Employment Contracts In Singapore – A Complete Guide

A contract of service is an agreement that’s typically created by a law firm in Singapore. that’s entered into between an individual and a company in which the individual agrees to work for the company as an employee and the company agrees to hire the individual as an employee. The employment contract regulates the relationship between the employer and employee by clearly stating the rights and obligations of each party.

Independent contractors, not employees

A contract of service is different from a contract for services. An individual who enters into a contract of service is an employee of the company. However, an individual who enters into a contract for services is an independent contractor.

In a recent press reply issued by the Ministry of Manpower, a range of factors is used to determine if an individual should be an independent contractor an employee. The range of factors could include:

• Whether the company has the obligation to provide work for the worker;
• Whether the worker is obliged to accept work assigned by the company;
• If the individual is personally required to carry out the work;
• If tools and equipment are provided by the company;
• The extent to which the worker has control of the prescribed method or work; and
• Whether the worker must comply with the company’s procedures.

Essentially, the extent of control of the employer over the individual and the extent of integration of that individual into the company’s processes and procedures. The Ministry also stated that it is irrelevant that the contract itself states that the individual is an independent contractor. Finally, it was emphasized that because of the wide variety of work situations, there can be no single conclusive test that can determine if an individual should be an independent contractor an employee.

This difference is important because independent contractors are not covered by the Employment Act. Accordingly, the statutory benefits and regulations do not apply to such individuals. Additionally, the employer is usually vicariously liable for the wrongdoings of an employee (committed in the course of their employment) and not an independent contractor.

Creation of the employment contract

The Employment Act provides that an employment contract may be in writing or oral, express or implied. However, to avoid disputes between parties, it would be prudent to draft the agreed terms and conditions into an employment contract.

Express terms

A well drafted employment contract would usually state the following:

• Details of the parties;
• Job title, scope and responsibilities;
• The period of employment or duration of contract;
• Working arrangements;
• Salary details;
• Notice period; and
• Employee benefits.

If an employment contract contains restrictive covenants (such as non-competes), then it would be important to ensure that such clauses drafted to be reasonable and enforceable.

Implied terms

Certain terms could be implied into an employment contract by:

• Prevailing custom or practice;
• By the courts; or
• Through incorporation or reference.

Prevailing custom or practice

A term could be implied into an employment contract by custom. The person arguing for the incorporation of the term by custom has to show, inter alia, that the custom is of sufficient notoriety, reasonable, general and uniform. The custom must also conform with the law’s requirement so as to be considered to be a valid custom.

It is also noteworthy that if there is any conflict between the implied term and terms of an employment contract, the latter would prevail.

By the courts

In order for a term to be implied by the courts into a contract, the term must:

• Be both reasonable and equitable;
• Be implied so as to give business efficacy to the contract and/or that it is so obvious that the implication “goes without saying”;
• Be clear and unambiguous; and
• not contradict any terms of the contract.

Although the conditions are clear, in order to respect the parties’ autonomy to contract and decide on terms, courts are usually slow in implying a term into a contract.

Through incorporation or reference

Terms could be implied into an employment contract via the reference or incorporation of extrinsic materials. For example, a clause in the employment contract could state that the employee must obey the rules provided in the company’s employee handbook. In that case, the content of the handbook will be incorporated into the employment contract and would be given equal weight with provisions of the employment contract.

This allows employment contracts to be drafted with relative speed and efficiency. Additionally, it also guarantees conformity as every employee of the company will be bound by the same rules present in the handbook. It could also allow employers to vary terms in the handbook without the need to enter into fresh contracts with every single employee.

Modification of contractual terms

Any modification or variation of contractual terms (hereafter known as a “modification”) will only be valid if both parties consent and consideration for such modification is furnished, unless this modification is effected by deed.

The employee will not be deemed to have acquiesced to a modification simply by the fact that he/she is continuing in his employment. The courts would also unlikely accept that a modification is consensual (and therefore valid) the alternative of accepting the modification is dismissal and the modification is adverse to his/her interest.

The consideration for a modification must be “sufficient” and cannot be a past consideration.

For example, if there are 2 employees in the company and one leaves, and the company offers extra remuneration for existing employee to cover the other employee’s duties, both parties would be regarded to have given good consideration. However, if there are 100 employees in a company and one leaves, any extra remuneration paid to existing employees would likely not be enforceable as there was insufficient consideration provided by the existing employees.