Singapore’s primary labor law, the Employment Act of 1968, regulates the employer-employee relationship within organizations, aiming to uphold high employment standards and protect working conditions for employees.
Adhering to employment regulations is crucial for Singaporean companies. Regardless of their size or industry, all businesses must comply with these laws when recruiting, overseeing, and ending employment contracts.
It’s crucial for employers to establish employment contract terms in alignment with employment law provisions. This article will outline the essential aspects of the Employment Act that companies should understand.
1. Applicability of the Act
In general, all employees working under an employment contract are covered.
The Act covers all individuals who are working under a contract of service with a company. It is valid both for local and foreign workers.
The terms stipulate that an employee can work:
- A full-time job
- A part-time job
- Temporarily
- Under a special contract
Individuals not covered by the Employment Act can find their terms and conditions in the employment contract they sign.
However, there are certain exceptions.
- Seafarers
- Domestic workers
- Civil servants and statutory board employees.
For instance, Part IV of the Act dedicated to rest days, hours of work, and other conditions of service, does not deal with managers or executives.
Who is covered under Part IV?
Part IV stipulates terms and conditions regarding rest days, hours of work, and other conditions of service.
It only applies to :
A workman (manual laborer) earning a basic monthly salary of not more than $4,500.
An employee who is not a workman, but is still covered by the Employment Act and earns a monthly basic salary of not more than $2,600.
Keep in mind that Part IV of the Act does not pertain to managers or executives.
Does the Employment Act cover foreigners?
Singapore’s Employment of Foreign Manpower Act (EFMA) regulates the employment of foreign employees and protects their well-being.
Furthermore, the Employment of Foreign Manpower Act outlines the requisite duties and responsibilities for hiring foreign workers in Singapore. It covers regulations, enforcement measures, as well as matters concerning offenses and work permits.
The EFMA lists different responsibilities related to work passes, applications, cancellations, medical insurance, levy, cancellation, and repatriation.
Foreigners covered by the Singapore Employment Act are entitled to:
- Salary
- Hours of work, overtime, and rest days
- Public holidays
- Annual leave
- Sick leave
As an employer, you are encouraged to have a solid written employment contract with foreign employees that covers these areas.
2. Employment Contract
The Employment Act directly influences the drafting of employment contracts. It explicitly prohibits any terms that are disadvantageous to employees, rendering such terms legally invalid. Therefore, employment contract terms must align with the Employment Act’s legal provisions. RBA can aid in creating a model employment contract that adheres to the terms of the Employment Act.
The employment contract holds significant legal importance as it delineates the employer-employee relationship. Typically, it outlines aspects like the employee’s job scope, salary particulars, overtime compensation, rest days, leave entitlements, and non-compete clauses.
3. Key provisions of the Act
The Employment Act guarantees certain benefits to employees. These benefits include annual leave, sick leave, maternity benefits, paid public holidays etc. Employers must ensure that they fulfil all such requirements in the Act and also draft the terms of the contract accordingly.
Specifically, employers must be compliant with the following provisions of the Act:
Minimum age
All employers have to be aware that an employee needs to be at least 13 years of age to be eligible for any kind of employment. However, the age limit differs depending on the employee’s type of work.
For example, an employer cannot engage individuals aged 16 or below in any workplace with hazardous conditions that can lead to detrimental effects when it comes to a person’s health.
Minimum wage
The wages are stipulated according to the agreed terms of the contract between the employer and the employee. The Employment Act does not prescribe any details regarding the minimum wage for employees.
Work hours
According to the Act, the usual working hours of an employee are 8 hours a day up to a maximum of 44 hours a week. On top of that, no employee should work consecutively for 6 hours a day without any break.
Employers have to confirm the hours of work in the employment contract. The work hours do not include break-time for any meals, drinks, or rest.
Rest days
All employees are entitled to one rest day each week without pay. The rest day is either Sunday or any other day of the week.
