What is the Employment Act?
The Employment Act (Cap 91, Rev Ed. 2016) (“the Employment Act”) authoritatively prescribes the minimum standard of employment terms for applicable employees in Singapore. In order to avoid prosecution, employers must know whether the Employment Act applies to their employees, and if applicable, how the Employment Act applies exactly.
While employers are given a wide berth to define the scope of employment, employers should still take care to ensure that the contractual terms between their business and affected employees comply with the Employment Act.
Scope of Article
In this article, we shall first discuss the most salient parts of the Employment Act. We will also share significant changes introduced pursuant to the Employment (Amendment) Act 2015 (No. 27 of 2015) (“the 2015 Amendments”) which came into effect on 1 April 2016.
It is important for employers to know what these changes are in order to change or adapt their employment practices accordingly.
Taking the employer’s perspective
To assist employers in understanding the Employment Act, this article will approach the Employment Act from the employer’s perspective: –
- Is the Employment Act applicable to my employees?
- If applicable, what are the minimum employment standards required for me to adopt?
- What are the recent amendments and how will they affect my business?
A. Who is the Employment Act applicable to?
The Employment Act applies to almost all employees in Singapore, regardless of nationality, who work under a contract of service (“employment contract”) with an employer.
The following employees are not covered by the Employment Act: –
- Any person employed in a managerial or executive position earning more than $4,500 basic monthly salary;
- Any seaman;
- Any domestic worker;
- Any person employed by a statutory board or the Government.
(i) Who are Managers or Executives?
Managers and executives are usually either or both of the following: –
- Employees with executive and supervisory responsibilities, which include making or influencing employment decisions, formulating business strategies and policies, and managing the business; and
- Professionals possessing specialised knowledge (e.g. lawyers, accountants, and doctors).
An employee who is employed partly for manual labour and partly for the purpose of supervising others is deemed under the EA as a workman if more than 50% of his scope of work involves manual labour.
(ii) Part-time Employees
Part-time employees are those workers who work less than 35 hours a week. Employers should take care to note that part-time employees are covered by the Employment of Part-Time Employees Regulations which provide fairer terms that protect the interests of such employees.
(iii) Independent Contractors
Independent contractors in general are not employees, and are therefore not covered by the Employment Act. The law makes a clear distinction between an employment contract and a contract for service – the latter does not fall within the ambit of the Employment Act. Employers therefore enjoy a greater freedom to negotiate their working relationship with such workers.
Workmen are an exception to the above. Under section 65(1) of the EA, where a principal in the course of his business (or in the interests of his business), contracts for the supply of labour or provision of services, and salary is owed to any workman by the contractor or sub-contractor, then the principal and the contractor and any sub-contractor (not being the employer) are all jointly and severally liable with the employer to pay the workman as if the workman has been immediately employed by him. Additionally, with the enactment of Employment Claims Act 2016 (Act 21 of 2016), which came into force on 1 April 2017, a mechanism is provided under the EA for workmen to recover salary from any persons liable under section 65(1) of the EA.
B. What does the Employment Act mean for me as an employer?
As mentioned, the Employment Act sets the minimum standard of employment terms and working conditions.
In addition, the Employment Act renders illegal any term in an employment contract that is less favourable than that provided for under the Employment Act.
If this occurs, the unfavourable (and therefore unlawful) term would be rendered null and void, and the relevant provisions under the EA will be imputed into the contractual relationship instead.
Employers should also note that it is a criminal offence for them to enter into an employment contract with Applicable Employees with terms that contravene the standards fleshed out below.
(i) Basic Employment Terms
In relation to basic employment terms, the three main areas governed by the Employment Act are (1) termination; (2) salary, and (3) sick days & holidays.
The summary below provides a general guide on the minimum standards set by law. It is aimed at providing a starting point for employers to ensure that their existing employment contracts operate within the boundaries of these standards.
#1 Termination
Termination of employment without notice
- Under the Employment Act, the employer may terminate an employment contract without notice by paying to the employee salary that would be payable to the employee during the period of notice (“salary in lieu of notice”).
- Alternatively, the employer may also terminate an employment contract without notice if the employee deliberately breaches a condition of the employment contract. The Employment Act also provides that if the employee is absent from work for more than 2 days continuously without prior leave and with no reasonable excuse, or without informing or attempting to inform the employer, the employee shall be deemed to have terminated the employment contract.
