PERSOL HR DATA BANK in APAC
SINGAPORELabor Laws
When comparing the labor laws of various Asian countries, it could be said that Singapore is a jurisdiction designed to be the most advantageous for companies. Although, due to the recent amendments, the Employment Act now covers all employees in principle, employees who are subject to the part which prescribes matters related to hours of work, rest breaks, and rest days are limited; and provisions that are advantageous to companies, such as there is in principle no laws prescribing minimum wages, are notable. When a company is to dismiss a worker, no due cause is required for the dismissal. Furthermore, unless a separate agreement has been reached, a company is not obligated to pay any retirement benefit so as long as the company gives a prior notic e to the employee. Moreover, trade unions are rare, and workers hardly ever go on strike. Accordingly, it could be said that Japanese companies can flexibly reorganize employees relatively easily.
Depending on the form of the company, (although it is necessary to keep in mind that mandatory provisions of employment laws of other countries may apply) it may be effective to adopt a scheme to actively leverage Singapore's labor laws that are advantageous for companies, execute a Contract of Service with the laws of Singapore as the governing law, and arrange that employee as seconded employee to subsidiary or an affiliate of another country.
Meanwhile, in recent years, it is becoming more difficult for foreign workers to acquire an employment pass, and it should be noted that Singapore's policy regarding the employment of foreigners is becoming relatively stricter.
Points to consider regarding labor management, characteristics of labor practices, and the status of recent labor policy in Singapore
Labor laws predominantly favorable for companies
Singapore actively receives foreign capital and is known for labor laws that are extremely favorable for companies in order to create an attractive investment environment. For instance, typical examples are that Singapore has worker categories covered by labor laws (duty to pay overtime allowance is limited to specific workers among those covered by the Employment Act) because there are no minimum wage laws1, wages are determined based on a contract between labor and management, and grounds for dismissal (rational reason) are not required upon dismissing a worker.
Conversely, if a Japanese company were to use its employment contract and work rules as is in accordance with the laws of Japan, that company would not be able to leverage the benefits of Singapore's labor laws that are advantageous to companies. Accordingly, when preparing work rules or individual employment contracts, such as a Letter of Appointment, some companies think that it may be necessary to pay attention to Singapore's labor laws and revise the contents accordingly.
High turnover rate
In Singapore, many people switch jobs, and the overall turnover rate is high in comparison to Japan. It is often the case that an employee who was considered an asset switches jobs soon after joining the company, and while there are labor laws that are advantageous to companies, it is necessary to create an attractive working environment.
Acquisition of pass
Because Singapore emphasizes the introduction of foreign capital as a part of its policy, it could be said that Singapore is a jurisdiction where foreign nationals can acquire passes relatively easily in comparison to other jurisdictions. Nevertheless, caution is required because, in recent years, requirements for foreign nationals to acquire passes have gradually become stricter in light of the aging of Singapore nationals and other factors. In addition, it is generally understood that obtaining a work pass has become even more difficult due to the increase in unemployment rate of Singaporeans as a result of COVID-19 pandemic.
Trade unions
In Singapore, trade unions are quite rare. Furthermore, the rights of trade unions are considerably restricted, and the rights to strike and employ collective bargaining are also considerably restricted. From this perspective also, it could be said that Singapore is a jurisdiction where companies can manage their employees extremely easily.
Meanwhile, with companies that have a trade union, caution is required since sincere negotiations with the trade union are often necessary.
Existence of laws of Singapore as a common law system
Because Singapore is subject to restrictions under common law that has been inherited from the British legal system, rights and obligations under common law also exist in employment relations. Thus, it must be noted that rights and obligations, which are not set out in express provisions and which are unique to common law, may arise.
In particular, because the laws of Japan are civil laws based on a legal system that differs from common law, caution is required by Japanese companies familiar with the laws of Japan.
*Overview of Common Law and Civil Law
Common Law is a legal system mainly in use in the UK and in nations formerly part of the British Empire (the USA, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and precedent.
On the other hand, civil law developed on the European continent in nations, such as France and Germany, and as a legal system compared to common law, civil law places emphasis on statutes. Japan uses a civil law legal system.
Overview of basic labor laws of Singapore
Overview of labor-related statutes
The key labor-related statutes in Singapore are as follows.
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Statutes related to working conditions
Employment Act
The Employment Act was enacted for clarifying the basic working conditions of employees and the rights and obligations of companies and employees. The Act is characterized by the fact that while it prescribes provisions for the protection of employees, the scope of employees who are covered by Part 4 of the Employment Act that stipulates overtime payment and others is limited.
Employment of Foreign Manpower Act
The Employment of Foreign Manpower Act prescribes the work permit and other conditions that are required for foreign workers to work in Singapore.
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Statutes related to labor-management relations
Trade Unions Act
The Trade Unions Act prescribes the activities of trade unions, including proper union activities, accounting of unions, and method of electing union executives.
