At a glance: termination of employment in Singapore

Termination of employment

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Employees covered by the Employment Act (EA) may now only be dismissed purely contractually, or with ‘just cause or excuse’. Aggrieved employees may lodge a claim before the Employment Claims Tribunals (ECT) for reinstatement or compensation, notwithstanding that the employee may have received full contractual notice or payment in lieu of notice. However, professionals, managers and executives (PMEs) will not be statutorily entitled to bring a wrongful dismissal claim within the first six months of their employment if they were dismissed with notice, or with payment of salary in lieu of notice; the same is not true for non-PMEs, who can bring a claim for wrongful dismissal at any time, regardless of whether they receive notice (or payment in lieu). If the employee’s claim falls outside the ECT’s jurisdictional limit, the employee may also bring a claim in court for such compensation.

The Tripartite Guidelines on Wrongful Dismissal recognise the employer and employee’s right to contractually terminate employment with notice (or payment in lieu of notice), and provide that dismissals with notice (or payment in lieu) are presumed not to be wrongful if no other reasons are provided for the termination or dismissal.

Further to this, however, the presumption that the dismissal is not wrongful may be displaced if the employee is able to substantiate a wrongful reason for the dismissal, such as discrimination (including on the basis of age, race, gender, religion, marital status and family responsibilities or disability), the deprivation of an employment benefit or owing to an employee exercising his or her statutory rights. The Tripartite Guidelines also provide that where an employer has provided a reason for dismissal with notice, but the reason given is later proven to be false, the dismissal may then be wrongful.

Other legitimate reasons that may be given for dismissing an employee with notice include poor performance or redundancy; however, this is provided that the reasons given are true. In the case of poor performance, the employer would have to substantiate the employee’s poor performance with documented proof.

Redundancy occurs when the employer has excess manpower, the company is undergoing restructuring, the old job no longer exists (or will no longer exist) or the employee’s job scope has changed. In such cases, employers should have regard to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment. An employee may potentially be wrongfully dismissed if the employer’s reason for dismissal is, in fact, false; for example, if the employer stated that the dismissed employee’s old job no longer exists, but later employs a new employee to replace the dismissed employee in the same position.

The Tripartite Guidelines on Wrongful Dismissal further provide that misconduct is the only legitimate reason for dismissal without notice (or payment in lieu). Even then, dismissal should only occur after ‘due inquiry’.

Employers should also bear in mind that dismissal under the EA includes ‘the resignation of an employee if the employee can show, on a balance of probabilities, that the employee did not resign voluntarily but was forced to do so because of any conduct or omission, or course of conduct or omissions, engaged in by the employer. This is a statutory recognition of the concept of ‘constructive dismissal’, and employees may accordingly be regarded as having dismissed or terminated even if the employee had resigned.

The jurisdictional limit for claims brought before the ECT (and the Tripartite Alliance for Dispute Management (TADM)) is S$20,000 per claim (or S$30,000 per claim if the employee has gone through union-assisted mediation), and the ECT may order the employer to reinstate the employee to his or her former employment or compensate the employee with his or her lost wages or both. It should be noted that an employee may potentially bring both a salary-related claim and a wrongful dismissal claim before the ECT (effectively claiming S$40,000, or S$60,000 in cases of union-assisted mediation, in aggregate).

Claims can only be referred to the ECT after parties have gone through mediation at the TADM.

The above marks a further shift for Singapore away from pure ‘at-will’ employment. Although the right to contractual terminations (both for the employer and employee) is preserved, employers should now exercise a larger degree of responsibility and caution when terminating employees to ensure that their conduct does not attract claims of wrongful dismissal. It will also require a change to Singapore’s common law and jurisprudence on the subject. Before the changes to the EA on 1 April 2019, the Singapore courts had taken the position that employees who have been wrongfully dismissed are only entitled to salary in lieu of notice as this would be what an employee would be contractually entitled to had the employee been terminated in accordance with the contract instead of being wrongfully dismissed (since such employees would have had no further recourse at law for wrongful dismissal). This is unless the wrongful dismissal also resulted in a loss of other benefits, such as deferred bonuses or vested share options, in which case the claim could include such other benefits as well. It is now clear, however, that the ECT and the courts may award compensation for wrongful dismissal per se over and above salary in lieu of notice in appropriate cases.