Termination with notice
In all other cases, employees must be given notice of termination. The notice period is determined by the terms of the employment contract. However, if the period provided contractually is less than the minimum period prescribed by the Employment Act, or if the contract is silent, the respective notice periods will apply:
- If the length of employment is less than 26 weeks: 1 day’s notice
- If length of employment is for 26 weeks or more but less than 2 years: 1 week’s notice
- If length of employment is for 2 years or more but less than 5 years: 2 weeks’ notice; and
- If length of employment is for 5 years or more: 4 week’s notice.
If the employer wishes to terminate the employment before the notice period, the employer must pay the employee salary in lieu of notice.
#2 Salary
- Salary period: employers may fix periods in respect of which salary earned shall be payable. However, the Employment Act prescribes that no salary period shall exceed one month, and where no such period is fixed, the salary period shall be deemed to be one month.
- Time of payment: Other than additional payments for overtime work, salary must be paid within 7 days after the end of the salary period. Additional payments for overtime work shall be paid within 14 days after the end of the salary period. Payment must also be made on a working day and during working hours at the place of work, or at any other place agreed to between the employer and employee. It may also be paid into an employee’s personal bank account.
- No unauthorised deductions: Employers must not make any deductions unless the deduction is authorised by the Employment Act or required to be made by the Singapore Courts or by a competent authority. In any event, the total amount of most deductions (except for particular instances as specified under section 32(1) of the EA) must not exceed 50% of the salary payable to the employee in the relevant salary period.
- Offence: Employers will fail to pay salary in accordance with the Employment Act will be liable on conviction to a fine between S$3,000 and S$15,000, or an imprisonment term of not more than 6 months, or both. For a repeat offender, the figures will be doubled.
#3 Sick Leave & Holidays
Employers must pay their employee for every day of permissible sick leave. The number of days of paid sick leave that an employee is entitled to depend on the duration of the employee’s service to the employer, with the maximum number of sick leave days capped at 14.
| No. of months of service completed | Sick Leave days per year |
|---|---|
| 3 months | 5 |
| 4 months | 8 |
| 5 months | 11 |
| 6 months | 14 |
| Thereafter | 14 |
Employees are entitled to a paid holiday at his gross rate of pay on a public holiday that falls during the time that he is employed, subject to the following:
- Parties can agree to substitute any other day or days for any one or more public holidays;
- If the public holiday falls on a rest day, the next working day shall be a paid holiday; and
- If any public holiday falls on a day when the employee is not required to work, the employer may either pay the employee for that holiday at his gross rate of pay or give the employee a day off substitution for that holiday.
(ii) Additional protection for employees under the Employment Act
Part IV of the Employment Act provides for additional rights relating to rest days, hours of work, overtime pay and other conditions of service for the following types of Applicable Employees: –
- Workmen earning not more than $4,500 basic monthly wage.
- Non-workmen earning not more than $2,500 basic monthly wage.
Minimum Terms & Working Conditions:
- Break time – Employees are not required to work more than 6 consecutive hours without a break. If the nature of work is as such that it requires continuous work for up to 8 hours, breaks must be provided for meals. The breaks should be at least 45 minutes long.
- Overtime work – Employees may claim for wages for all work in excess of the normal hours of work. Overtime pay is calculated by the following formula: hourly basic rate of pay x 1.5 x number of hours worked overtime. Employees are not permitted to work overtime for more than 72 hours a month.
- Maximum hours of work – Except for particular scenarios listed at 38(1)(i) to (iv) of the EA, generally, an employee is not allowed to work more than 6 consecutive hours without a period of leisure, or more than 8 hours in one day or more than 44 hours in one week.
- Rest days – The employer is required to provide at least 1 rest day per week. The rest day comprises one whole unpaid day and is determined by the employer.
C. Recent changes mandated in 2015
From 1 April 2016, employers are required to undertake three further obligations in relation to the Applicable Employees
- Providing in writing a list of Key Employment Terms (“KETs”) to its Applicable Employees
- Employers are required to make and keep employee records for Applicable Employees.
- Employers must issue itemised pay slips to Applicable Employees.
Traditionally, offences under the EA are criminal in nature. The above requirements under the 2015 Amendments are therefore unique and unusual as breaking these rules are considered civil in nature and will attract penalties that are administrative in nature.
#1 KETs
The 2015 amendments to the EA require employers to provide employees with a list of KETs. The rationale behind this legislation was to provide greater clarity and assurance to employees, as well as to enable employees to better understand their employment terms and benefits in order to minimize employment disputes.
The KETs must include the following items:
- Full name of employer.
- Job title, main duties, responsibilities.
- Start date of employment.
- Duration of employment (if the employee is on a fixed term contract).
