Termination of Employment in Singapore: Understanding the Legal Requirements

The cessation of an employment relationship, known as termination of employment, is a significant event for both employers and employees in Singapore. While either party can file for termination of employment, there are legal frameworks that must be followed to protect rights and obligations on both sides. Failure to adhere to the prevailing legal requirements can expose employers to unfair dismissal claims and result in costly legal battles, or in penalties for employees.

Our guide will shed light on the key legal aspects governing termination of employment in Singapore, so you can know your rights and entitlements throughout this process.

Types of Termination of Employment in Singapore

Singapore’s Ministry of Manpower (MOM) recognises three main ways that termination of employment can occur:

Termination with notice

Termination with notice is the most common form of termination. Either the employer or the employee can terminate the employment by providing the required notice period as stipulated in the employment contract or the statutory minimums for notice outlined in the Employment Act, whichever is more favourable to the employee. A termination letter (by either employee or employer), in writing, is mandatory as part of the process.

Notice can also be waived by mutual consent between employee and employer. If notice is not waived, employees are obliged to serve the notice period or pay compensation in lieu of notice to the employer.

Termination without notice

Both employees and employers may terminate an employment contract without notice and must have clear and documented grounds for termination without notice. It generally happens in situations where the employment contract terms have been broken, employers have failed to pay salary in a timely manner, or employees have been absent from work without cause.

It is recommended for either party to reach out for more information before deciding to terminate.

For example, if an employee wishes to terminate without notice on the grounds of failure to pay salary within seven days of it being due, they should first reach out to the employer to see if there is a reason for this delay. If there is no credible reason, the employee should document this breach in contract through bank account statements or other relevant documents before pursuing termination.

Similarly, if an employee is continuously absent from work for two consecutive working days without approval and/or prior informing, employers should first reach out to find out if there could be a credible reason. If there is no credible reason, the employer should document the absence through relevant documents before pursuing termination.

Termination without notice may result in the employee having to pay a compensation fee, in addition to notice pay. This will be based on the terms and conditions laid out in their contract of service.

Termination due to employee misconduct

Termination due to employee misconduct is a more drastic measure permissible only under specific and legally justifiable circumstances, typically involving serious misconduct on either party’s part. What constitutes serious misconduct can include theft, fraud, insubordination, or any act that fundamentally breaches the trust and confidence inherent in the employment relationship. It could also be an act that places the employer in legal jeopardy.

If an employee is suspected of misconduct, the employer should first conduct an inquiry and investigation before proceeding with disciplinary action or termination of employment. Failure to do so, or a poorly conducted inquiry, may be grounds for a wrongful dismissal claim. More information on wrongful dismissal can be found further down this blog.

Grounds for Termination of Employment & Responsible Retrenchment Procedures

As mentioned above, there are several legally acceptable grounds for termination of employment in Singapore. This includes:

• Misconduct: As mentioned earlier, serious misconduct such as workplace harassment can be grounds for termination without notice.
• Poor performance: Consistent failure to meet reasonable performance standards, despite being given opportunities for improvement (e.g. being put on a Performance Improvement Plan (PIP)), can be a valid ground for termination with the required notice period.
• Breach of contract: If either the employer or the employee significantly breaches the terms of the employment contract, it can be grounds for termination by the other party. This breach does not have to result in criminal offenses.

Redundancy and business restructuring can also be legitimate grounds for termination with or without a notice period. Companies seeking to terminate employees due to such reasons must follow responsible retrenchment procedures outlined by the MOM, such as:

• Notifying the MOM of retrenchment exercises involving a certain number of employees within a specified timeframe, within five working days of the employee(s) being informed of their retrenchment
• Engaging in consultation with employees and any relevant unions to explain the reasons for the retrenchment and discuss potential alternatives
• Establishing fair and objective criteria for selecting employees for retrenchment, avoiding discriminatory practices
• Providing the required notice period and severance pay in accordance with the Employment Act and contractual obligations

Following these guidelines for how to retrench employees ensures fairness and transparency in compliance with the law, and helps in maintaining good employee relations.

Notice Period and Severance Pay

The notice period is the duration an employee or employer must provide to the other party before the termination of employment takes effect. The length of the notice period is primarily determined by the employment contract. However, the Employment Act sets out minimum notice period requirements based on the employee’s length of service, and the employee is entitled to the longer of the contractual or statutory notice period.

Severance pay is a form of compensation paid to employees whose employment is terminated due to redundancy or retrenchment procedures. It is not legally mandated in all cases of termination. However, under the Employment Act, employees who have served for at least two years are entitled to severance pay if their termination of employment is due to retrenchment or redundancy. The amount of severance pay is typically negotiated or based on industry norms and the employee’s length of service.

Wrongful Dismissal Claims

According to the Employment Act, wrongful or unfair dismissal is when an employee is dismissed without just or sufficient cause, such as discrimination, retaliation for exercising an employment right, or unsubstantiated misconduct or poor performance. These are typically circumstances which breach the terms of their employment contract or violate statutory provisions. Redundancy is not considered grounds for wrongful dismissal, if proper redundancy or retrenchment procedures have been followed.

Employees who believe they have been wrongfully dismissed may have legal recourse to seek remedies such as reinstatement or compensation. They should file a claim with the Tripartite Alliance for Dispute Management (TADM) to seek mediation and conciliation. If conciliation fails, the case may be referred to the Employment Claims Tribunals for adjudication.

To avoid wrongful dismissal claims, employers must ensure they have valid grounds for termination and follow fair procedures. Both employers and employees can consult our employment contract lawyers in Singapore to help navigate these complex issues.

How to Protect Your Rights During Termination of Employment

Both employers and employees should take steps to protect their rights during the termination of employment process:

For employees:

• Seek legal advice if you are unsure about your rights or believe your termination was wrongful dismissal
• Understand the terms of your employment contract regarding notice period and severance pay
• Document all communication related to your termination, whether the process was initiated by you or the employer
• Negotiate the terms of your departure if appropriate (e.g. notice period, severance pay, compensation in lieu of notice, departure date, extension of notice)

For employers:

• Ensure you have valid grounds for termination and follow fair and documented procedures
• If an enquiry or investigation into employee conduct is required, ensure full documentation and transparency throughout the process
• Document all reasons for termination and the process followed
• Provide the correct notice period and severance pay as required by law and the employment contract
• Seek legal counsel to ensure compliance and mitigate the risk of wrongful dismissal claims

The legal requirements surrounding termination of employment in Singapore are multifaceted and can be challenging to navigate without expert guidance. Compliance is paramount for both employers and employees to avoid potential legal repercussions.

Seeking timely advice from an experienced corporate litigation lawyer or employment contract lawyer is often necessary to ensure that all procedures are followed correctly and that the rights of all parties are protected. At Farallon Law, our team of experienced employment lawyers is well-versed in all aspects of employment law and can provide comprehensive legal support and guidance throughout the termination process, as well as review employment contracts.

Contact Farallon Law today for a consultation to discuss your concerns.