Understanding The Employment Termination In Singapore

When concluding an employment contract, it is mutually advantageous for employers and employees to part ways harmoniously, setting the stage for a positive future and seamless transition. However, in Singapore, crucial knowledge of employment termination is necessary to achieve this. This article aims to provide a comprehensive understanding of the grounds for termination and the requirements that both parties must fulfill, to ensure mutual benefits are upheld.

Definition of termination of employment

The Ministry of Manpower defines employment termination as the decision of either the employer or employee to end a contractual relationship.

There are various reasons for termination, but they can be categorized into three types: with notice, without notice, and termination due to employee misconduct.

The decision to provide notice or not depends on the specific circumstances leading to the termination. However, in most situations, it is essential to provide notice to allow the other party to prepare accordingly.

When creating or reviewing a contract, both parties need to carefully consider the provisions concerning employment termination. By clearly specifying the terms, both sides can easily follow the contract’s guidelines when a termination situation arises.

Additionally, they can also refer to the guidelines provided in the Employment Act for further guidance.

The scope of the employment termination

In Singapore, the scope of employment termination is closely linked to the provisions of the Employment Act.

The primary purpose of the Employment Act is to safeguard the rights of employees. It generally applies to the majority of employees but excludes those in managerial or executive positions, domestic workers, seamen, and certain government personnel.

Employees not covered by the act are still expected to follow company policies and guidelines that are agreed upon by both parties, and these guidelines typically align with the provisions outlined in the Employment Act.

The notice period of termination

A notice period refers to the period of time that an employer or an employee must provide prior to terminating an employment contract. It serves as a formal notification of the intention to end the employment relationship and allows both parties to prepare for the transition.

During the notice period, the employer and employee are expected to fulfill their contractual obligations until the termination takes effect.

In some cases, if both the employers and employees agree that the notice period is unnecessary, they can mutually waive it by entering into a written agreement.

Employees who complete the entire notice period are entitled to CPF Contributions for the salary they receive.

The employer terminates the contract service

There are two parties involved in employment termination: the employer and the employee. In this section, we will focus on situations where employers choose to end the contract with their employees.

The employee underperforms during the probationary period:

During the probationary period in Singapore, which typically lasts from 3 to 6 months, employees are expected to perform well and demonstrate their qualifications for the position.

If they fail to meet these expectations, the employer has the right to terminate their contract by providing 1-2 weeks’ notice before the end of the probation period.

The employee breaches the company contract:

In cases where employees breach the contract, the employer has the authority to terminate the employment without notice or payment in lieu.

Breach of contract can occur when an employee is absent from work for more than two consecutive days without approval or without informing the employer.

The employee misconducts in the workplace:

If the employee misconduct, employers can terminate the contract without notice or salary in lieu.

Examples of misconduct include not fulfilling the employment conditions specified in the contract, such as unauthorized possession of company property or engaging in abusive behavior.

The employee is being transferred:

When an employer plans to transfer their employees to another company, whether it’s a subsidiary, associated company, or unrelated entity, they may choose to terminate the existing employment contracts.

This termination can happen when there are significant changes happening within the corporate structure, such as mergers, acquisitions, or the creation of new subsidiaries.

If the decision to transfer employees is made, it is important to follow the company’s regulations and bylaws to prioritize the satisfaction of the employees being transferred. In case any disputes arise during this process, they can be resolved by referring them to the Commissioner for Labour.

The employee reaches the retirement age:

In Singapore, the retirement age is 62. Once an employee reaches this age, their employer must provide advance notice if they intend to terminate their employment, as stated in the contract.

The Retirement and Re-employment Act requires employers to offer re-employment opportunities until the employee reaches the age of 67. This implies that employees have the option to continue working even after reaching retirement age. However, the provision of retirement benefits is contingent upon the specific terms outlined in the contract.

Terminating employees due to retrenchment:

Terminating employees due to retrenchment refers to the act of ending the employment of individuals because their positions are no longer needed or viable within a company.

Retrenchment typically occurs when a company faces financial difficulties, undergoes restructuring, or experiences a decline in business that necessitates reducing its workforce.

To ensure responsible handling of retrenchment, employers should follow certain procedures. These include providing advance notice to employees, informing the Ministry of Manpower, and reaching an agreement on retrenchment benefits

Other reasons for terminating employees:

Employers may decide to terminate employees for other reasons. including poor performance, illness affecting work, or conflicts with colleagues. However, it is crucial that such terminations are approached thoughtfully, with careful consideration, and with advance notice given to employees to allow them to prepare accordingly.

The employee terminates the employment contract

There are certain situations where the employee decides to terminate the contract. In this section, we will discuss each situation in detail.

Resignation by the employees:

Employees can terminate their employment contract by resigning. This applies to both regular employment and the probationary period. even during the probationary period, through notice or payment in lieu of notice.

The notice period should be in line with the contract terms or follow the guidelines outlined in the Employment Act. Importantly, employers are not allowed to reject an employee’s resignation.

Breach of contract by the employer:

If an employer fails to fulfill their contractual obligations, an employee has the right to terminate the employment contract.

For instance, when the employer does not pay the employee’s salary on time or neglects to provide a safe working environment. In such a situation, the employee can terminate the contract without having to provide notice or make a payment in lieu of notice.

Wrongful dismissal:

Dismissal is when an employee is fired without a valid reason. Wrongful dismissal can occur due to discrimination or denial of benefits, or if an employee faces punishment for asserting their rights.

Valid dismissal can happen for reasons like poor performance or misconduct.

If wrongfully dismissed, steps to take include

• resolving the issue internally,
• filing a claim in court, or opting for mediation.
• if mediation fails, an appeal can be made to the Employment Claims Tribunals.

Employee retirement:

When employees reach the retirement age, which is 62, they have the option to end their employment earlier. Under the Retirement and Re-employment Act, employers are obligated to offer re-employment to eligible employees until they reach the age of 65.

Other reasons for employment termination

Expiration of fixed-term contract:

When a contract reaches its agreed-upon end date, it automatically terminates, usually after a notice period.

There are different types of fixed-term contracts such as

• piece rate contracts that end once a particular project is finished; and
• time contracts that conclude after a specified duration.

If an employer wishes to keep employing the individual for a longer period or on another project, it’s necessary to create a new contract.

End of a probationary period:

In Singapore, it is common for companies to have a 6-month probationary period for new employees.

At the end of this period, the employment contract comes to an end. If the employer wishes to keep the employee on as a permanent staff member, a new employment contract needs to be drafted and signed.

Death of either party:

When an employee dies, their employment contract is automatically terminated. Similarly, if the sole  employer passes away, it also leads to the termination of the contract.

Conclusion

Having the right knowledge about employment termination is beneficial for both companies and employees.

It enables them to determine the circumstances under which a contract can be terminated and the obligation to provide adequate notice to the other party.

This knowledge facilitates smooth transitions, minimizing potential issues. So that both parties can embark on a fresh start, making valuable contributions to their desired organizations.

If you still need more information, our support team is more than happy to help via service@bbcincorp.com

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