Trade Disputes Act
The Trade Disputes Act prescribes restrictions on trade dispute acts, such as trade disputes, strikes, and lockouts.
Industrial Relations Act
The Industrial Relations Act was enacted for establishing a framework for deterring and resolving labor-management disputes and prescribes amicable solutions between labor and management through collective bargaining, mediation, and arbitration by the Industrial Arbitration Court.
Singapore Labor Foundation Act
The Singapore Labor Foundation Act prescribes matters for improving the welfare of trade union members and their families and assisting the development of the trade union movement in Singapore.
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Statutes related to social welfare
Retirement and Re-employment Act
The Retirement and Re-employment Act was enacted to establish a framework related to retirement and subsequent re-employment. It should be noted that this Act applies to all employees, including managers or executives.The Act stipulates a minimum retirement age of 63 years old and prohibits dismissal on the grounds of age before the said retirement age (Retirement and Re-employment [Prescribed Minimum Retirement Age] Notification 2022). Furthermore, the Act also requires employers to continue offering re-employment to employees who have reached the said minimum retirement age.
Central Provident Fund Act
The Central Provident Fund Act was enacted to establish the Central Provident Fund (CPF). The CPF guarantees the living expenses of retired employees.
Child Development Co-Savings Act
The Child Development Co-Savings Act was enacted to establish a child development co-savings scheme to support families and prescribes maternity protection and benefits, adoption leave, childcare leave, unpaid infant care leave, and other systems. The Employment Act also prescribes provisions for childcare leave and maternity leave, and these provisions are favorable to employees. It should be noted that this Act applies to all employees, including managers or executives, if the child is a Singapore national.
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Statutes related to workplace safety and health
Workplace Safety and Health Act
The Workplace Safety and Health Act was enacted to ensure the safety and health of the workplace and takes over the Factories Act that previously prescribed rules pertaining to workplace safety.
Work Injury Compensation Act
The Work Injury Compensation Act was enacted to prescribe matters related to the payment of compensation to employees who suffered a work injury and sets forth measures for eliminating any delay in compensation and speeding up of the process for compensating employees promptly.
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Others
Skills Development Levy Act
Based on the Skills Development Levy Act, companies are required to pay, on a monthly basis, a certain amount of Skills Development Levy to employees, and the Skills Development Fund is applied to (a) the promotion, development, and upgrading of skills and expertise of persons preparing to join the workforce, persons in the workforce, and persons rejoining the workforce; (b) the retraining of retrenched persons; and (c) the provision of financial assistance by grants, loans, or otherwise for the purposes of the abovementioned objects.
Workforce Singapore Agency Act
The Workforce Singapore Agency Act constitutes the Workforce Singapore Agency, which is an organization for training employees and cultivating skills.
Employment Agencies Act
Companies must observe the Employment Agencies Act upon operating an employment agency in Singapore.
Scope of the Employment Act
As described above, while the most important labor-related statute in Singapore is the Employment Act, the conditions and scope of employees who are covered by the Employment Act are limited as prescribed below, and it should be noted that Part 4 of the Employment Act is applicable only to certain employees.
Foremost, in order to be covered by the Employment Act, an employee must be under a Contract of Service, not under a Contract for Service (classification based on the types of contract).
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Examination of whether a Contract of Service is concluded
Foremost, a Contract of Service and a Contract for Service are classified as follows.
Contract of Service:
Employment status where an employee engages in work under the supervision of the company, and it could be said that this concept corresponds to an employment contract (koyo keiyaku) under the laws of Japan. An employee will be covered by the Employment Act only when it is determined that such employee's contract corresponds to a Contract of Service.
Contract for Service:
This is one type of supply contract. It could be said that this form of contract corresponds to a service contract (ukeoi keiyaku) or an engagement contract (inin keiyaku) under the laws of Japan. Specifically, a service contract between a contractor and a subcontractor of construction work and an engagement contract executed between an outside attorney, certified public accountant, or tax accountant and a company are not a Contract of Service and correspond to a Contract for Service. When it is determined that an employee's contract corresponds to a Contract for Service, the Employment Act will not apply to that employee.
Specifically, a Contract of Service and a Contract for Service are classified by giving comprehensive consideration to various factors that include the (i) existence of supervisory authority (who determines the hiring and dismissal of the employee, who pays for the employee's wage and how is such payment being made, who determines the production process, hours, and production method, who is responsible for the workplace rules), (ii) existence of ownership in job performance (who supplies tools and equipment for the production, who provides the workplace and materials), and (iii) economic consideration (for whom is the employee performing services, from where are the revenues and profits being paid, and who is responsible for such services)
When an employee's contract is classified as a Contract for Service based on the foregoing factors, the Employment Act will not apply to that employee.
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(On the assumption that a Contract of Service is valid) whether the employee is covered by Part 4 of the Employment Act (restrictions on application of the Employment based on the definition of an "employee")
In Singapore, when an employee falls under the definition of a manager or executive, Part 4 of the Employment Act that stipulates the employer's obligations to pay overtime allowance does not apply to that employee (other parts of the Employment Act apply to that employee).