If an employer can’t allow an entire day for rest to a shift worker, the rest day has to be a continuous period of 30 hours.
Public holidays
Employees are guaranteed a total of 11 paid public holidays every year. The employer can replace the public holiday for another day by specifying the term in the agreement made between the two parties.
If a public holiday falls on any of the rest days, the next working day is considered a paid holiday. However, bear in mind that if an employee works on that day, the employer has to pay the employee full day’s pay.
Annual leave
An employee is guaranteed a paid annual leave if they have been working for the employer for at least three months. The number of days of annual leave is based on the years of service completed by the employee in the company.
For example:
For 1 year of service, an employee is entitled to 7 days of annual paid leave.
For 2 years of service, an employee is entitled to 8 days of annual paid leave.
For 8 or more years of service, the employee is entitled to 14 days of annual paid leave.
Sick leave
An employee is guaranteed paid sick leave. However, they have to meet the conditions listed below:
The employee must have been working for the employer for at least 3 months.
They must tell their employer about their absence within a timeline of 48 hours.
They need to submit a certificate by a company’s doctor or a government doctor.
The number of days of sick leave an employee is entitled to depends on the years of service completed.
Parental and maternity benefits
According to the Act, a working mother can claim paid maternity leave and working parents can claim paid child care leave upon fulfillment of certain conditions.
For an employee to claim leave of this kind, they must have completed at least 3 months in service. On top of that, the child for whom the employer provides such benefits has to be a citizen of Singapore.
Retirement
As per the Retirement and Re-employment Act, the mandated minimum retirement age is 62 years. Employers are prohibited from compelling employees to retire before this age. Moreover, individuals reaching retirement age can be re-employed until they reach 65 years. However, re-employment eligibility is exclusive to Singaporean citizens and permanent residents.
Retrenchment
Retrenchment refers to the involuntary termination of an employee’s position. According to the Act, employees are eligible for retrenchment benefits if they have served continuously with the employer for at least two years. However, the Act does not outline specific retrenchment benefits. Instead, employers and employees can agree upon these benefits mutually when signing the contract.
Termination
The employment contract must state the way in which either party can terminate the contract. A contract is terminated either by the employer or the employee. If there is no clause in the contract explaining the termination process, the termination provisions of the Employment Act are applicable.
The contract can be terminated either:
- With Notice
- Without Notice or
- On grounds of misconduct
The parties can terminate the contract on the basis of a written notice. However, both the employer and employee must follow the notice period in the contract. In case the contract does not specify any notice period the notice period of the Act is to be followed. Where either of the parties commits a material breach of any of the contractual terms, the contract can be terminated without any written notice.
Lastly, if any employee is guilty of misconduct (such as theft, dishonesty, or negligence) an inquiry should be held on the matter, pursuant to which the employee can be dismissed. The Act does not prescribe any procedure for an inquiry. However, as a general guideline, the employer must:
Inform the employee of the misconduct,
Ensure that the person hearing the inquiry is not in a position of bias, and
Give the employee an opportunity to present his case.
The Act states that during the inquiry procedure, the employer can suspend the employee from work for a maximum period of one week. In case the employee feels that he or she has been unfairly dismissed, the employee can appeal to the Employment Claim Tribunal (ECT) within one month of the dismissal.
Penalties
Not abiding by the regulations outlined in the Employment Act results in penalties. Each violation may incur a fine of $5,000, a 6-month imprisonment term, or both. For subsequent offenses, the fine can reach up to $10,000, with imprisonment for up to one year, or both.
Conclusion
Singapore has long been recognized as one of the best cities for business thanks in part to its non-bureaucratic, business-friendly labour laws. Entrepreneurs appreciate the high degree of transparency and reliability in business, economic and regulatory affairs in Singapore. A stable political structure with parliamentary democracy, a well-established judicial system, and the presence of strong domestic institutions with good corporate governance practices, have made the Singapore business environment very attractive to global investors.
