Things To Know About The Termination Of Employment in Singapore: Dos & Don’ts

Terminating employment is a significant decision for any business, especially for small businesses where every team member plays a crucial role. The Employment Act in Singapore provides a comprehensive framework to guide employers and employees through this process.

Here’s what you need to know about terminating employment according to the Employment Act, including the dos and don’ts to ensure compliance and fairness.

General Guidelines for Termination of Employment

• Either the employer or the employee can terminate the employment relationship by giving notice or paying compensation in lieu of notice.
• Termination can occur due to resignation, dismissal, or the expiration of the contract terms.

Notice Period

The notice period is typically specified in the employment contract. If not, the statutory minimum notice period applies based on the length of service:

• Less than 26 weeks: 1 day
• 26 weeks to less than 2 years: 1 week
• 2 years to less than 5 years: 2 weeks
• 5 years or more: 4 weeks.

During probation, the notice period is usually shorter and specified in the employment contract.

1. Termination with Notice

• A termination letter is mandatory, and the notice must be in writing.
• The notice period includes public holidays and weekends, and employees can use their annual leave during this period.
• Sick leave taken during the notice period is treated as part of the notice period.

2. Termination without Notice

• Termination without notice can occur due to misconduct or other serious issues. In such cases, proper documentation and adherence to legal requirements are essential.
• Employers must provide compensation in lieu of notice if they dismiss an employee without notice.

Retrenchment of Employee

1. Notification to MOM

Employers must notify the Ministry of Manpower (MOM) if they retrench any employee and have at least 10 employees.

2. Retrenchment Benefits

Employees with at least 2 years of service are eligible for retrenchment benefits, typically ranging from 2 weeks to 1 month of salary per year of service.

Wrongful Dismissal

Wrongful dismissal occurs when an employee is dismissed without just or sufficient cause. This includes dismissals on discriminatory grounds or to deprive an employee of benefits.

• Employees can file a wrongful dismissal claim with the Tripartite Alliance for Dispute Management (TADM) within one month from the last day of employment.
• If unresolved, the claim can be referred to the Employment Claims Tribunals (ECT).

✅ For expert financial advice, contact Counto, your trusted partner in accounting, tax, company secretary, and company incorporation services.

Key Dos & Don’ts in Termination of Employment

DOs

1. Provide Proper Notice or Compensation: Always provide the required notice period or compensation in lieu of notice to the employee as stipulated in the employment contract or by statutory requirements.
2. Document Everything: Keep thorough records of all communications, notices, and reasons for termination. This documentation is vital if any disputes arise.
3. Conduct Fair Inquiries: In cases of misconduct, ensure a proper inquiry is conducted. Allow the employee to present their case and ensure the process is fair and unbiased.
4. Pay All Dues Promptly: Ensure that all outstanding salary, accrued annual leave, and other contractual benefits are paid by the last day of employment or within three working days.
5. Understand Retrenchment Rules: If retrenching, follow the MOM guidelines and provide appropriate retrenchment benefits to eligible employees.

DON’Ts

1. Dismiss Without Just Cause: Avoid terminating an employee without a valid reason, as this can lead to wrongful dismissal claims.
2. Overlook Legal Requirements: Ensure compliance with all legal requirements, including notification to MOM for retrenchments and adherence to the Employment Act.
3. Neglect Employee Rights: Respect the rights of employees, including the right to take annual leave, sick leave, and maternity leave, without affecting the notice period.
4. Ignore Claims of Wrongful Dismissal: Take any claims of wrongful dismissal seriously and participate in mediation processes if required.
5. Dismiss During Protected Periods: Do not dismiss employees during protected periods, such as maternity leave, as this is illegal and can result in severe penalties.

Summary

Understanding and adhering to the Employment Act when terminating employment ensures compliance with Singapore’s employment laws and maintains a fair and transparent process. By following these dos and don’ts, employers can navigate the termination process smoothly, minimising the risk of disputes and legal issues.

Experience the Counto advantage

Counto is the trusted provider of accounting, tax preparation and CFO services for startups and SMEs. Get accounting plans that combine bookkeeping with corporate tax filing to help you stay compliant at an affordable price. To learn more, speak to us directly on our chatbot, email us at [email protected], or contact us using this form.

Here are some articles you might find helpful:

ECI filing

Improve cash flow

Mental models for business owners