- Working arrangements, such as daily working hours, number of working days per week, rest days.
- Salary period.
- Basic Salary.
- Fixed allowances.
- Fixed deductions.
- Overtime payment period.
- Overtime rate of pay.
- Other salary-related components such as bonuses and incentives.
- Type of leaves provided.
- Medical benefits provided for.
- Probation period (if any).
- Notice period for termination.
#2 Employee Records
Additionally, the 2015 Amendments mandate that all employers must maintain detailed employment records for employees covered by the EA for the last 2 years, in either soft or hard copy. The list of information to be recorded can be found here.
#3 Itemised Pay Slips
Employers are also obligated to issue itemised pay slips to employees. This can be done in soft or hard copy form, and must be given together with payment to the employee. If for some reason the pay slip is unable to be given together with the payment, the payslip is to be given within three working days of payment.
Frequently Asked Questions
Lawyers frequently get questions on the employment act either because employers and employees are unsure about all the rules covered within the Employment Act, or employers may have intentionally or unwittingly not followed the Employment Act and need to extricate themselves from a situation
I’d like to share a few that I hear frequently and answers to them:
(1) How can I as an employer begin to implement the changes required by me under the 2015 Amendments?
A good starting point would be to refer to this booklet issued by MOM. This is a very helpful resource which provides employers with KETs and pay slips templates and samples. It also provides a useful summary on the KETs and pay slips requirements under the 2015 amendments. This booklet is available at MOM Services Centre, ASME, Tripartite Alliance for Fair and Progressive Employment Practices, National Trades Union Congress, and SME Centres.
Sample forms are also available for download and use on MOM’s website.
(2) What if I have a salary related dispute with my employee. Must I find a lawyer?
No. For a salary-related claim, including a claim for an amount equivalent to salary in lieu of notice, as long as the claim is within S$20,000, employers may file a claim in the Employment Claim Tribunals (“ECT”). Employers should note that the Tripartite Alliance for Dispute Management (“TADM”) will be providing advisory and mediation services before claims are heard in the ECT.
The limitation periods for such claims are as follows: if the employee is still employed by the company, the claim has to be filed within 1 year after the dispute arose. If the employee is no longer employed by the company, the claim has to be filed within 6 months from the employee’s last day of work.
(3) Is there a more efficient way of implementing KETs and issuing payslips?
Yes. Electronic copies of KETs and payslips may be provided and issued to employees. The 2015 Amendments provide that employers may fulfil their obligations to provide KETs by giving the employee an electronic record of the KETs that is accessible and useable by the employee for subsequent reference. Alternatively, employers may authorise the publishing of the KETs on an internet website and provide the address to employees for their easy reference.
Similarly, in relation to payslips, employers can fulfil their statutory obligations by providing an electronic record containing the necessary information in a manner that allows the employee to easily access and use the information.
(4) How else can I reduce the costs of implementing the necessary changes under the 2015 Amendments?
You may consider adopting IT solutions in implementing these changes as there are government grants available for SMEs and local businesses, such as the Productivity and Innovation Credit (PIC) Scheme for instance. You can find more details on PIC here.
(5) What happens if I fail to implement the necessary changes within my business practice?
Employers should note that if they fail to implement the necessary changes or fail to provide accurate information or particulars to an inspecting officer or the Commissioner, they will be found to have contravened the Act.
In such a scenario, an authorised officer may issue a contravention notice to an employer requiring the employer to pay an administrative penalty. At this stage, the employer may appeal to another authorised officer or appeal to the High Court. In the event that the subsequent authorised officer also confirms the contravention, the employer will have another opportunity to appeal to the High Court to hear the matter.
Along with the contravention notice, or in substitution of it, an authorised officer may also issue directions to the employer to take action to remedy, rectify or mitigate the effects of the contravention. Failure to comply with such directions is a criminal offence.
That’s it!
As we have reiterated, the purpose of this article is to provide a general summary on the parts of the Employment Act that are most salient to an employer in a manner that is easy to understand. As this article is not intended to be exhaustive, it is advisable for you to consult an employment lawyer on the drafting or review of your employment contract or employment practices to ensure that your employment practices are consistent with the Employment Act.
Have a question on the Employment Act?
If you have any question about employment law, you can get a Quick Consult for a transparent, flat fee of S$49. You can expect a call back within 1-2 days on the phone to get legal advice and have your questions answered. Alternatively, you may wish to request a quote from Zhi Xin for employment matters.
This article is written by Tan Zhi Xin from Derrick Wong & Lim BC LLP and Ng Shu Yih.
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