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Ending employment or contract work in Singapore

In Singapore, employers must adhere to specific rules and regulations when ending an employment contract, ensuring both compliance and fairness.

For example, for contract work in Singapore, the terms of termination should be clearly defined in the employment agreement.

When an employee’s work contract ends, what happens next is typically dictated by what is outlined in the contract. For fixed-term contracts, the employment automatically ends when the contract expires, without the need for notice unless otherwise specified.

To navigate the complexities of contract termination, businesses may benefit from expert guidance, such as advice from experienced workforce solution providers like CXC. This ensures that all legal requirements are met and that the end of employment is handled professionally, minimising potential risks.

In this guide, we will discuss everything you need to know about end of employment practices in Singapore, including notice period, termination process, post-termination restraints, waivers, and more.

Notice period in Singapore

Employers in Singapore must ensure their notice period policies align with both legal requirements and industry standards. Understanding the rules and nuances ensures compliance with local laws while maintaining positive relationships with employees.

Standard notice period in Singapore

The standard resignation notice period is governed by the Employment Act. This notice period depends on the length of an employee's service, unless otherwise stipulated in the employment contract:

  • Less than 26 weeks of service: 1-day notice.
  • More than 26 weeks but less than 2 years of service: 1-week notice.
  • More than 2 years but less than 5 years of service: 2-weeks’ notice.
  • More than 5 years of service: 4-weeks’ notice.

Employers and employees may mutually agree on different terms, provided they meet the legal minimum notice period in Singapore. For instance, some businesses may specify longer periods to align with operational needs or industry norms.

If an employee resigns or is terminated, the calculation of the notice period starts the day after notice is given. It is also worth noting that unused annual leave can often be offset during the notice period.

Average notice period in Singapore

The average notice period in Singapore can vary depending on the type of worker and the terms of the employment agreement:

  1. Full-time employees: Typically follow the legal notice guidelines or any extended terms outlined in their contracts.
  2. Part-time employees: Notice periods are generally proportional to their working hours and are also subject to the same Employment Act provisions.
  3. Contract and freelance workers: These workers usually operate under specific agreements that detail their notice periods, which may differ significantly from the Employment Act norms.

Employers should ensure that all agreements are clearly documented to avoid potential disputes when workers resign or are terminated.

Notice period for probationary employees in Singapore

During probation, the rules around notice periods are slightly different. The probation period in Singapore typically lasts between three to six months, as specified in the employment contract. During this period:

  • Either party can terminate the employment with a five-day notice.
  • Some employers may stipulate a longer notice in contracts to better safeguard their interests.

Probationary employees are still entitled to fair treatment, including the proper calculation of their resignation notice period, as per the law.

Terminating contracts in Singapore

Ending an employment relationship is never an easy decision. For employers, it is crucial to ensure that the process aligns with legal requirements and maintains fairness.

When an employer terminates a contract in Singapore, all employment agreements must follow the Employment Act to facilitate smooth transitions.

Reasons for termination of employment contract in Singapore

Employers or employees can end the employment relationship by providing the legally required notice, as outlined in the employment contract. However, the termination must not be based on illegal grounds such as discrimination against a legally protected group. Employers should ensure the process complies with the Employment Act, which governs the termination of contracts in Singapore.

There are several valid reasons for terminating employment, including poor performance, misconduct, redundancy, or operational restructuring. Employers must communicate the reason for termination clearly to the employee to ensure transparency and avoid potential disputes. Misconduct cases require proper investigation and documentation to substantiate the termination. Redundancy, on the other hand, may necessitate retrenchment benefits if the employee has served for at least two years.

When ending a contract, employers are required to:

  • Provide the agreed notice period or payment in lieu of notice.
  • Settle all outstanding wages, including unused annual leave, assuming the termination is not due to misconduct.
  • Ensure that the reasons for termination are lawful and well-documented to avoid disputes.

