A Guide to Termination of Employment in Singapore

In Singapore, an employer or employee wishing to terminate the employment relationship may do so by terminating the contract of service. However, termination of employment requires certain legal obligations on the part of employers and employees. This is because termination of employment can expose employers to various risks if not done correctly, and proper procedures must be followed to ensure that there is no impact on your business. Thus, before either party decides to terminate the employment relationship, it is vital to consider the following points:

• What relevant legislation applies to the situation?
• What does the employment contract say about the termination?
• What are the dos and don’ts of employment termination in Singapore?

This article will help you understand the basic rules and regulations governing termination of employment in Singapore.

The Law Governing Termination of Employment in Singapore

The Employment Act is the primary law governing termination of employment in Singapore. It covers all employees except those in managerial or executive positions, domestic workers, seamen, and most government staff. For employees who are not covered by the Act, termination of employment guidelines must follow company policy and their employment contract. Note that it is a common practice in Singapore that these guidelines follow the law as set out in the Employment Act.

For additional information about the Employment Act, please refer to:

A Comprehensive Guide to Singapore Employment Act

The Employment Contract

Either an employer or an employee can terminate an employment contract. The contract itself usually determines how the termination will be effected and what notice is required, if any. In some instances, employment contracts terminate naturally, and the notification period does not apply.

Grounds for Employment Contract Termination 

The following are the circumstances in which a contract can be terminated.

1. Termination of employment initiated by employers

Some reasons why employers initiate employment termination are:

Unsatisfactory performance during probation

In Singapore, most employees start their employment on a probationary period (usually 3-6 months) and are appointed permanent employees upon completing the probationary period. However, employers are entitled to terminate the employment before the completion of the probationary period by providing notice or by paying salary in lieu of notice.

Breach of contract by the employee

An employer can usually terminate the employment contract if the express terms of the contract have been breached by their employee (for example, absent from work without the employer’s approval). In such cases, termination can be done without giving notice to the employee or paying a salary in lieu of notice.

Dismissal for employee misconduct

An employer may terminate the employment contract without notice or salary in lieu of notice if their employee is found guilty of misconduct. Although the law does not state the degree of wrongdoing that justifies dismissal, fault generally arises when an employee fails to meet their obligations. Common examples include unauthorized ownership of company property, abusive or disobedient behavior, negligence that raises questions about safety and security, etc.

Before terminating an employee for misconduct, the employer must investigate the employee’s wrongdoing. This investigation should include informing the employee of the error and providing the employee with an opportunity to present their case.

Dismissal of employees for reasons other than misconduct

There are certain common situations in which an employer may be forced to lay off an employee. However, such dismissal should be taken after careful thought and an adequate warning to the employee concerned. For example, an employer may terminate the employment contract due to poor job performance, illness, or disability to the extent that it harms the employee’s day-to-day work performance, mismatch with other employees to the degree that affects relationships at work, etc.

Employee transfer

An employment contract may be terminated by an employer who intends to transfer their employee to another employer (e.g., a subsidiary or associated company or an unrelated company). To do so, the employer must notify the employee in advance. However, please note that the employee has the right to accept or dismiss the transfer. 

Employee retirement

Employers can initiate termination of employment for employees who are approaching retirement age by giving notice following the employment contract terms. Under the Retirement and Re-employment Act, employers are now required to offer re-employment to eligible employees aged 62 up to age 67. However, the law does not provide for mandatory pensions. Thus, employees can continue to work beyond the statutory retirement age.

Employee retrenchment

There is no statutory framework for retrenching employees in Singapore, but employers are advised to handle retrenchments responsibly. Retrenchments usually occur when a company decides to close operations, sell a portion of its business, or undergo massive restructuring.

Employers are obliged to inform and provide information to the relevant authorities regarding the retrenchment of their employees. In addition, employers must also notify their employees of their employment termination, and the duration of the notice must be per the terms of the employment contract. In the absence of a notice period being previously agreed upon, the Employment Act stipulations will apply.

2. Termination of employment initiated by the employee

Below are the reasons why an employee may initiate their employment termination:

Resignation

An employee may terminate the employment contract by submitting a notice of resignation following the employment contract terms. In addition, the employee can also resign before their probationary period ends. To do so, they must give notice to the employer. In the absence of any express notice period, the notice period to be served would be dictated by the Employment Act.

Breach of contract by the employer

An employment contract is breached when the employer fails to pay the employee’s salary within seven days after the salary is due or asks the employee to perform work that is not in accordance with the terms of the service contract (usually referring to unsafe and risky work). In such cases, the employee is entitled to terminate the contract without giving notice.

Retirement

Employees approaching retirement age who wish to retire may terminate their employment prior to their 62nd birthday. Additionally, they are not obliged to accept their employer’s offer of re-employment mandated by the Retirement and Re-employment Act.

3. Natural termination of employment 

The following are some of the circumstances in which an employment contract terminates naturally:

Expiry of a fixed-term contract

A  contract terminates automatically upon its expiry. As such, if an employer wishes to hire their employee for the next term of office, they must renew the employment contract or make another one. 

End of a probationary period

An employee’s employment contract may terminate automatically at the end of the probationary period if the employer does not confirm employment.

Death of either party

An employment contract is terminated automatically upon the death of the concerned employee or their sole employer.

How to terminate an employment contract

An employment contract can be terminated in two ways: with notice or without notice. 

Terminating employment with notice 

If a contract specifies a notice period, an employee who resigns must give notice to their employee or pay compensation in lieu of notice. However, notices may be waived by mutual agreement between the employee and the employer.

When terminating an employment contract with notice, either the employee or the employer must give written notice. The termination letter should be signed by both parties to help prevent misunderstandings or disputes.

The terms of the employment contract typically determine the notice period. However, If the contract does not specify the notice period, the following minimum notice periods in the Employment Act apply:

CPF contribution during the notice period

Both the employer and the employee must make CPF contributions for the employee’s salary earned during the notice period while the employee is still considered part of the company. However, CPF contributions are not required for compensation in lieu of notice (notice pay).

Terminating employment without notice

Either an employer or an employee can terminate an employment contract without notice. However, to do so, they must pay the salary in lieu of notice. As explained above, termination without notice can happen in certain situations, such as breach of contract terms, failure to pay wages, and unreasonable absence.

For more information about the terms and conditions of employment termination in Singapore, please visit the Ministry of Manpower (MOM) website. And, if you have any inquiries regarding compliance requirements in Singapore or need help with company secretarial services, feel free to drop us an email. 

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