The term "manager" or "executive" is not clearly defined in the Employment Act. Thus, whether an employee falls under the definition of a manager or executive is determined by giving comprehensive consideration to various circumstances, such as whether the employee is authorized to hire personnel, impose disciplinary punishment, terminate the Contract of Service, evaluate performance, and decide remuneration, or whether the employee has substantial authority, such as being involved in formulating corporate strategies or policies, upon giving consideration to the employee's nature of business, responsibilities, qualifications, wages, and other factors.
What requires attention is that, in Singapore, managers or executives that are not covered by Part 4 of the Employment Act are interpreted to have a broader meaning than under the laws of Japan. For instance, an acting branch manager or a manager of a branch office of a company who does not work together with the owner of the company and who is never involved in work that influences the business management of the company would not correspond to a manager or an employee in a position to manage others in Japan, but is likely to fall under the definition of a manager or executive who is not covered by Part 4 the Employment Act in Singapore.
As described above, in Singapore, since the interpretation of managers or executives is used in a broader range in comparison to Japan, the applicable scope of Part 4 the Employment Act is limited by that range. From this perspective also, it could be said that Singapore's labor laws are designed to be more favorable for companies.
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Employees who do not fall under Managers or Executives
Furthermore, it should be noted that, even if an employee does not fall under the definition of a manager or executive, not all provisions of the Employment Act are automatically applicable to that employee.
Part 4 of the Employment Act is applied only to matters related to the "Rest Days, Hours of Work, and Other Conditions of Service" of employees. Specifically, when classifying the applicable employees, provisions of Part 4 of the Employment Act apply only to the following employees.
（ⅰ）Workmen whose basic wage (monthly salary) is 4,500 SGD or less (excluding payment of overtime pay, bonus, Annual Wage Supplement, productivity reward or any other monies, irrespective of the pretext thereof), or any workman who is receiving other amounts designated by the Minister for Manpower.
With respect to this point, a workman is defined as an employee who is engaged in manual labour, such as janitors, construction workers, machine operators, assembly workers, train/bus/van drivers, or inspection clerks.
（ii）Employees other than a workman whose basic wage (monthly salary) is 2,600 SGD or less (excluding payment of overtime pay, bonus, Annual Wage Supplement, productivity reward, or any other monies, irrespective of the pretext thereof)
The reason why the scope of application of the Employment Act is broader for a workman is because a workman is more often engaged in manual labor, and the necessity of protection is higher.
Conversely, for employees who do not fit the foregoing definition, only Part 4 of the Employment Act will not apply, but the other parts of the Employment Act will apply.
Points to consider in setting wages
When considering the above, for instance, in the case of employees who are not managers or executives and who are not workmen, if their wage is 2,600 SGD or less, Part 4 of the Employment Act will apply; consequently, the company will be obligated to pay overtime allowance and bear the various other obligations labor laws. Thus, some companies set the wage to be an amount that is greater than 2,600 SGD to avoid various obligations, including the duty to pay overtime allowance.
Duty to prepare Employment Handbook in Singapore and contents of Employment Handbook
Duty to prepare Employment Handbook
In Singapore, unlike Japan, there is no legal obligation for a company to prepare an Employment Handbook. Nevertheless, on a practical level, many companies prepare their own Employment Handbook.
Purpose of Employment Handbook
While no legal obligation is imposed, the actual practice in Singapore is that many companies prescribe common matters related to working conditions in their Employment Handbook and prescribe unique matters in a Letter of Appointment or an Individual Contract of Service.
The reason for this is because, if an Employment Handbook is available, it will be possible to specify the common standards of employee working conditions, which in turn will prevent companies from engaging in individual negotiations upon hiring new employees on the grounds that they are common standards for all employees. Furthermore, it will be possible to alleviate the burden of labor costs of resident personnel, matters that need to be entrusted to arbitrary decisions can be reduced, and unlike Japan, in Singapore companies can unilaterally change the contents of the Employment Handbook (even if it is an adverse change for employees), and the company's personnel management can be operated expeditiously by changing the Employment Handbook ex-post facto. However, the power to enact such unilateral changes must be written in clear language in the Contract of Service.
In preparing its Employment Handbook, a company is legally obligated to observe such obligations. Accordingly, if an Employment Handbook prepared in Japan is applied as is, benefits that are greater than those required under laws will be given to employees; therefore, that company would not be able to leverage the benefits of Singapore's labor laws that are advantageous to companies. Thus, some companies prepare an Employment Handbook that is suitable for Singapore's labor laws.
Subordination of legal binding force of Employment Handbook
In Singapore, the legal binding force of the Employment Handbook is weaker than that of an Individual Contract of Service, and if there is any description in the Employment Handbook that contradicts labor protection laws, the labor contract, or the Individual Contract of Service, such description is generally deemed to be null and void as being subordinate to the foregoing laws and contracts.
