Employment Contracts In Singapore: Everything You Should Know

by | Dec 1, 2023 | Blog

An employment contract in Singapore is a fundamental instrument that outlines the terms and conditions governing the relationship between an employer and an employee. It clarifies, ensures mutual understanding, and establishes expectations for both parties.

Given Singapore’s well-structured labour framework and dynamic workforce, understanding the intricacies of employment contracts holds significant importance.


The Legal Framework Surrounding Employment Contracts

Singapore’s primary labour legislation, the Employment Act, sets out the minimum terms and conditions for employment, as well as the rights and responsibilities of both employers and employees. This legislation offers a robust framework for ensuring fair treatment and practices within the workplace.

The act covers essential components like working hours, rest days, salary periods, notice periods, and various employee benefits such as sick and annual leave.


What Is An Employment Contract?

An employment contract, or an employment agreement, is a legally binding document between an employer and an employee. It specifies the key employment terms, covering various aspects like job responsibilities, remuneration details, probation period, and other mutually agreed terms and conditions.

While the Employment Act sets out the basic standards, the employment contract can provide additional benefits or stipulations if they do not contradict the act’s provisions. It’s common practice in Singapore for employers to clearly lay out every term to prevent ambiguities or misunderstandings in the future.

Key Differences Between Employment Contracts For Locals And Foreign Workers

While the foundational principles of the employment contract remain consistent, there exist some key differences between contracts for local and foreign workers:

  1. Work Permits and Validity: Foreign employees typically require relevant permits, such as the S Pass or Employment Pass, to work in Singapore. The employment contract will usually specify the terms related to the validity and renewal of these permits.
  2. Repatriation: Employment contracts for foreign workers often include clauses regarding the employee’s repatriation to their home country upon termination or completion of the contract.
  3. Benefits and Allowances: While medical benefits, annual leave, and sick leave are standard for all, some allowances or benefits might be exclusive to foreign workers, such as housing allowances or relocation benefits.

Tax Implications: Foreign employees might have different tax considerations, which can be detailed in the employment agreement to ensure compliance with Singapore’s tax regulations.

Essential Components Of An Employment Contract

An employment contract will cover many details depending on the job. However, a fair employment contract will have the following details:

Basic Information

Every employment contract in Singapore typically starts with the basic details. This encompasses the names of both the employer and the employee, the job title the employee will be taking on, and the date on which employment commences.

Job Scope and Responsibilities

An integral part of any employment agreement is the detailed description of the job’s scope and responsibilities. It clarifies what is expected from the employee and provides a benchmark for performance evaluations.

Remuneration Details

Central to the employment contract are the terms of remuneration. This section outlines the basic salary, additional bonuses, overtime pay, and other financial benefits. Furthermore, the employment contract should also specify the salary period, whether monthly, bi-weekly, or otherwise, and the chosen payment method through cheque, bank transfer, or cash.

Working Hours, Rest Days, and Overtime

This segment details the standard working hours an employee is expected to commit to and the designated rest days. It is common practice in Singapore to also mention any terms related to overtime, such as the pay rate and conditions under which it applies.

Probationary Period Terms

Many employment contracts include a probation period during which both the employer and the employee can assess the suitability of the working relationship. This section outlines the length of this period and the terms related to the evaluation and potential confirmation post-probation.

Employee Benefits and Entitlements

Benefits are an integral part of the employment contract. This includes annual and sick leave stipulations, pay computation if a public holiday falls on a rest day, and other types, such as parental or compassionate leave. The discussion of annual wage supplements should also be discussed.

Additionally, details about medical or retirement benefits and any other perks or insurances the employer provides are mentioned here.


Terms To Be Wary Of In An Employment Contract

Most employment contracts will have a list of terms that you should always double check. These are set within the contract to protect you and the employer’s business. This could mean the potential revelation of company secrets, termination clauses due to poor performance, and penalties to such that do not amount to dismissal.

  1. Restrictive Covenants: While restrictive covenants such as non-compete, non-solicitation, and non disclosure agreements are standard in many employment contracts, it’s vital to understand their implications. These clauses can limit your ability to work in certain areas or industries and protect the company’s proprietary information after leaving your job.
  2. Termination Terms: Termination of an employment contract can be a delicate matter. Therefore, understanding the terms related to the notice period and any severance pay is crucial. The Employment Act provides certain guidelines, but the specifics will be in your contract.
  3. Penalties for Breach of Contract: A critical section of the employment agreement highlights the penalties imposed if either party breaches the contract. Being aware of these can prevent unforeseen complications in the future.
  4. Dispute Resolution Mechanisms: In case of disagreements or employment disputes, the employment contract should lay down the mechanisms for resolution, whether through arbitration, mediation, or legal recourse.


