All You Need to Know About the Employment Contract in Singapore
By Trinity Hanson, Updated: 2023-05-24 (published on 2019-06-02)
What is an employment contract?
An Employment Contract is a contract by which a company hires an employee. The Employment Contract sets out detailed provisions on various aspects of employment.
When drafting an Employment Contract in Singapore, the employer should be aware of certain statutory provisions in determining the terms of employment, for example the amount of minimum wage (if applicable), rest days, paid annual leave, statutory holidays or maximum working hours (if applicable).
The purpose of employment contract is to make good relationship and working environment between employee and employer.
Employment Agreements Validation Criteria in Singapore
According to Employment act, employment agreement in Singapore cannot contain any terms less favorable than the minimum standards stated in the Employment Act. In case if the act is violated then the terms will be considered void and illegal.
For example, the Employment Act in singapore stipulates a minimum of 7 days’ paid annual leave for employees who have completed their first year of service. The employer therefore cannot include a term providing the employee with only 6 days’ of paid annual leave in the employment agreement.
The terms in agreement are free to include whatever terms parties wish into a contract, provided that these terms are not illegal. However, it is not quite that simple as you need to follow Employment Act. employment agreement should be valid and should be according to law before signing employment contract.
Key Employment Terms (KETs)
Key employment terms (KETs) is a compulsory document that refers to essential terms of employment contained in a contract of service between the employer and the employee.
Employers must issue KETs in writing to all employees:
- 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. This refers to the length of contract, not the number of days of work.
The KET should be Soft or hard copy, including handwritten within 14 days from the start of employment.
KETs must include:
|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:
For hourly, daily or piece-rated workers, employers should also indicate the basic rate of pay (e.g. $X per hour, day or piece).
|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:
|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 covers all persons (including foreigners) working under a contract of service in Singapore except:
- Manager or executive with monthly basic salary of more than $4,500.
- Domestic worker.
- Statutory board employee or civil servant.
Additionally, Part IV of the Employment Act, which contains provisions for working hours, days of rest and other conditions of service, only applies only to:
- A workman (doing manual labour) earning a basic monthly salary of not more than $4,500.
- An employee who is not a workman, but who is covered by the Employment Act and earns a monthly basic salary of not more than $2,500.
From 1 April 2019, there will be changes to the Employment Act. The changes include:
- Covering all employees under the Employment Act.
- Covering more non-workmen under Part IV of the Employment Act.
- Wrongful dismissal claims to be heard by ECT.
What happens if a contract is not in compliance?
If the employment in question is covered by the Act, AND the employer enters into an employment contract which does not follow the requirements of the Employment Act, then the employer will be found guilty of a criminal offence which is punishable with a fine of up to $5000, up to six months in prison, or both. Repeat offenders could face fines of up to $10 000, up to 12 months in prison, or both.
(government provide different grants for Business In Singapore)
Tips to know about employment act
Employers’ Minimum Legal Obligations
Having said that, Singapore’s Employment Act does provide some additional protections to employees who meet certain criteria, most notably those earning a monthly basic salary of S$4,500 or below. This category of employees is fully covered by the Employment Act and hence must receive minimum (and not less favourable) conditions offered by the Employment Act, which include things like paid public holidays and overtime pay.
There are also basic underlying legal obligations that cannot be contracted out, whether or not an employee is covered by the Employment Act. These include contributions to an employee’s Central Provident Fund (CPF) (for Singaporean citizens and permanent residents) and maternity leave (the minimum length of which varies depending on whether or not the employee’s baby is a citizen of Singapore).
There are also some fairly basic administrative requirements such as maintaining a record of employees and their salaries and deductions, i.e. payroll, and reporting workplace accidents.
As employment laws vary from country to country, it is advisable that you consult a lawyer to ensure you are compliant with local Employment Act. This can sometimes be quick and inexpensive given limited state intervention into the employer-employee relationship.
Employing foreigners in Singapore
Hiring foreigners will attract more administrative hassle than hiring Singaporeans and permanent residents. A company who wishes to hire foreign employees needs to hire a certain number of Singaporean citizens or permanent residents into the company, in any capacity.
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.
Companies must also note the Fair Consideration Framework (FCF) introduced in 2014 that requires you to first advertise the job vacancy on the national Jobs Bank for at least 14 calendar days.
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.
When Things Go Wrong in
Compared to many other neighbouring countries, it is relatively easy to fire employees in Singapore –there are no criteria that need to be met and no reasons that need to be given (other than if the employee is pregnant).
Practically speaking, most employees may only have recourse to informal methods of dispute resolution such as mediation at MOM or representations by their union, if any. Employees who are covered by the Employment Act may bring a complaint to the Commissioner of Labour within a certain time frame. It is even more difficult for foreign employees to successfully sue their employers as their termination also results in the cancellation of their visa; meaning that, in many cases, unless they are able to secure employment quickly, they will not be able to remain in Singapore to see through any claim against you (though it is possible to instruct for them to appoint lawyers abroad).
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 long-term investment to consult a lawyer (i) when drafting your company’s standard employment contract or (ii) to review the terms of your employment contract before you sign it (as an employee). 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.
Related Link: Employment Contract