In this respect, the Employment Claims Regulations 2017 provide that, where wrongful dismissal is made out, the amount of compensation to be awarded by the ECT is to consist of compensation for:

• the employee’s loss of income, subject to a maximum of three months of the employee’s gross rate of pay; and
• the harm caused to the employee by the ex-employer from the wrongful dismissal.

With regard to the latter, the amount of compensation for harm caused to the employee is to be computed using a base amount not exceeding two months of the employee’s gross rate of pay, which may increase or decrease by 50 per cent of the base amount, depending on the aggravating or mitigating factors at play. Examples of such aggravating factors include the former employer’s conduct of the wrongful dismissal in a humiliating manner or in a manner that caused physical harm to the employee, or any false accusation or allegation used by the former employer as a ground for wrongful dismissal. Conversely, mitigating factors may include any misconduct or poor performance of the employee or insubordination by the employee that, while not providing just cause or excuse, or sufficient cause for the dismissal, was taken into account by the former employer in dismissing the claimant.

The total amount an employee may claim for wrongful dismissal at the ECT (not including any other claims that the employee may have) would effectively range from zero to six months of basic salary, subject to the overall jurisdictional claim limits under the ECT. This compensatory framework is, therefore, more suitable for employees who are lower fee earners rather than high-earning PMEs (whose recourse would then be with the courts, who should broadly apply the same statutory principles notwithstanding the lack of case law on this, as well as the principles in the Tripartite Guidelines on Wrongful Dismissal). Moving forward, PMEs may also be further incentivised to become unionised employees in the interest of having a higher jurisdictional claim limit applicable to them under the ECT. Employers and employees alike may expect further guidance from published ECT or court decisions.

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

The EA allows employers or employees to provide notice to terminate the contract of employment or to provide payment in lieu of notice (employers should, however, have just cause or excuse when dismissing an employee). Where the employment contract is silent as to the relevant notice period, the EA prescribes minimum notice periods according to the employee’s length of service:

• one day’s notice for employees employed for less than 26 weeks;
• one week’s notice for employees employed between 26 weeks and two years;
• two weeks’ notice for employees employed between two and five years; and
• four weeks’ notice for employees employed for five years or more.

These periods can be (and in practice often are) extended by mutual contractual agreement.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

The EA allows for termination of the employment contract without notice in the event of any wilful breach by the other party of a condition of the employment contract. An employer may also dismiss an EA employee after due inquiry without notice on the grounds of misconduct inconsistent with the employee’s obligations and conditions of service (ie, for cause). Although the term ‘due inquiry’ is not defined under the EA, the High Court, in Long Kim Wing v LTX-Credence Singapore Pte Ltd (2017) SGHC 151, held that due inquiry comprises more than merely making inquiries and conducting an investigation, and involves informing employees concerned of the allegations and evidence against them. Although this case concerned a then non-EA employee whose contract expressly gave the employer the right to summarily terminate his or her employment after due inquiry, it should be noted that the website of the Ministry of Manpower (MOM) also provides general guidelines for holding an inquiry (to which the High Court in this case referred). Recourse is available where an employee feels as though he or she has been wrongfully dismissed.

The EA also allows for termination of the employment contract without notice in the event of any wilful breach by the other party of a condition of the employment contract. Although the EA does not expressly require the employer to hold a due inquiry before summarily dismissing the employee on such grounds, given the introduction of the Tripartite Guidelines on Wrongful Dismissal, which now provide that an employee may only be dismissed without notice (or payment in lieu of notice) on the grounds of misconduct and after a due inquiry has taken place, employers should, as a matter of prudence, treat wilful breaches of the employment contract as instances of misconduct if they intend to dismiss the employee without notice, and conduct a due inquiry first.