Variations And Amendments

As businesses evolve, there might be a need to modify certain terms of the employment contract. As agreed upon by both parties, the correct procedures to enact these changes should be detailed in the contract.

Circumstances Under Which Changes May Or May Not Be Made

There are situations where altering the contract might be necessary and others where it isn’t permissible. The employment contract should define these scenarios to prevent potential conflicts.

The Necessity Of Mutual Agreement

Any variations or amendments to the employment contract require the mutual agreement of both the employer and the employee. Unilateral changes can be deemed invalid and could lead to legal disputes.


Termination And Expiry Of Contract

In Singapore, the termination of an employment agreement can occur for a variety of reasons. The Employment Act stipulates the conditions under which both an employer and an employee can validly terminate an employment contract.

For employers, common grounds include:

  • Misconduct of the employee.
  • Redundancy or the need for restructuring.
  • Unsatisfactory performance during the probation period.

Employees, on the other hand, can also initiate termination based on reasons such as:

  • Breach of employment contract terms by the employer.
  • Unsafe working conditions.
  • Non-payment or delayed payment of salary for an extended salary period.

It’s worth noting that while these are some common grounds, the specifics of each employment agreement might provide additional terms or clarity.

Procedures For A Fair Dismissal

Ensuring a fair dismissal is paramount in maintaining the employment contract’s sanctity and adhering to the Employment Act. The common practice in Singapore involves:

  1. Giving the appropriate notice period: Both parties should adhere to the notice period within the employment contract when initiating a termination. This period can vary based on the length of service and the employment agreement terms.
  2. Documenting reasons for dismissal: Especially in the case of misconduct or unsatisfactory performance, employers should maintain records as evidence of the grounds for termination.
  3. Conducting an exit interview: Though not mandatory, this step provides a platform for clear communication and understanding between both parties.

Rights Of Employees Upon Termination

Upon the termination of the employment contract, employees in Singapore have certain rights that employers must respect:

  1. Receiving outstanding wages: All due salary, bonuses, and other remunerations must be paid post-termination within the agreed salary period.
  2. Medical benefits: Depending on the employment contract and common practice in the industry, employees may be entitled to certain medical benefits even post-termination.
  3. Leave encashment: Unused annual leave and, in some cases, sick leave should be converted into cash and paid to the employee.


Conclusion On Employment Contract In Singapore

The employment contract outlines key employment terms, expectations, rights, and obligations that both parties agree upon.

A clear understanding of the clauses, especially around sensitive topics like termination and non disclosure agreements, safeguards the interests of both the employer and the employee.

Individuals must diligently understand their employment rights and responsibilities in Singapore in a fast-evolving employment landscape. The intricacies of the Employment Act and the various clauses in employment contracts can sometimes be complex.

If you face uncertainties regarding workplace issues, engaging with a professional lawyer is wise. Allow The Singapore Lawyer to help you understand the complexities of employment law and ensure your rights are upheld.

Contact us today and get a 30-minute free consultation.


Frequently Asked Questions About Employment Contract In Singapore

What Is The Minimum Notice Period Required For Termination In Singapore?

The notice period varies based on the employment contract. iIf unspecified, a reasonable notice period can range from 1 day to 4 weeks, depending on the duration of service.

Are Non-Compete Clauses Enforceable In Singapore’s Employment Contracts?

Non-compete clauses can be enforceable if deemed reasonable in scope, time, and geography, but they are subject to scrutiny by Singapore Courts.

Do Part-Time Employees Have Different Rights Under The Employment Act?

If an employee is only working less than 35 hours a week, they are considered part-time and will have prorated rights based on their working hours, but they are protected under the same Employment Act.

Is It Mandatory For Employers To Provide A Written Employment Contract?

While verbal agreements are valid, it’s recommended to have a written employment contract to clearly define the terms and protect both parties’ interests.

How Are Public Holidays Handled In Employment Contracts?

Employees are entitled to 11 paid public holidays annually; however, the employment agreement should specify the treatment of work on public holidays.

Can An Employer Make Deductions From An Employee’s Salary Without Consent?

Yes, deductions are allowed unless stipulated in the  employment contract, or with the employee’s written consent.

About the author

About the author

Jonathan Wong

Jonathan is the Founder and Managing Director of Tembusu Law. He is also the founder of LawGuide Singapore, a prominent legaltech startup which successfully created and launched Singapore’s first legal chatbot in 2017.