A Guide to Employee Termination in Singapore

Singapore is an at-will employment jurisdiction, meaning both an employer and an employee are entitled to terminate their employment. The process for this is usually set out in the contract of employment. However, lots of employment legislation in Singapore governs the rights and duties of both parties, even if the contract is at variance with these or remains silent.

An employment contract should comply with the relevant legislation and clearly set out what happens in the event of termination in specified circumstances. The contract can include additional terms and conditions, providing these don’t conflict with the employer and employee’s legal rights and duties.

Terminating employment incorrectly can leave both the employer and the employee open to legal action.

What does termination of employment mean?

Termination of employment means the end of an individual’s period of work with a particular employer. It can be instigated by the employee (voluntary) or against their will (involuntary).

The Employment Act (EA) in Singapore covers many employment matters, such as termination of service, and fixed-term contracts, where employment automatically ends at the term date. It also has provisions on notice periods, the giving of notice, how it should be executed, and what can happen during the notice period.

Termination with notice

Either party to the employment contract can give notice when they wish to end the formal employment relationship. Giving notice is the usual process when an employee wants to resign, or an employer wants to terminate their contract. The notice must be given in writing and is the same length for both the employer and the employee.

Typically, an employee will work out their notice period, which can vary from a month to three months, and even six months in some cases, depending on seniority. However, sometimes, the employer prefers that this doesn’t happen and agrees with the employee that they leave immediately with pay, waiving the notice requirement.

Whatever happens regarding notice, the employer should provide a formal letter stating that the contract is terminated; this is mandatory. If notice is given correctly and lawfully, neither the employer nor the employee must provide a reason for the contract termination.

Some employment contracts don’t include a specific notice period. In these cases, notice is usually calculated based on the length of service. The Singaporean Ministry of Manpower (MOM) has a helpful table which calculates the notice period according to the duration of employment if the contract is silent.

Sometimes, an employer is absolved of giving notice and can terminate an employment contract immediately; this would be in cases of the employee’s gross misconduct or the wilful breach by either party of a contract condition. Exceptions to giving notice are covered in Section 11 of the Employment Act.

Taking sick leave during a notice period

If the Employment Act covers the employment contract, any employee’s sick leave is treated as part of the notice period; an employer cannot claim short notice from their employee.

Whilst sick leave doesn’t impact the notice period, an employee remains contracted to their current employer until the last day of the period, so it is not usual to start new employment before the end of the notice term.

Termination without notice

Usually, if an employment contract is terminated without notice, either party must pay a salary in place of notice. An employee may wish to resign immediately, or the employer might want to terminate a contract without that employee working out their notice period for various reasons.

Whoever instigates the termination without notice is responsible for financial compensation equivalent to the salary which would have been earned during that period.

Certain events can prompt immediate termination or resignation, including the employer breaching a condition of the employment contract, such as failing to pay salary. Compensation can be payable in addition to any salary for the notice period.

If an employee remains absent from the workplace without a good reason or prior approval from the employer for more than two working days, the employer can terminate the contract without notice. This also applies to an absence of two working days if the employee has not informed the employer of the reason. 

When can an employer justify immediate contract termination without notice?

Some breaches of the employment contract’s terms and conditions justify immediate dismissal, so the employer is not required to give any notice. Typical scenarios include gross misconduct such as insubordination and disorderly, immoral or violent behaviour. Gross misconduct also extends to false information provided at the recruitment stage, which may not be apparent for months or even years.

The Ministry of Manpower defines this situation generally as an employee’s failure to fulfil the employment terms and conditions.

However, the employer must instigate an investigation and disciplinary procedure rather than merely rely on outright dismissal. During this time, the employee may be suspended under the Employment Act.

There is no formal procedure for an inquiry, so employers can conduct their investigations as they wish. However, if the process is not transparent or fair, they could be at risk of a claim for wrongful dismissal from their employee.

The employee should be told how the inquiry will work, including the people running it, and the timescales involved. An investigation is always best conducted by someone impartial to avoid any suggestions of bias. Employees should be advised of the exact nature of the allegations against them and be allowed to present their side of the story.

Employees should be paid at least half their usual salary during the suspension period. If an investigation shows no evidence of misconduct, then an employee must be compensated. An employee cannot be suspended for more than one week without the Commissioner for Labour’s approval.

If the investigation indicates that the suspension will be longer than one week, the employer must seek approval from the Commissioner for Labour using a detailed description of the inquiry. It should include the nature of the alleged misconduct and the reasons for extending the suspension period.

Failure to follow the correct process could allow an employee to bring a case for wrongful or unfair dismissal, even if the grounds for termination without notice are fully justified.

If the investigation concludes that there is evidence of gross misconduct, the employer can terminate the contract immediately without any requirement to give notice. There is also no obligation to pay salary in lieu of notice in this situation.

Wrongful dismissal

Employers can validly dismiss employees for breach of their contract of service. However, employment law protects employees from situations where their employment is unfairly terminated, defining their rights and what happens next.

If an employee is dismissed without sufficient cause, it could constitute wrongful dismissal. Clear examples of wrongful dismissal include termination of employment based on:

• Race
• Religion
• Age
• Marital status
• Disability
• Pregnancy

What can an employee do in a case of wrongful dismissal?

Dismissal means an employer has ended an employee’s contract of employment either with or without notice. There may be established evidence of gross misconduct or none.

Employees who believe they have been wrongfully dismissed are entitled to bring a claim against their employer. The claim can be brought in court or through the mediation service offered by the Tripartite Alliance for Dispute Management (TADM).

A one-month window to file a claim with TADM runs from the last day of employment. Claims made via TADM can be up to S$20,000. There is also the option of bringing a claim up to S$30,000 using the Tripartite Mediation Framework with union assistance under the Industrial Relations Act.

Cases that the TADM does not resolve can be appealed at the Employment Claims Tribunal (ECT). If the wrongful dismissal is based on age, the claimant should take their case to the MOM.

Successful claimants can expect to be offered reinstatement and compensation for any income lost due to the wrongful dismissal or paid a sum in compensation.

Collective dismissals

Singaporean employers who want to reduce their workforce via a retrenchment exercise must inform the Ministry of Manpower if they have at least ten employees and have retrenched five or more employees within any six-month period.

Employers should comply with the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment issued by TAFEP (the Tripartite Alliance for Fair and Progressive Employment Practices). This means following the termination provisions in each employee’s contract regarding any notice period and payment in place of notice.

Final thoughts on employee termination in Singapore

Terminating service, particularly on the part of the employer, requires care to avoid breaching an employment contract or infringing legislation.

A starting point is good contract drafting, which clearly sets out the rights and obligations of both parties. Robust processes for investigating wrongful conduct and a disciplinary procedure can help protect employers from employee claims for wrongful dismissal.

Specialist legal advice is always available to help with contract drafting and management of employment termination disputes and claims.