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

The right to severance pay is not statutorily provided for in Singapore except for employment assistance payments (payable under the Retirement and Re-Employment Act (RRA) to employees between 62 to 67 years of age whose employment is terminated and who are not re-employed. Any right to (and calculation of) severance pay will have to be expressly provided for in the employment contract (or a collective agreement, in the case of unionised employees).

Part IV of the EA currently provides that an employee covered under this Part is not entitled to retrenchment benefits unless he or she has been in continuous service with an employer for two years or more. However, this is a minimum requirement and does not automatically entitle the employee to any retrenchment benefit or severance payment in the absence of an express contractual provision granting this in his or her employment contract or collective agreement.

Employers may (and often do) still choose to pay severance even in the absence of contractual obligations for reasons of morale, reputation, industry norms or consistency with group offices in other jurisdictions. In cases of redundancy or retrenchment, employers should also have regard to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment. It is also possible that the payment of severance may assist an employer’s position that the relevant employee has been terminated on account of redundancy, while a lack of severance pay may prejudice such an employer’s position (in the event of a wrongful dismissal claim). Again, further guidance may potentially be had from published ECT or court decisions on the matter moving forward.

Often, a dispute will arise in respect of the effect of termination on bonus payments. In this regard, the High Court in Leong Hin Chuee v Citra Group Pte Ltd & Anor (2015) 2 SLR 603 commented that even where such bonus payments are contractually stipulated to be payable at the employer’s sole and absolute discretion, the implied duty of mutual trust and confidence may oblige an employer to exercise its discretion towards an employee in a bona fide and rational manner. That said, the Court noted that much will depend on the intention of the employer and employee, as reflected in the terms of the employment contract and the circumstances of the case. In this respect, making such payments subject to the ‘sole and absolute discretion’ of the employer at least helps to preserve some discretion for the employer on whether to make such payments.

Are there any procedural requirements for dismissing an employee?

Employers are obliged to conduct a due inquiry before dismissing any employee covered by the EA without notice on grounds of misconduct. In any event, employers should only dismiss employees with just cause or excuse, unless this is being done purely contractually, and must not do so for reasons of discrimination, deprivation of employment benefits or for exercising statutory rights, which would amount to wrongful dismissal.

Section 22 of the EA provides that the total sum due to an employee who has been dismissed shall be paid on the day of dismissal or, if this is not possible, within three working days thereafter. However, section 24 provides that no payment of salary or any other sum due to a foreign employee on termination of service shall be made to the employee by the employer without the permission of the Comptroller of Income Tax (ie, the withholding tax element). An employer shall immediately give notice of a termination of service to the Comptroller of Income Tax, and the payment of the salary or other sum due to the employee shall then be paid within 30 days of such notice being given to and received by the Comptroller of Income Tax (after the employer deducts the necessary taxes payable to the Inland Revenue Authority of Singapore and pays these direct to the Authority).

Beyond termination, employers should also be mindful of exercising reasonable care when writing references or recommendations for former employees. In Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd (2016) 4 SLR 1124 (Ramesh Krishnan), an employer was found liable to pay damages to an employee arising out of a misleading letter of reference (with damages eventually assessed at over S$4 million, although that was very much due to the facts of the case as the employee was a high earner). The Court of Appeal, in Ramesh Krishnan, stated that a standard of care was expected of employers when writing a reference for both current and former employees. Employers must ensure that the facts stated in a reference are true and that any opinions expressed in the reference are based on and supported by facts that are true. Further, employers must also ensure that the reference as a whole does not give an unfair or misleading overall impression of the employee, even if the discrete pieces of information within the reference are factually correct. Misleading references can also potentially result in an aggravated level of compensation for wrongful dismissal.

In what circumstances are employees protected from dismissal?

