What is an employment contract?
An employment contract outlines detailed provisions on various aspects of employment.
When drafting an Employment Contract in Singapore, the employer must be cognisant of specific statutory provisions in determining the terms of employment, for instance, the amount of minimum wage (if applicable), rest days, paid annual leave, statutory holidays, or maximum working hours (if applicable).
The purpose of the employment contract is to foster a positive relationship and working environment between the employee and employer.
Singapore employment agreements validation criteria
Under the Employment Act, employment agreements in Singapore cannot include any terms less favourable than the minimum standards stated in the Employment Act. Terms that violate this act will be deemed void and illegal.
For example, the Employment Act in Singapore mandates a minimum of 7 days of paid annual leave for employees who have completed their first year of service. Consequently, an employer cannot stipulate a term in the employment agreement that provides the employee with only 6 days of paid annual leave.
The terms of the agreement may freely include any terms the parties wish, provided that these terms are not illegal.
Key Employment Terms (KETs)
Key Employment Terms (KETs) are obligatory documents that denote essential terms of employment contained in a contract of service between the employer and the employee.
Employers are required to issue KETs in writing to all employees who:
- Enter into a contract of service on or after 1 April 2016.
- Are covered by the Employment Act.
- Are employed for 14 days or more, referring to the length of the contract, not the number of days worked.
The KET should be issued in either soft or hard copy, including handwritten, within 14 days from the start of employment.
KETs must include:
| Number | Item description |
| 1 | Full name of employer. |
| 2 | Full name of employee. |
| 3 | Job title, main duties and responsibilities. |
| 4 | Start date of employment. |
| 5 | Duration of employment (if employee is on fixed-term contract). |
| 6 | Working arrangements, such as:
|
| 7 | Salary period. |
| 8 | Basic salary. For hourly, daily or piece-rated workers, employers should also indicate the basic rate of pay (e.g. $X per hour, day or piece). |
| 9 | Fixed allowances. |
| 10 | Fixed deductions. |
| 11 | Overtime payment period (if different from item 7 salary period). |
| 12 | Overtime rate of pay. |
| 13 | Other salary-related components, such as:
|
| 14 | Type of leave, such as:
|
| 15 | Other medical benefits, such as:
|
| 16 | Probation period. |
| 17 | Notice period. |
| 18 | (Optional) Place of work.
Used if the work location is different from the employer’s address. Although optional, you are strongly encouraged to include this info. |
Does the employment act in Singapore cover everyone?
The Employment Act in Singapore encompasses all individuals (including foreigners) employed under a contract of service within Singapore with the exception of:
- Managers or executives earning a monthly basic salary of more than $4,500.
- Seafarers.
- Domestic workers.
- Statutory board employees or civil servants.
Furthermore, Part IV of the Employment Act, which includes provisions for working hours, rest days, and other service conditions, applies solely to:
- Workmen (engaged in manual labour) with a basic monthly salary of not more than $4,500.
- Employees who are not workmen, but are covered by the Employment Act and earn a monthly basic salary of not more than $2,500.
Starting from 1 April 2019, modifications to the Employment Act entail:
- Extending the Employment Act’s coverage to all employees.
- Including more non-workmen under Part IV of the Employment Act.
- Hearing wrongful dismissal claims by the Employment Claims Tribunals (ECT).
What happens if a contract is not in compliance?
If an employment contract, under the Employment Act’s purview, fails to meet the Act’s stipulations, the employer commits a criminal offence, facing penalties of up to a $5,000 fine, up to six months in prison, or both. For repeat offences, penalties can increase to a $10,000 fine, up to 12 months in prison, or both.
What to look out for in employment contracts
Employers’ minimum legal obligations
While Singapore’s Employment Act extends additional protections to employees earning a monthly basic salary of S$4,500 or below, there exist fundamental legal obligations that cannot be circumvented, irrespective of whether an employee is covered by the Employment Act. These include contributions to the Central Provident Fund (CPF) for Singaporean citizens and permanent residents, and maternity leave entitlements, among others.
Administrative requirements such as maintaining payroll records and reporting workplace accidents are also mandatory. Given the variance in employment laws globally, consulting a legal professional to ensure compliance with the local Employment Act is advisable.
Employing foreigners in Singapore
Employing foreigners entails more administrative requirements compared to hiring Singaporean citizens and permanent residents. Employers are required to maintain a certain local-to-foreign employee ratio, which differs by industry and is subject to changes. Visa requirements for foreign employees depend largely on their salary levels.
The local to foreigner employee ratio for each employer varies depending on the industry you’re in and, in some cases, the nationality of the potential foreign hire in question and these quotas are subject to change.
You should check the Ministry of Manpower’s (MOM) website to find out the prevailing quota for your industry. The type of visa required will depend mainly on your employee’s level of salary.
Employers must also adhere to the Fair Consideration Framework (FCF), mandating the advertisement of job vacancies on the national Jobs Bank for at least 14 calendar days, among other guidelines to ensure fair employment practices.
The Tripartite Alliance for Fair Employment Practices (TAFEP) provides guidelines for employers when advertising for jobs. In general, TAFEP discourages advertisements that indicate a preference for foreign employees over locals (although it is acceptable to express preference for a local over a foreigner is acceptable), advertisements that indicate a racial preference or advertisements that indicate a preference for a younger employee (although expressing a preference for an older employee is acceptable).
While these are guidelines are positioned as non-mandatory, the MOM has been known to refuse visa applications for companies who fail to comply.
Employment contract template Singapore
Compared to its neighbours, Singapore offers a relatively straightforward process for terminating employment. However, the importance of an accurately drafted employment contract cannot be overstated, as it lays the foundation for fair and compliant terms of employment and provides necessary protections for both employer and employee.
While employees may file a suit in court for unfair dismissal, their arguments are usually restricted by the terms of the Employment Agreement they signed. This is why it’s so important to get this right from day one, and why it is a very wise to use an employment contract template drafted by real lawyers.
Moreover, having a lawyer experienced in contract management can help ensure that the terms of the employment contract are fair, compliant with applicable laws, and provide necessary protections for both parties involved.