It should be noted that this differs from Japan in which the legal binding force of work rules (Employment Handbook) takes precedence over an individual contract.
When the Employment Handbook contradicts individual employment agreements, it is often unclear which takes precedence. It is therefore advisable to specify superiority in the Employment Handbook and in the individual employment agreements.
Adverse change of Employment Handbook
In Singapore, it is common practice for the Employment Handbook to prescribe, for example, "The Company is entitled to interpret, change, revise, supplement, or invalidate the Employment Handbook's conditions, policies, or a part thereof, as needed and at any time, by providing a prior notice to employees," and this kind of provision is considered to be valid on a practical level. Based on the premise of an agreement between the company and an employee at the time that such employee joins the company, it is considered that the company may revise the Employment Handbook even after that employee starts working for the company.
Needless to say, in Singapore also, just because the foregoing provision is provided, it should be noted that not all adverse changes will be deemed valid.
Overview of the wage system (bonus, retirement benefit, and overtime pay) in Singapore
Following the revision of the Employment Act in April 2019, all employees are now covered by the Employment Act. Thus, it should be noted that employers need to comply with applicable laws and regulations for managers or executives whose employment conditions were determined by their respective agreement with their employees prior to the revision. In particular, Core Provisions of the Employment Act (such as provisions regarding annual leave, sick leave, maternity leave, childcare leave, and public holiday; requirement to keep employee information; requirement to issue written Key Employment Terms; and requirement to issue itemized Pay Slips) have come to be applied to all employees, including managers or executives. In terms of wages, it should be noted that the provision requiring employers to pay wages within seven (7) days from the closing date of salary calculation date, which had not been applied to managers or executives before the revision, have come to be applied to all employees.
Setting of calculation period of wages and timing of payment
While a company may set the wage calculation period, the period shall not exceed one month. Any wage period that is set to be longer than one month is deemed to be one month.
General rule of full payment
Generally, a company may not deduct a fixed or undetermined amount from wages and must observe the rule of full payment. The only time that the foregoing deduction is permitted is when the employee has provided written consent (the employee may withdraw such consent without incurring any penalty at any time), such deduction is prescribed in the Employment Act, or an order was made by a court or public institution.
Furthermore, provisions are also prescribed for exceptional deductions, such as a deduction for absences, deduction for compensation of damage, deduction of income tax, and deduction for CPF. In addition, as a general rule, any deduction for damage or loss caused by the negligence or default of an employee must not exceed 1/4 of the monthly wage, and the employee must also be given an opportunity to object to such deduction. Nonetheless, deductions based on the employee’s written consent should not exceed one-half of the monthly wage (Section 32(1) of the Employment Act.).
General rule of currency payment
Wages of employees must be paid in legal currency, and payment in kind is not allowed (Section 32(1) of the Employment Act.).
Retirement Benefit
Provisions that prescribe the duty to pay Retirement Benefits do not exist in the Employment Act. Nevertheless, if such provisions are separately provided in the labor contract, the Employment Handbook, or the Individual Contract of Service, they must be followed.
Bonus, Annual Wage Supplement
Provisions that prescribe the duty to pay bonuses do not exist in the Employment Act. Nevertheless, if such provisions are separately provided in the labor contract, the Employment Handbook, or the Individual Contract of Service, they must be followed.
In Singapore, the system of paying Annual Wage Supplement (AWS) is generally adopted. This is a system where the company pays, once a year, one month's worth of wages to employees, and many companies are adopting this system in practice. Provisions that prescribe the duty to pay AWS also do not exist in the Employment Act, and the duty to pay AWS is acknowledged only when such provisions are prescribed in the labor contract, the Contract of Service, or the Employment Handbook.
Minimum wage
In Singapore, there are no laws that prescribe a minimum wage, except for certain industries, such as security companies. Accordingly, wages are determined based on the supply and demand of labor (that is, based on a contract between labor and management).
Furthermore, the National Wage Council composed of personnel from the government, companies, and trade union representatives offers recommendations to the government regarding the wage policy according to long-term economic goals, and additionally offers guidelines on the increase of wages.
Methods and points to consider regarding ordinary dismissal, retrenchment, and punitive dismissal in Singapore
When a company is to dismiss a worker, the method of dismissal is largely classified into the following three types: specifically, ordinary dismissal, dismissal on grounds of reorganization, and punitive dismissal. Each type of dismissal in Singapore is now explained.
Ordinary dismissal
While a company may dismiss an employee without any particular reason (ordinary dismissal) by unilaterally sending a dismissal notice, this is limited to cases where there is no special provision regarding discharge restrictions in the Individual Contract of Service.
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Specification of grounds for dismissal
Irrespective of whether a specific term is prescribed, the Contract of Service may be terminated by either the company or the employee without any particular reason by providing an advance notice of termination, but in such a case, an advance notice period, or salary in lieu of the said notice period is required. Accordingly, due cause for dismissal is not required, and the fact that a company can dismiss an employee without any particular reason is a unique feature of Singapore's labor laws (Section 11(1) of the Employment Act.).