Employers cannot dismiss female employees under the Child Development Co-Savings Act or the EA during maternity leave. They also cannot issue a notice of termination of employment in a manner that results in a female employee being dismissed during her maternity leave (i.e. where the notice period expires during the maternity leave period).

As for older employees, the RRA makes it an offence for employers to dismiss or terminate the contracts of employees below the statutory retirement age of 62 on the sole grounds of age (although this does not affect the employer’s right to terminate the employment for poor performance, ill health or misconduct). 

There are also provisions in the law which protect employees from wrongful or unfair dismissals. Employees covered by the EA may be dismissed contractually, or for ‘just cause or excuse’. The Tripartite Guidelines on Wrongful Dismissal released on 1 April 2019 (to which the ECT and Courts are statutorily required to have regard), expressly provide that dismissing an employee because of discrimination, for the deprivation of an employment benefit, or owing to an employee exercising his or her statutory rights is wrongful. If an employer has provided a reason for dismissal with notice, and the reason given is later proven to be false (including if no reason is provided under a contractual dismissal but there is in truth a reason, e.g. poor performance), the dismissal may likewise be wrongful.

If an employee feels that he or she has been wrongfully dismissed, whether or not notice has been provided, the employee can commence a wrongful dismissal claim before the ECT and seek either compensation or reinstatement. Claims for reinstatement of employment are relatively less common though, especially since the initial dismissal would already have negatively impacted the employer-employee relationship.

These aside, there is no other absolute statutory prohibition against dismissal.

Are there special rules for mass terminations or collective dismissals?

The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM) sets out guidelines on how an employer should handle and manage retrenchments where necessary, including in respect of retrenchment benefits and other assistance. In response to the unprecedented covid-19 crisis and its resulting impact on the global economy, the TAMEM was updated in March 2020 to set out a number of alternatives to managing staff costs and excess manpower in lieu of retrenchments during economic downturns. Although the TAMEM is not statutorily binding, it may be enforced by the MOM through administrative action, and it could also have a bearing on how wrongful dismissal claims are assessed.

The latest amendments to the TAMEM encourage employers to first explore alternatives to retrenchments, such as (in order of increasing severity of impact to employees):

• training and upgrading employees;
• redeploying employees to other areas of work;
• implementing flexible work schedules;
• implementing shorter work weeks (with a reduction of not more than three work days and paying employees not less than 50 per cent of their wages on non-work days during this period);
• temporary lay-offs (with 50 per cent pay);
• adjusting salaries; and
• no pay leave (essentially furlough).

Before implementing cost-cutting measures, employers should engage and seek the consent of unions and employees, and communicate the impact of the measures early, with management encouraged to adopt similar (or more stringent measures) at higher levels of the organisation. Approval from the Controller of Work Passes is also required if the salaries of foreign workers are to be impacted. Employers registered in Singapore and who have at least 10 employees are also obliged to notify the MOM if they have implemented any cost-cutting measures that affect employee salaries.

Retrenchment (defined as dismissal on the grounds of redundancy or by reason of any reorganisation of the employer’s profession, business, trade or work) should be seen as a ‘last resort’ after the above alternatives have been considered. If this is necessary, the TAMEM indicates that unions should be consulted as early as possible (the norm is one month before employees are notified of the retrenchment exercise, and this is also usually provided for as a contractual term within a collective agreement if there is one). The intention to retrench should also be communicated to the employees early, before the public notice of retrenchment is given. Employees should also receive at least the contractually-agreed notice period (or the statutory minimum notice period, if there is none stated), if not more. Employers who employ at least 10 employees are also required to notify the MOM if five or more employees are retrenched within any rolling six-month period. 

On the issue of retrenchment benefits, the TAMEM suggests that employees with two years’ service or more are eligible for retrenchment benefits at a recommended level of between two weeks’ and one month’s salary per year of service, with one month being encouraged under normal working circumstances. It is also recommended that those with less than two years’ service could be granted an ex-gratia payment. In unionised companies where the quantum of retrenchment benefit is stipulated in the collective agreement, the norm is one month’s salary for each year of service.

