These professionals include accountants, dentists, doctors, and lawyers.
• Seamen, Domestic Workers
• most government employees

Additionally, under Part IV of the Employment Act, workers making less than S$ 2,600 per month are given additional protection regarding “Rest Day, Hours of Work and Overtime, Public Holidays, Annual Leave, Sick Leave, Retrenchment Benefits, Retirement Benefits, Annual Wage Supplement and Other Variable Payment.”

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SALARY, BONUSES, & BENEFITS: STATUTORY REQUIREMENTS & COMMON PRACTICES IN SINGAPORE

Salary & Bonus

• Statutory Requirement

The minimum wage that each employee must get is not governed by the Employment Act. In other words, the compensation is negotiable between the company and the employee and has no minimum obligation. Nonetheless, the salary must be paid within 7 days of the end of the wage period at least once per month.

If applicable, overtime pay must be paid within 14 days of the designated wage period. The Employment Act of Singapore does not stipulate that bonuses be paid.

• Common Practice

Naturally, the position and abilities necessary will affect an employee’s pay. In Singapore, giving annual bonuses that are at least equal to one month’s worth of pay has become customary. According to corporate policy, the bonus amount might vary from employee to employee and is typically based on both the employee’s and the firm’s success. 

The employment contract will typically provide specific information about the bonus policy. Employees in Singapore frequently receive bonuses that are 2-3 times their monthly salaries when the economy is doing well.

Public Holidays

Given the multicultural variety of Singapore, public holidays are made to accommodate a wide range of ethnic communities. They include Christmas Day, Good Friday, Labor Day, Vesak Day, National Day, Hari Raya Puasa, Deepavali, and Hari Raya Haji.

• Statutory Requirement

The Employment Act stipulates the following basic standards for workers making less than SGD 2,600 per month. The employee is entitled to paid time off on public holidays, albeit the exact dates may be changed to any other day if both the employer and employee agree to it.

If a public holiday falls on a Sunday or other rest day, the following Monday will be treated as a paid holiday. In addition, if the public holiday falls on a day when the employee is not contractually compelled to work, they must make up the time by giving them an extra day off or paying them extra wages.

• Common Practice

The Employment Act does not impose any regulations governing public holidays for employees making more than SGD 2,600 per month. Nonetheless, as is customary in Singapore, all employees receive the same reward for public holidays.

Hours of Work & Overtime

• Statutory Requirement

Only employees making less than SGD 2,600 per month are covered by the Singapore Employment Act’s regulations on hours of work and overtime. Workers who are subject to the Employment Act in the manner described above are only allowed to work a maximum of 44 hours a week. 

The Ministry of Manpower in Singapore has strict regulations governing working hours and the circumstances surrounding overtime. An employee is only allowed to work a maximum of 8 hours per day or 44 hours per week. Employees are not permitted to labour continuously for more than six hours, according to the Employment Act. 

Employees are only permitted to work a total of 12 hours a day, including overtime, unless there is an actual or imminent accident, a national security or defence-related emergency, or unforeseen circumstances that force an interruption of work. 

On the other hand, shift employees are never permitted to work more than 12 hours every day. Workers are allowed one rest day per week, which is not paid time off and is regarded as a non-working day from midnight to midnight. 

The maximum amount of time between two rest days is 12 days.

• Common Practice

The Employment Act’s aforementioned requirements do not apply to employees making more than S$ 2,600 a month; instead, the employee and the employer are free to negotiate their own terms. 

In Singapore, office workers often work Monday through Friday, from 9 am to 6 pm or 7 pm, depending on the sector and the company’s policies. 

Singaporean workers frequently put in 9 to 10 hours throughout the week and a half-day on Saturday.

Sick Leave

• Statutory Requirement

The Employment Act outlines the following statutory sick leave entitlements for workers making less than SGD 2,600 per month.

• • The employee is entitled to 14 days of annual sick leave and 60 days of hospitalization leave if they have worked for the company for at least six months (inclusive of the 14 days).
  • The employee is entitled to 11 days of annual sick leave and 45 days of hospitalization leave if they have worked for the company for at least five months but less than six (inclusive of the 11 days).
  • The employee is entitled to 8 days of annual sick leave and 30 days of hospitalization leave if they have worked for the company for at least 4 months but less than 5 months (inclusive of the 8 days).
  • The employee is entitled to five days of annual sick leave and fifteen days of hospitalization leave if they have worked for the company for at least three months but less than four (inclusive of the 5 days).

The employee is required to present a medical certificate signed by a government doctor, a doctor from an authorized hospital, or a company doctor (if one is appointed).

• Common Practice

The minimum criteria of the Employment Act as stated above are generally met by sick leave benefits for all corporate employees in Singapore.