Employee resignation in Singapore

Employees in Singapore may resign by providing notice as per their employment contract. This notice period allows both parties to plan for a smooth transition, ensuring minimal disruption to business operations. Employees should submit their resignation in writing, stating their last working day, to avoid misunderstandings.

If an employee serves the full notice period, final payments should be made on their last working day or within three days if immediate settlement is not feasible. However, if an employee resigns without notice and does not serve the notice period, payment must be made within seven days of their last day of employment. In cases where notice is not provided, employers may deduct compensation from the employee’s final salary for the unserved notice period, as specified in the employment contract.

Employers must also:

  • Ensure all outstanding entitlements are paid, including unused holiday leave.
  • Seek tax clearance from the Inland Revenue Authority of Singapore (IRAS) before making the final payment if the employee is a foreign national.

Severance pay in Singapore

In cases of retrenchment or redundancy, severance pay may be applicable. While not mandated by law, it is common practice for employers to provide such benefits based on the employment contract or collective agreements. Typically, severance pay ranges from two to four weeks of salary per year of service.

Key considerations include:

  • Eligibility: Employees with at least two years of service are generally entitled to retrenchment benefits.
  • Fairness: Employers are encouraged to provide severance in good faith to maintain a positive reputation.

Restrictive covenants in employment contracts in Singapore

Restrictive covenants, also known as post-termination restraints, are a common inclusion in employment contracts in Singapore. These clauses aim to protect a company’s legitimate interests but must be carefully drafted to ensure enforceability.

Non-compete clauses in Singapore

Non-compete clauses restrict an employee from engaging in competing business activities within a specific geographic area and time frame after leaving an employer. While these clauses are designed to protect a company’s market position and trade secrets, they are not automatically enforceable in Singapore.

Under Singapore law, covenants in restraint of trade, such as non-competes, are “prima facie” or “based on first impression” void unless the employer can prove they are reasonable. To be enforceable, a non-compete clause must:

  • Protect a legitimate proprietary interest, such as trade secrets, confidential information, or trade connections.
  • Be no broader than necessary in terms of duration, scope, and geographic coverage.

Courts in Singapore assess the reasonableness of non-compete clauses by examining factors such as the seniority of the employee, the type of industry, and the potential impact on the employee’s livelihood. For instance, restrictions on a senior executive with access to sensitive information may be more justifiable than for a junior staff member. Additionally, the duration of the restriction should not exceed what is necessary to safeguard the employer’s interests, with most enforceable clauses ranging between six to 12 months.

Employers are advised to define the scope and geographic limitations clearly to avoid ambiguity. Broad or vague terms may render the clause unenforceable.

Non-solicitation clauses in Singapore

Non-solicitation clauses prohibit an employee from soliciting a company’s clients, suppliers, or other employees after leaving the organisation. These clauses are generally seen as less restrictive than non-competes and are more likely to be enforced if they are reasonable and necessary to protect the employer’s interests.

To be valid, a non-solicitation clause must:

  • Be limited to key stakeholders critical to the business.
  • Specify a reasonable time frame for the restriction.

For example, preventing a former employee from poaching clients or employees for a year may be deemed reasonable, provided it does not overly limit the individual’s professional opportunities. Courts consider whether the clients or employees being protected have been directly nurtured by the departing employee. This ensures the clause is genuinely aimed at protecting the employer’s trade connections rather than unfairly restricting competition.

Employers should regularly review and update their non-solicitation clauses to reflect the evolving nature of their business relationships. Additionally, clear definitions of what constitutes “”solicitation”” can help prevent disputes.

Other restrictive covenants in employment contracts in Singapore

Employers in Singapore may also include other post-termination clauses, such as:

  • Confidentiality clauses: These clauses prohibit former employees from disclosing sensitive company information after their employment ends. Unlike other restrictive covenants, confidentiality obligations often remain enforceable indefinitely. Employers should explicitly define what constitutes “”confidential information”” to avoid ambiguities.
  • Garden leave provisions: During the notice period, employees may be required to stay away from the workplace while continuing to receive their salary. This helps protect company interests by preventing employees from accessing sensitive information or poaching clients and colleagues before their departure. Garden leave provisions also allow employers to prepare for a smoother transition without risking the loss of proprietary information.
  • Non-disparagement clauses: These provisions prevent former employees from making negative statements about the company, its leadership, or its practices. While less common, non-disparagement clauses can help maintain a business’s reputation post-termination.