Where possible, employment facilitation services should also be provided. In this regard, in February 2020, the National Trades Union Congress announced that it was piloting a Job Security Council, which aims to match workers from ‘releasing’ companies to ‘receiving’ companies.

Employers should note that failure to comply with the TAMEM or to consult unions can potentially result in considerable pressure and negative publicity, over and above any administrative action that may be taken by the MOM. In late September 2019, well-known Hong Kong-based duty-free retailer DFS retrenched around 60 workers from one of its largest outlets with immediate effect. DFS initially offered a severance package of one week’s pay per year of service, capped at 13 weeks’ pay. This drew widespread criticism in the media, and the Minister for Manpower commented publicly that the DFS Group ‘could have better handled’ the exercise, referring also to TAMEM. The relevant employee union eventually negotiated the severance package to one month’s salary per year of service, capped at 25 years. A subsequent case (Sasa, another well-known Hong Kong based retailer), did not draw the same level of attention. This could have been because a union was not involved in that case.

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Class action suits are not provided for under Singapore’s Rules of Court per se, and every employee who wishes to assert a claim has to do so on an individual basis (ie, as an individual plaintiff to the suit or ECT action). Employees may, however, bring a representative action, provided that the various parties have the same interests in the proceedings (in which case, one or more of them may potentially represent the group in the proceedings).

Collective claims may be commenced by a union representing a group of employees, but only before the Industrial Arbitration Court and potentially before the ECT.

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Under the RRA, the current statutory retirement age is 62, and the current statutory re-employment age is 67. The statutory requirement and re-employment ages are set to increase to 63 and 68 respectively on 1 July 2022, and to 65 and 70 respectively by 2030.

It is an offence to dismiss an employee on grounds of age alone. This could also constitute a wrongful dismissal owing to age discrimination, leading to a claim by the employee. This does not prevent an employer terminating an employee’s contract for poor performance, health or misconduct; however, employers should still have regard to the Tripartite Guidelines on Wrongful Dismissal.

Under the RRA, it is mandatory (with some exceptions, for example, where foreign workers are concerned) for companies to offer re-employment opportunities to workers beyond the statutory retirement age, up to the statutory re-employment age. The employer is only obliged to offer re-employment where the employee is medically fit and, upon the assessment of the employer, can deliver satisfactory job performance. In cases of re-employment, a new contract of service is to be entered into between the employer and the employee where the job scope and the terms and conditions may vary from the previous contract of service, as long as the variation from the original contract is based on reasonable factors, such as the employer’s requirements and the employee’s productivity, performance, duties and responsibilities. The new employment contract cannot be for less than one year, unless otherwise agreed.

If the employer is unable to re-employ an eligible employee because the employer is unable to find, after having made reasonable attempts to do so, a vacancy in the company that is suitable for the eligible employee, the employer is required to transfer its re-employment obligations to another employer with agreement from the employee or (more commonly) offer the employee an employment assistance payment (EAP).

The Tripartite Guidelines on the Re-Employment of Older Workers (which employers are statutorily obliged to take into account, and to which the ECT and appellate courts may have regard) states that for employees between the ages of 62 and 64.5, a lump sum EAP could be three-and-a-half months’ salary and, in any event, range between S$5,500 and S$13,000. For employees between the ages of 64.5 to 67, the lump sum EAP could be two months of salary and, in any event, range between S$3,500 to S$7,500.

Alongside the raising of the statutory retirement and re-employment ages from 1 July 2022 onwards, the recommended EAP amounts are also set to increase. From that date, for employees between the ages of 63 and 65.5, the suggested EAP would be between S$6,250 and S$14,750, while for employees between the ages of 65.5 and 68, the suggested EAP would be between S$4,000 and S$8,500.