Annual Leave

• Statutory Requirement

The Employment Act specifies the required annual leave for workers making less than SGD 2,600 per month.

The employee must have worked for the employer for at least three months in order to be eligible for yearly leave.

The length of annual leave depends on the terms of the contract between the employee and your employer, but it must be at least seven days in the first year and one more day for each year of service after that.

A half-working day of annual leave counts as one full day of leave, unless the employment contract specifies otherwise.

Unless otherwise stated in the employment agreement, the employee’s annual leave will be forfeited in the event of termination for cause, excessive absences from work (more than 20% of the scheduled working days in a month), or if the leave is not used up within 12 months of every year of continuous service.

• Common Practice

All employees in Singapore receive an average of 14 days of annual leave every year, which is far more than what is needed by the Singapore Employment Act.

Maternity and Childcare Leave

• Statutory Requirement

Simply put, women who have been employed for more than three months can be qualified for paid maternity leave benefits. A total of 16 weeks of leave are available to qualified female employees. 

Employees on maternity leave cannot be fired by their employers. If a notice of termination is delivered within three months of an employee’s delivery without good reason, the employer must pay the employee for the whole period of maternity leave. 

If a qualified female employee has worked for the company for more than three months and is the parent of a child under the age of seven, she is also entitled to 6 days of annual childcare leave in addition to her right to maternity leave.

• Common Practice

Benefits for maternity and childcare leave for employees of companies in Singapore often match the aforementioned Employment Act’s minimum standards.

Health Insurance

• Statutory Requirement

In Singapore’s Employment Act, offering private health insurance coverage to employees is not required by law. As a basic level of insurance protection for all Singaporeans, working professionals who are Singapore Citizens or Permanent Residents are automatically given Medishield, a low-cost medical insurance. 

A specific percentage of payments made to the CPF, the employee’s retirement fund, are automatically transferred to the employer’s Medisave account. The Medishield insurance program aids Medisave account holders and their families in covering the expense of medical care for serious illnesses or old age. The Medisave accounts are used to pay the Medishield premiums.

• Common Practice

Benefits for health insurance are largely dependent on the employer. In contrast to smaller businesses, the majority of large corporations in Singapore provide their workers with additional private medical insurance benefits.

Employers may wish to offer private healthcare insurance benefits through any of the numerous private insurance companies in Singapore in order to provide a higher level of healthcare benefits than what is offered under the basic Medshield scheme and to provide medical insurance benefits to Employment Pass holders.

Refer to the Singapore employment pass scheme for more information.  

Employment Termination

• Statutory Requirement

Either party may end the employment agreement by giving the other party written notice or by paying salary in place of notice. The number of days for the notification period is not specified by law. The notice time must be the same for both parties and is based on the terms of the employment contract.

Any accumulated yearly leave may be used by the employee to shorten the notice period. If the other party willfully violates the terms of the employment contract, either party may terminate it without giving the other party prior notice.

• Common Practice

It is customary to give 2 weeks’ notice during the probationary phase and 1 month’s notice once the job has been confirmed. Despite the fact that both parties may offer income in lieu of notice under the Employment Act, the Singapore courts have maintained that an employee cannot end a contract by offering his salary in lieu of notice due to the practical challenges an employer would encounter.

Probation Period

• Statutory Requirement

There are no provisions regarding an employee’s probationary period under the Employment Act.

• Common Practice

Employees frequently have to go through a probationary period that lasts between three and six months. A shorter notice time for termination typically reflects the probationary period.

Retrenchment/Layoffs/Downsizing

• Statutory Requirement

According to the Singapore Employment Act, employees who make less than SGD 2,600 per month must abide by the following general rules:

• On the final day of employment, the employer is obligated to pay all wages and benefits owed to the workers.
• The notice period must follow the terms of the employment contract.
• Retrenchment benefits ought to be given to workers who have worked for the company for at least three years. The type and value of these benefits are left up to the employees and employer’s mutual agreement and are not governed by the Employment Act. According to the Employment Act, a worker who has been with a company for less than three years is not eligible for retrenchment payments.

The Ministry of Manpower advises employers to carry out any retrenchment exercise responsibly because it has detrimental effects on the workforce, including loss of skills, energy, morale, commitment, and degradation of physical and mental health as a result of employees withdrawing physically and emotionally.

• Common Practice

Retrenchment benefits in Singapore are frequently based on the company’s size and financial standing. A small business might not be able to provide more than what is necessary to meet the regulatory standards mentioned above. It is best to include the specifics of retrenchment benefits in the employment contract to prevent any disputes and misunderstandings.

Education & Training

• Statutory Requirement

The provision of perks for education and training to employees of Singaporean companies is not mandated by law.

The Ministry of Manpower generally encourages companies to offer their staff members chances for training and development in order to increase job competency and open up the possibility of career promotion. The Singaporean government also offers a number of programs to help offset the cost of training and skill development.

