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Discontinuing employment

i Dismissal

Employees may generally be dismissed in one of three ways:

  1. termination with notice (if the employee is covered by the Employment Act and his or her employment contract does not state the applicable notice period, the periods prescribed in the Employment Act will apply);
  2. termination with payment in lieu of notice; and
  3. summary termination without notice or payment in lieu.

The scenarios in points (a) and (b) are generally understood as termination without cause, while the scenario in point (c) is generally understood as termination for cause.

Sections 11(2) and 14(1) of the Employment Act, when applicable to the employee concerned, prescribe that termination without notice or payment in lieu of notice is only permissible (1) in the event of any wilful breach by the other party of a condition of service; or (2) on the grounds of misconduct inconsistent with the fulfilment of the conditions of service. As noted in Section VI.ii, the Employment Act presently does not cover PMEs earning above S$4,500 monthly, but it will from 1 April 2019 (when it will essentially cover all private-sector employees).

The Employment Act expressly requires that an employer conduct a 'due inquiry' process before dismissing the employee on second ground listed above, whether summarily or with notice or payment in lieu. A similar due inquiry process may also be required before summary termination on the first ground, and should be assumed to be the case as a matter of prudence. While the term 'due inquiry' is not defined under the Employment Act, TAFEP has advised that: a decision to dismiss an employee should be based on documented poor performance or misconduct; and an inquiry should be conducted to allow the employee to present his or her case before any decision is made dismissing the employee. The MOM's website also provides general guidelines for holding an inquiry, which have been referred to by the High Court. Employers and employees can also expect the new Tripartite Guidelines on Wrongful Dismissal to provide important further guidance in this regard. These Guidelines are expected to be released prior to the Employment Act amendment date (1 April 2019) and bear close monitoring as they should answer some of the above questions.

A contract of employment can also be brought to an end by way of an agreement, such as a separation or settlement agreement, between the employer and employee, which would normally contain release and discharge provisions, whether unilateral or mutual. The validity of such agreements is subject to provisions of the Employment Act and general common law principles.

There are presently no statutory notification requirements for dismissing employees, unless there is a termination or retrenchment exercise (see subsection ii). There is also no absolute statutory prohibition against dismissals, save for a few situations including the following:

  1. employers cannot dismiss female employees during the period of their statutory maternity leave;
  2. pursuant to the Retirement and Re-Employment Act, employers cannot dismiss elderly employees below the age of 62 solely on account of their age; and
  3. employers should not wrongfully or unfairly dismiss employees on pain of having to compensate or reinstate them.

An employee covered by the Employment Act who feels that he or she has been dismissed without just cause or excuse, regardless of whether notice or payment in lieu of notice has been provided, may make representations within one month of dismissal to the Minister of Manpower through the MOM. If the MOM finds for the employee, the employer may be directed to reinstate the employee to his or her former employment, compensate the employee for lost wages, or both. After changes to the employment regime are implemented by April 2019, all employees may bring wrongful or unfair dismissal claims before the ECT (which presently only hears employment payment disputes). As previously mentioned, the Tripartite Guidelines on Wrongful Dismissal should soon provide greater clarity on what amounts to wrongful dismissal and what the appropriate level of compensation for the wrongful dismissal should be (which the ECT and the courts would be statutorily required to have regard to).

With the exception of employment assistance payments, which are payable under the Retirement and Re-Employment Act to employees of 62 years of age or older who are terminated and not re-employed, severance or redundancy payments are not statutorily required in Singapore. Any contractual right to, and calculation of, severance pay will have to be set out in the employment contract, or any applicable collective agreement in the case of unionised employees. Notwithstanding this, employers may still choose to pay severance even in the absence of contractual obligations in order to maintain morale, reputation, industry norms or consistency with group offices in other jurisdictions (and a number do, in particular multinationals). The Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment, which are non-binding but may be considered by the ECT and the courts, suggest a scale of two weeks' to one month's pay per year of service, which is the customary norm.

ii Redundancies

Employers who employ at least 10 employees are required to notify the MOM if five or more employees are retrenched, or dismissed on the ground of redundancy or by reason of any reorganisation of the employer's profession, business, trade or work, within any rolling six-month period. This applies to both permanent employees and contract workers with full contract terms of at least six months. This administrative retrenchment notification requirement will become a statutory requirement after amendments to the Employment Act are implemented in April 2019.

The Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment also provide that retrenchment exercises should be carried out responsibly in consultation with the union (if the company is unionised) or with the affected employees (if not unionised). The selection of employees for retrenchment should also be fair and based on objective criteria, and employees with at least two years' service should be eligible for retrenchment benefits. Those with less than two years' service should at least be granted an ex gratia payment. Employers are also urged to help affected employees look for alternative jobs.

Apart from this set of Tripartite Guidelines, which are not presently statutorily binding, there are no other rules mandating the provision of retrenchment benefits. While Part IV of the Employment Act provides that an employee covered by that part is not entitled to retrenchment benefits unless the employee has been in continuous service with an employer for two years or more, it does not automatically entitle the employee to any retrenchment benefit or severance payment in the absence of an express contractual provision or collective agreement.