In Japan, "a dismissal shall, if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, be treated as an abuse of right and be invalid" (Labor Contract Act, Article 16), and it could be said that this is one of the most different aspects between the labor laws of Japan and the labor laws of Singapore.
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Advance notice period upon termination of Contract of Service
An advance notice period on termination of the Contract of Service in Singapore to an employee must be the same period for both the company and the employee. As long as this rule is observed, unlike Japan, the Contract of Service may be terminated without reason in Singapore by unilaterally giving a dismissal notice to the employee. Furthermore, if the advance notice period is set out in the labor contract, the Employment Handbook, or the Individual Contract of Service, it should be noted that measures need to be implemented according to such provision.
However, where a payment equal to the salary that would have accrued during the notice period is made, such advance notice is not needed, and the Contract of Service can be terminated forthwith (Section 11(1) of the Employment Act.).
According to the above, for instance, if the Employment Handbook prescribes that a company is only required to give an advance notice of five days, but an employee is required to give an advance notice of one month, such provision will be deemed invalid. Meanwhile, if a company and an employee agree that an advance notice period is not required, such provision will be deemed valid. In actual practice, it is often the case that, in Singapore, the Employment Handbook or the Individual Contract of Service prescribes that a one-month advance notice is required for both the company and the employee.
If the collective agreement, the Employment Handbook, or the Individual Contract of Service does not prescribe an advance notice period, the Employment Act applies and the following advance notice period is required.
Retrenchment
As for retrenchment, whether an employee can be dismissed and whether an advance notice is required are determined similarly as with an ordinary dismissal; no reason is required for the dismissal, but an advance notice period is required. Accordingly, there are no provisions that correspond to the four requirements for strict retrenchment as under the laws of Japan. However, the following two points differ from ordinary dismissal: (i) payment of a retrenchment benefit may be required, and (ii) if an employer has at least ten employees and notifies at least one employee of their retrenchment, a notice to the Ministry of Manpower (MOM) is required. An employer needs to notify MOM within five working days after affected employees are notified of their retrenchment.
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Determination on whether a dismissal corresponds to retrenchment
Distinction between ordinary dismissal and retrenchment is determined whether or not the company dismisses the employee for streamlining its business operation; however, specific requirements are not prescribed under the laws. Thus, there are cases where whether the dismissal corresponds to a retrenchment is contested between the company and the employee. As an example, if the company does not recruit new employee after dismissing the employee, such dismissal may be deemed a retrenchment.
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Retrenchment benefit
Retrenchment benefit is handled as follows:
For an employee who has been in continuous service with an employer for less than two years
With regard to the duty to pay a lump sum referred to as the retrenchment benefit in relation to a dismissal on grounds of reorganization, the Employment Act prescribes as follows: "No employee who has been in continuous service with an employer for less than two years shall be entitled to any retrenchment benefit upon dismissal on the grounds of redundancy or by reason of any reorganization of the employer's profession, business, trade, or work" (Employment Act, section 45). Accordingly, even if a company dismisses an employee who has been in continuous service with an employer for less than two years on the grounds of reorganization, that company will not be obligated to pay a retrenchment benefit (nevertheless, there would be no problem for a company to arbitrarily make an ex-gratia payment).
For an employee who has been in continuous service with an employer for two years or longer
Meanwhile, whether an employee who has been in continuous service with an employer for two years or longer can request a retrenchment benefit is sometimes contested because there is no express provision that prescribes the same in laws.
With respect to this point, foremost, with regard to the interpretation of section 45 of the Employment Act, there is a judicial precedent that indicates as follows: "It shall not be interpreted that an employee who has been in continuous service with an employer for two years or longer shall be entitled to any retrenchment benefit." Meanwhile, on the grounds of interpretation by argument from the contrary of section 45 of the Employment Act, MOM rendered its opinion to the following effect: "When a company is to dismiss an employee who has been in continuous service with an employer for two years or longer on the grounds of reorganization, the company should pay some kind of retrenchment benefit that the employee is entitled to receive." Furthermore, on November 19, 2008, a tripartite consisting of MOM, the Singapore National Employers Federation, and the National Trades Union Congress announced the Tripartite Guidelines on Managing Excess Manpower for developing an outlook on managing excess manpower. These Guidelines state that, with regard to the payment of a retrenchment benefit, "with two years’ service or more are eligible for retrenchment benefit. " However, these Guidelines are not a statute and have no legal binding force. Consequently, there are contradictory circumstances where a company is not obligated to pay retrenchment benefits according to judicial precedents on the one hand but is obligated to pay retrenchment benefits pursuant to MOM's administrative opinion and under the Tripartite Guidelines on the other.
Nevertheless, in light of circumstances where the judicial precedents are more than 10 years old and MOM is currently supporting the payment of retrenchment benefits, it cannot be denied that the judicial precedents may change in the future. Thus, as a realistic policy, to follow the administrative opinion may be one course of action that may be taken.