As with all restrictive covenants, these clauses must be reasonable and tailored to the specific circumstances of the employment relationship. Courts will assess whether the restraint is proportionate to the employer’s legitimate interests and does not unfairly disadvantage the employee. For example, confidentiality obligations that cover general industry knowledge, rather than proprietary information, may be deemed overly broad and unenforceable.

Employment waivers in Singapore

Employment waivers can help employers in Singapore manage disputes and contractual complexities. However, they must be clear, fair, and supported by consideration. Employers should stay informed about the common elements of waivers in Singapore and work with legal experts to craft enforceable agreements that align with statutory requirements.

Waivers in employment contracts in Singapore

A waiver in an employment contract refers to an agreement where one party voluntarily gives up a legal right. In Singapore, a waiver of privilege can address disputes or manage obligations but must meet certain conditions to be valid and enforceable.

A waiver must be clear, though it can be oral, written, or inferred from actions. For example, if an employer repeatedly overlooks a contractual breach without action, it might imply a waiver of that obligation. Courts carefully assess the circumstances to ensure fairness and absence of coercion. To avoid ambiguity, waivers should be documented and precise, especially for significant rights like non-compete clauses or termination notice periods.

Waivers in settlement agreements in Singapore

Waivers play a key role in settling disputes or ensuring smooth exits. In termination cases, settlement agreements may include a waiver clause where the employee gives up claims against the employer in exchange for benefits like severance pay or extra compensation.

For a waiver in a settlement to be enforceable, it must:

  1. Be voluntary: The employee should not feel pressured into agreeing.
  2. Be supported by consideration: The employee receives value, such as monetary compensation, in return.
  3. Be clear and specific: The scope must define which rights or claims are waived.

Statutory protections under Singapore’s Employment Act cannot be waived. For instance, salary and leave entitlements, or protections against discrimination, remain enforceable despite agreements.

Employers should seek expert advice when including waivers in settlement agreements to ensure compliance and avoid unintended consequences.

Transfer of undertakings in Singapore

The transfer of undertakings in Singapore requires employers to prioritise compliance, clear communication, and fair negotiations. Following EA internal employee policies ensures employee rights are protected, fostering trust and business continuity.

Grounds for transfer of undertakings in Singapore

Under the Employment Act (EA), the transfer of undertakings occurs when a business, or part of it, is transferred as a going concern. During such transfers, EA Employees (those covered under the EA) are automatically transferred to the new employer with their existing terms and conditions intact. Employers must comply with EA internal employee policies, including mandatory notification and consultation to minimise disruptions.

Non-EA Employees are not automatically transferred. Their contracts must be terminated by the outgoing employer (transferor), after which the incoming employer (transferee) may rehire them under new terms or novate existing contracts. Employers should plan carefully to ensure smooth transitions for all employees.

To prepare, employers must update documentation, such as EA forms and the EA employee directory, to reflect the changes.

Employee protections during transfer of undertakings in Singapore

The EA safeguards employee rights during business transfers. For EA Employees, the new employer must honour existing employment terms, including salary and leave entitlements. Any changes require mutual agreement.

Employers are also required to notify employees in advance and consult them to address concerns and provide job security assurances. Non-compliance may lead to disputes or penalties.

For Non-EA Employees, while rights are not automatically preserved, fair rehiring terms help maintain morale and minimise attrition. Employers must also address outstanding payments, CPF contributions, and accrued leave entitlements to ensure compliance with employee rights in Singapore.

Minimise risk with our end-to-end employment solutions

There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Singapore — or you could end up facing legal issues.

Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.

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