• Common Practice

Offering employees benefits for training and skill upgrades is not a common practice. Typically, it depends on the size of the firm, the type of business, and the class of employees.

Central Provident Fund (CPF) Contributions

• Statutory Requirement

The employer is obligated to make CPF fund contributions for employees who are Singapore citizens or permanent residents. The employee and the employer both make monthly contributions. By the 14th of the next month, the employer must send the monthly payment, which includes both the employer’s and the employee’s respective payments.

Then, the employee’s share is subtracted from the pay. Employer and employee CPF contribution rates are limited to 16% and 20%, respectively, and may be lower depending on the employee’s age, status as a permanent resident, and other circumstances. For foreign workers in Singapore with an Employment Pass or Work Permit, there is no CPF contribution.

• Common Practice

Common usage does not vary from the statutory requirement for CPF contributions in any way.

Non-Statutory Benefits and Perks

• Healthcare, well-being and personal benefits 

Several Singaporean businesses provide medical insurance plans that include dependents and often cover hospitalisation and personal accidents.

• Relocation package

Most employers offer relocation benefits to workers who have to relocate to Singapore with their families. An expat compensation package frequently includes the following benefits: paid delivery of personal items, paid plane travel, free or heavily discounted accommodation, payment of energy bills, paid childcare, and paid school fees for children.

Employees may be hired on “full expat” terms, “partial expat” terms, or “full local” terms. Employers frequently pay for employees to stay in hotels or serviced apartments for a set amount of time while they look for suitable housing.

• Per Diem 

Several employers who offer positions that require travel offer a daily stipend, a transportation stipend, or reimbursement for actual travel expenses. The per diem amount varies depending on where the employee is going.

• Employee stock purchase plans

Some companies provide employee stock purchase plans, especially to senior employees.

Additional benefits could be paid corporate memberships, sponsorship of educational and training programs for employees, restaurant discount cards, mobile phone plans, paid gym/club memberships, organisation of sporting events, team outings and parties, referral bonuses, sabbaticals, etc.

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HOW TO NAVIGATE THE SINGAPORE EMPLOYMENT CONTRACT?

• Study the law

This is the initial and most crucial action that the applicant should take. Before signing an employment contract or any other type of contract, they might wish to speak with a lawyer. They can do this by consulting the job contract page on MOM’s website.

• Understand renewal process

The contract should specify when the job term expires and the options the applicant has for renewing it. One-way renewal clauses are present in some contracts, requiring just the consent of one party to renew, while joint renewal clauses call for the consent of both parties. Some contracts also don’t renew or renew automatically.

Reviewing this section of the contract is a good idea, especially if the agreement is subject to automatic renewal. This is due to the fact that any term negotiations should take place before a contract’s expiration or renewal.

• Research salary average

It’s usually a good idea to look into average salaries for the particular industry so one can be sure they are getting paid fairly. To obtain a sense of typical pay plans in the profession, look up average salaries for comparable positions in the area. 

• Keep a copy

Always keep a copy of the signed employment contract for your records.

• Follow the terms

Once you have signed the employment contract, it is important to follow the terms and conditions outlined in it, including any notice periods, confidentiality agreements, and non-compete clauses.

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ADVANTAGES OF THE SINGAPORE EMPLOYMENT CONTRACT

• Clarity and certainty – An employment contract provides clarity and certainty for both the employer and employee regarding the terms and conditions of employment.
• Protection of rights – The employment contract provides legal protection for the rights of both the employer and the employee.
• Prevention of misunderstandings – The employment contract helps prevent misunderstandings and disputes between the employer and employee by setting out clear expectations and obligations.
• Flexibility – Employment contracts can be tailored to the specific needs of the employer and employee, allowing for flexibility in the terms and conditions of employment.
• Compliance with legal requirements – Employment contracts ensure compliance with legal requirements such as the Employment Act, which sets out the minimum requirements for employment terms and conditions in Singapore.

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DISADVANTAGES OF THE SINGAPORE EMPLOYMENT CONTRACT

• Limited negotiation – In some cases, employees may not have much negotiating power when it comes to the terms of the employment contract, especially in industries with high competition.
• Limited flexibility – While employment contracts can provide flexibility, they may also limit the ability of both parties to make changes to the terms of employment.
• Potential for disputes – Even with a well-drafted employment contract, disputes can still arise between the employer and employee, which can be time-consuming and costly to resolve.
• Uncertainty – If an employment contract is not drafted clearly or does not cover all necessary terms and conditions, it can create uncertainty and confusion for both parties.
• Cost – Legal advice and drafting an employment contract can be expensive, particularly for small businesses or individuals who may not have the resources to hire legal professionals.

Reach out to us at Relin Consultants for further assistance.