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Amount of retrenchment benefit
Foremost, the amount of retrenchment benefit to be paid will be pursuant to the provision prescribed in the labor contract, the Employment Handbook, or the Individual Contract of Service. If no such provision is available, the Employment Act does not prescribe the amount of retrenchment benefit to be paid. Furthermore, MOM's opinion does not specify any amount and states that such amount should be decided based on negotiations between the company and the employee, and according to the company's financial condition.
Meanwhile, the Tripartite Guidelines state, as general standards, "two weeks to one month salary per year of service." Moreover, these Guidelines additionally state that "the norm is one month salary for each year of service" with regard to companies with a trade union in which the payment of retrenchment benefits is specified in the collective bargaining agreement.
Accordingly, in practice, many companies review the amount based on the foregoing standards and according to the negotiations between the company and the employee and the company's financial condition.
Punitive dismissal
If an employee is engaged in misconduct, a company may thoroughly investigate the matter and then dismiss the employee (punitive dismissal) (immediate dismissal that does not require any prior notice). An act in breach of the Contract of Service (Misconduct), theft, fraud, violation of an official order, and the like correspond to the above, but in practice, the Employment Handbook or the Individual Contract of Service often prescribes the details of such misconduct.
Moreover, as an alternative to dismissal, there are methods of immediately demoting the employee or immediately suspending the employee without pay for a period that is not longer than one week.
While this will also depend on the provisions of the labor contract, the Employment Handbook, or the Individual Contract of Service, if there are no specific provisions, an advance notice period is not required for a punitive dismissal, and the employer may dismiss the employee immediately.
Previously, if an employee believes that he/she was wrongfully dismissed without any of the foregoing reasons (Wrongful Dismissal), the employee was able to file a written protest with the Minister of Labor to be reinstated within one month after being dismissed. However, following the revision of the Employment Act in April 2019, all disputes with respect to Wrongful Dismissal or wages not exceeding SGD 20,000 are now referred to a dispute resolution institution called Employment Claims Tribunals (ECT) for resolution. Furthermore, as to what cases fall under Wrongful Dismissal, a Guideline for Wrongful Dismissal was announced in April 2019 by an independent organization. In this guideline, it is clearly indicated that dismissals on the grounds of any act in violation of the contract of service, underperformance, cutting down on excess workforce, and the like are not considered to fall under Wrongful Dismissal. However, on the other hand, if the employee successfully proves that the dismissal results in discriminating against the employee or depriving the employee of any benefit, or punishment of the employee for exercising its rights, such dismissal is considered to fall under Wrongful Dismissal. Prior to bringing the case to ECT, an employee is required to work for a solution by applying for a dispute resolution institution called the Tripartite Alliance for Dispute Management (TADM). Only when the employee and the employer are unable to reach an agreement through mediation may the case be brought to ECT for a decision. If ECT determines that the dismissal was groundless, ECT may issue an order that the company reinstate the employee or pay compensation for damages. Moreover, where the employee was represented at mediation by a trade union, the maximum claim amount increases to SGD 30,000 (Regulation 17(2) of the Employment Claims Regulations).
Because the act of embezzlement in Singapore may be subject to the Prevention of Corruption Act, the company should consider filing a criminal complaint or pressing charges against the employee based on the said Act, and in the foregoing case, the company should also take note as to whether it is obligated to report the criminal act.
Types of foreign national passes and acquisition requirements
Employment of Foreign Manpower Act
Singapore is adopting a relatively tolerant policy for foreign workers. The Employment of Foreign Manpower Act was enacted to protect foreign workers and their welfare and to maintain valid Work Passes.
The Employment of Foreign Manpower Act prohibits the employment of foreign workers who do not have a valid Work Pass. Illegal employment and active illegal behavior are punishable by a fine, imprisonment, or both. The Act authorizes inspectors to temporarily suspend, revoke, or change the terms of the Work Pass.
While Singapore is adopting a relatively tolerant policy for foreign workers, when a company is to hire a foreign worker, the company must pay a Foreign Worker Levy. Note that Employment Pass holders are not subject to the foregoing Levy.
There are employers that pay foreign workers a salary lower than the salary declared on the visa application and employers that force foreign workers to pay back the employers in cash a portion of the salary that has already been paid to the foreign workers. Care must be taken as there have been cases in recent years in which such employers were ordered to pay large fines.
Types of passes
The main types of passes that can be acquired by foreign nationals in Singapore are as follows.
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Employment Pass
Foreign nationals who hold certified professional qualifications are eligible to apply for the Employment Pass (EP). From September 1, 2020, the minimum salary eligible for the EP was raised to 4,500 SGD. Also, as for foreign nationals in the financial industry, the minimum salary eligible for the EP was raised to 5,000 SGD from December 1, 2020. These minimum amounts will be raised to 5,000 SGD and 5,500 SGD respectively from September 1, 2023. A family member of an EP holder may apply for a Dependant’s Pass and a Long-Term Visit Pass. For those who already have a valid EP, the new minimum salary requirement applies to their renewal from September 1, 2023.
