Employment Contracts in Singapore

Employment contracts are essential legal documents that govern the relationship between an employer and an employee. They contain important information regarding both parties' roles and responsibilities, both during and after the term of employment.

In Singapore, an employee may be subject to a permanent or fixed-term employment contract. A permanent contract refers to long-term indefinite employment, whereas a fixed-term contract refers to a specified term of employment.

Both parties must understand the fundamental parts of an employment contract before signing it. Specific laws apply to different types of employment in Singapore, with the Employment Act 1968 (the EA) being the primary legislation.

This article highlights fundamental terms ordinarily included in an employment contract and the governing laws.

Eligibility under the Employment Act

The EA does not protect those who are not deemed to be "workers" within the Act's definition. If a type of employment is not covered by the Act, their role and responsibilities will be solely governed by their employment contract. The EA will cover any employee working under a contract of service unless they are:

1. A seafarer, i.e. a person who is employed or works on board a ship;
2. A domestic worker, defined in the Act as "any house, table, or garden servant or motor car driver, employed… in connection with the domestic services of any private premises"; or
3. A statutory board employee or civil servant.

Part 4 of the EA, which sets out the law for employee's rest days, working hours, and other conditions of service, will also only apply to specific categories of workers. In particular:

1. "Workmen" (i.e. people doing manual labour) who receive a salary of less than $4,500 per month; and
2. Any other employee who receives a salary of less than $2,600 per month, except for those employed in a managerial or executive position.

Illegal employment contracts

The EA protects employees by setting out laws regarding their pay, holidays, and sick leave, among other things. Parties have the freedom to negotiate the specific terms of the employment contract; however, Section 8 of the EA renders any contract invalid that is less favourable to an employee than any of the conditions set out in the Act.

Standard terms

Some of the standard terms commonly found in employment contracts are as follows:

An employment contract that does not include the above terms may not be enforceable or may lead to a dispute between the parties. Therefore, employers and employees must understand the fundamental laws concerning the above terms and their corresponding rights.

Salary

Singapore has no minimum wage; instead, wages are guided by markets and demand. Therefore, an employee's remuneration depends on what the employer offers and how well the employee can negotiate a better salary.

However, the EA states that an employee must be paid before the expiry of the 7th day after the last day of the salary period, which cannot exceed one month. The employer must pay the employee for any overtime within 14 days of the relevant salary period.

Whilst the EA does not oblige employers to pay their employees bonuses, this is becoming common in Singapore. The employment contract should specify how bonuses are calculated and paid out. 

Working hours

The EA only regulates work hours for employees under Part 4 of the Act. Under this section, employees who work up to five days a week are allowed to work a maximum of 9 hours a day or 44 hours a week. If they work more than five days a week, they can work a maximum of 8 hours a day or 44 hours a week. Employees must also not work for any longer than six consecutive hours without a break.

Employees not covered under this section will be provided with their hours in their employment contract. It is common for employees who do not fall within Part 4 to work from Monday to Friday, and for their standard hours to be from 9 am to around 6 pm.

Holidays

Public holidays

Section 88 of the EA states: "Every employee is entitled to a paid holiday at his or her gross rate of pay on a public holiday that falls during the time that he or she is employed…". This provision includes all public holidays in Singapore from various cultures and religions.

Employees are entitled to an additional day off or a day's salary if a public holiday falls on a non-working day. When the public holiday falls on an employee's rest day, the employer will treat the next working day as a paid holiday. Rest days only apply to the two types of workers highlighted above under Part 4 and are defined as one unpaid rest day per week, which must be Sunday, or any other day as may be determined by the employer.

Alternatively, an employee may be required to work on a public holiday, in which case they can agree with their employer to substitute it with another day's holiday.

Annual leave

Employees become eligible for annual leave once they have been employed by the same employer for at least three months. The entitlement increases the longer a person works at a company. Within their first year of employment, employees will have seven days of annual leave. The number of days will increase by one day for each year they work there, and the maximum entitlement under the EA is fourteen days.

In practice, it is common for employees to be given more annual leave than is provided for under the EA, as the law only provides a minimum entitlement.

Sick leave

To be eligible for sick leave and pay, an employee must:

1. Be covered by the EA;
2. Have worked with the employer for at least three months; and
3. Have informed or tried to inform their employer of their absence within 48 hours.

An employee who satisfies the above will be entitled to paid outpatient sick leave and paid hospitalisation leave:

• Outpatient leave requires the employee to produce a certificate from a medical practitioner stating they are not fit to work.
• Hospitalisation leave covers any period during which an employee needs hospital care. It also includes bed rest and recovery periods following hospitalisation. To qualify, the employee must be admitted as an in-patient for day surgery, quarantined, or have a medical certificate.

The sick leave entitlement increases the longer an employee has worked for the same employer. However, unlike holidays, employees only need to complete six months of service to benefit from the full entitlement. The maximum number of days available for paid outpatient leave is fourteen; for paid hospitalisation leave, it is sixty.

Maternity leave

Women who have worked for the same employer for over three months are entitled to paid maternity leave. If the child is a Singaporean citizen born after 1 January 2017, a maximum of 16 weeks of paid leave will apply. If the child is not a Singapore citizen, the maximum entitlement is 12 weeks.

Termination

Section 10 of the EA provides that either party to the contract may notify the other party at any time of their intention to terminate the employment. Section 10(3) provides the minimum notice periods depending on the length of employment:

The notice period must be the same for the employee and employer. The relevant party must give the notice in writing.

Conclusion

Employment contracts will vary depending on the type of role and company. However, it is important that employers include the standard terms where appropriate and comply with the minimum legislative requirements.

Employees who are unsure about the terms of their contract should avoid signing it until they have sought clarification. A specialist employment lawyer can assist with reviewing and advising on the terms and negotiate with the employer where necessary.