From September 1, 2023, in addition to the minimum salary requirement, a foreign employee would have to score at least 40 points on the new COMPASS rubric. COMPASS assesses an employee based on the various factors of their salary, qualifications, employer’s workforce diversity, and employment of Singaporeans and Permanent Residents.2
As for foreign nationals who already have their EP, the EP may be renewed for up to three years as long as they apply for renewal before the expiry date (from six months before the pass expires).
Furthermore, in Singapore, restrictions on the employment of foreign nationals have been reinforced from August 2014, and for the purpose of offering opportunities for employment to Singapore nationals, a company to file an EP for employing a foreign national is obligated to foremost publicly offer the position to Singapore nationals and those with a permanent resident status on MyCareersFuture.sg (formerly referred to as JobsBank). However, companies who have less than 10 employees or positions in which the monthly salary is 20,000 SGD (22,500 SGD from September 1, 2023) or more are exempted from posting on MyCareersFuture.sg (formerly referred to as JobsBank).
In addition, companies have been exempted from job advertisement requirements at MyCareersFuture.sg (formerly referred to as JobsBank), when the EP application is made for an employee being transferred within the same group companies, also known as Intra-Corporate Transferee (ICT). On this point, MOM has announced new requirements with respect to EP applications using ICT. According to the new requirements, (1) the candidate cannot bring family into Singapore on a Dependant’s Pass or Long-Term Visit Pass, and (2) the candidate is also generally not eligible for future employment or for permanent residency in Singapore upon the expiry/termination of the work pass. Therefore, employers need to be mindful of the restrictions.
When an inquiry was made, MOM stated that there may be further changes to the ICT scheme. Therefore, it is necessary to carefully check the trends in the handling of ICT in the future.
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S Pass
The S Pass was introduced in 2004 in order to deal with demands for "mid-skilled" employees. The minimum salary eligible for the S Pass application was raised to 3,150 SGD from September 1, 2023. Therefore, persons eligible for the S Pass are holders of the same level of educational background or technical qualifications as graduates of high school or vocational school who have the relevant years of work experience and whose fixed monthly salary is 3,150 SGD or more. For those who already have a valid S Pass, the new minimum salary requirement applies to their renewal from September 1, 2024.
In order to hire a foreign worker holding an S Pass and a Work Permit (WP), there is a foreign quota relative to local workers. In other words, unless a company hires a certain number of local workers so that the employment of Singapore nationals is not threatened, that company may not hire a foreign worker holding an S Pass and WP.
From July 1, 2020, the Local Qualifying Salary (LQS) that a company’s local employee must earn was raised to 1,400 SGD per month before the person can be counted towards the company's quota entitlement. In line with the change, the LQS requirement for 0.5 local employees was raised from 650 SGD to 700 SGD per month.
Furthermore, a company must comply with the S Pass Sub-Dependency Ratio Ceiling that refers to the quota of foreign workers that a company can hire. Regarding this point, it was announced in Budget 2020 that the S Pass Sub-Dependency Ratio Ceiling would be gradually reduced across the construction, marine shipyard, and process sectors, and it has been reduced to 15% from January 1, 2023. For the manufacturing sector, the S Pass Sub-Dependency Ratio Ceiling has been reduced to 15% from January 1, 2023 , to match the construction, marine shipyard, and processing sectors.
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Work Permit
There are five types of Work Permits (WP): for semi-skilled workers working in specified sectors, domestic workers, confinement nannies, performers working in public entertainment outlets such as bars, hotels, and nightclubs, and trainees or students undergoing practical training in Singapore for up to six months. Among them, semi-skilled workers are further divided into two types, Higher Skilled (R1) and Basic Skilled (R2). Holders of those Work Permits may not acquire a Dependant’s Pass for their spouse, single biological child, and adopted child under the age of 21.
Companies are obligated to pay a monthly Foreign Worker Levy and a Skills Development Levy for managing the number of workers.
Moreover, companies must observe the Dependency Ratio Ceiling of foreign workers. The Dependency Ratio Ceiling of foreign workers refers to the maximum ratio of foreign workers to the total number of workers in the workplace and industry.
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Personalized Employment Pass
Because an EP is issued for employment under a specific company, when an EP holder leaves that company, the EP holder has no choice but to depart from Singapore. A Personalized Employment Pass (PEP) was introduced for promoting the continued employment of an EP holder in Singapore, and under this system a foreign worker may reside in Singapore up to six months after leaving the company to search for a new job.
A PEP holder must have 22,500 SGD3 for applicants who already have a valid EP and 18,000 SGD for new applicants as gross yearly earnings or more based on a fixed monthly wage and must notify MOM, as needed, of changes to one's personal information, including tax returns for certifying one's foregoing earnings. (However, the minimum monthly salary for both categories will be raised to 22,500 SGD from September 1, 2023.) A PEP can be issued only to EP holders or those who satisfy certain qualification standards. A PEP can only be issued once, is valid for three years, and cannot be renewed.
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Entre Pass
An Entre Pass is a work permit that is suitable for foreign entrepreneurs and is applicable to foreign nationals who wish to launch a business in Singapore, who have incorporated a corporation in Singapore within six months prior to the application, and who have satisfied any one of the following criteria: (ⅰ) Entrepreneur (the company raised funding of at least 100,000 SGD from a venture capitalist [VC] or the like that is recognized by a Singapore government agency), (ⅱ) Innovator (the company holds an intellectual property [IP] registered with an approved national IP institution), or (ⅲ) Investor (who has a minimum of eight years of experience as a senior management professional or executive in a large corporation).
An Entre Pass can be renewed and the duration of the renewed pass is one year for the first renewal and two years for subsequent renewals.
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Dependant's Pass
A spouse, single biological child, and adopted child under the age of 21 of foreign nationals who satisfy the conditions of an EP, S Pass, PEP, or Entre Pass may apply for a Dependant’s Pass (DP). A DP is attached to an EP or other WP and, once the EP is invalided, the DP will lose effect simultaneously.
If a DP holder wishes to work, the company used to be able to file a Letter of Consent with MOM and the DP holder could work if the request was approved. However, this has been discontinued, and it is now required to obtain one of EP, S Pass, or Work Permit if the DP holder wishes to work.
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Long Term Visit Pass
A foreign national who satisfies the conditions of an EP, S Pass, PEP, or Entre Pass may apply for a Long Term Visit Pass for one's common-law spouse, spouse, single child who is 21 or over and has a disability, single stepchild under age of 21, and parents who are paid above a certain monthly salary.
If a Long Term Visit Pass holder wishes to work in Singapore, such holder must separately acquire some type of work permit such as an EP, an S Pass, or a WP.
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Launch of the Tech.Pass
On January 19, 2021, the Singapore government launched a new work pass called the Tech.Pass, aiming at attracting experts in the information technology field. While the normal work pass is administered by the Ministry of Manpower, the Tech.Pass is administered by the Economic Development Board. Although there are only 500 places available for applicants upon launch, the government plans to increase those places as needed.
Eligibility Criteria for the Tech.Pass
To be eligible for the pass, which is open for application as of January 19, 2021, the applicants must satisfy any two of the following conditions:
- ・Have a last drawn fixed monthly salary (in the last one year) of at least SGD 22,500.4
- ・Have at least five cumulative years of experience in a leading role in a tech company with a valuation/market cap equivalent to at least USD 500 million or at least USD 30 million in terms of the funding raised.
- ・Have at least five cumulative years of experience in a leading role in the development of a tech product that has at least 100,000 monthly active users or at least USD 100 million in annual revenue.
Flexibility of Tech.Pass holders
Although the requirement to obtain the pass is strict, the Tech.Pass will allow pass holders flexibility in the participation of activities: unlike regular passes, such as Employment Pass, which is tied to a specific employer and does not allow holders to start a business or be employed by more than one company, the Tech.Pass will allow holders to come to Singapore to start a business or be employed by or act as an advisor to one or more companies. Characteristically, Tech.Pass holders are entitled to do the following:
- ・Start and operate one or more tech companies
- ・Be an employee in one or more Singapore-based companies at any time
- ・Transit between employers or to an entrepreneur
- ・Be a consultant or mentor, lecture in local institutions of higher learning, or be an investor and director in one or more Singapore-based companies
- ・Sponsor stay for spouse, children, and parents in Singapore on either a Dependant’s Pass (DP) or a Long-Term Visit Pass (LTVP) issued by MOM
- ・Renew for another two years upon meeting the renewal criteria
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Overseas Networks & Expertise (ONE) Pass
The ONE Pass was launched to attract top talent in business, arts, culture, sports, academia, and research.
Like the Tech.Pass, the ONE Pass allows a holder much more flexibility compared to other Work Passes. Because the ONE Pass is tied to the holder’s individual, said holder may concurrently work for multiple employers while also running their own businesses in Singapore. In other words, a ONE Pass holder would not need to apply for a new pass when changing jobs. Furthermore, the employers (if any) of ONE Pass holders are not subject to any foreign worker quota or levy.
- The following passes are available for the families of ONE Pass holders.
- (ⅰ)Dependant’s Pass (DP) for legally married spouses and unmarried children under 21 years old; and
- (ⅱ)LTVP for common-law spouses and parents.
While holding a DP, a ONE Pass holder’s spouse may also work in Singapore with a Letter of Consent.
The ONE Pass is valid for five years and is renewable for another five years each time. While the basic eligibility criteria are for one to earn a fixed monthly salary of at least $30,000 (either within the last year or under their future employer), this is not a strict requirement and applicants who have outstanding achievements in the relevant fields may qualify despite not meeting the salary criteria.
