Navigating employment termination in Singapore requires a thorough understanding of the legal framework and established best practices. Both employers and employees are governed by the Employment Act, along with various subsidiary legislation and tripartite guidelines issued by the Ministry of Manpower (MOM), the National Trades Union Congress (NTUC), and the Singapore National Employers Federation (SNEF). Adhering to these regulations is crucial to ensure fair treatment and avoid potential disputes or claims of wrongful dismissal.
Properly managing the termination process, whether initiated by the employer or employee, involves specific requirements regarding notice periods, grounds for termination, procedural fairness, and potential entitlements like severance pay. Employers must be diligent in following prescribed steps, especially when terminating employment due to performance issues, misconduct, or redundancy, to comply with the law and uphold ethical employment standards.
Notice Period Requirements
The required notice period for terminating an employment contract in Singapore depends on either the terms stipulated in the employment contract or the statutory minimums set out in the Employment Act, whichever is longer. If the contract does not specify a notice period, the statutory minimums apply based on the employee's length of service. Notice can be given by either the employer or the employee. Payment in lieu of notice is also permissible, where the party terminating the contract pays the other party the salary that would have been earned during the notice period.
Statutory Minimum Notice Periods:
| Length of Service | Minimum Notice Period |
|---|---|
| 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 |
It is important to note that contractual notice periods can be longer than the statutory minimums but cannot be shorter. The notice period should be clearly stated in the employment contract.
Severance Pay
Severance pay, often referred to as retrenchment benefits, is typically payable when an employee is terminated due to redundancy or restructuring (retrenchment). Under the Employment Act, there is no statutory requirement for employers to pay retrenchment benefits if the employee has been employed for less than two years. However, for employees with two or more years of service, retrenchment benefits are generally expected, although the specific amount is not mandated by law unless stated in a collective agreement (for unionized companies) or the employment contract.
Common practice for retrenchment benefits often ranges from two weeks to one month's salary per year of service. The actual amount can be subject to negotiation between the employer and employee, or determined by company policy or collective agreements. Severance pay is generally not mandatory or expected in cases of termination due to misconduct, poor performance, or resignation.
Typical Retrenchment Benefit Calculation (Common Practice):
| Length of Service | Typical Rate (per year of service) |
|---|---|
| 2 years or more | 2 weeks to 1 month's salary |
Employers are encouraged to provide reasonable retrenchment benefits, especially for long-serving employees, and to communicate transparently during the retrenchment exercise.
Grounds for Termination
Employment can be terminated on various grounds in Singapore, broadly categorized as termination with cause and termination without cause.
Termination with Cause: This occurs when the employee's conduct or performance warrants dismissal.
- Misconduct: Serious breaches of company rules, insubordination, dishonesty, or other actions that fundamentally break the employment relationship. For termination due to misconduct, employers must conduct a fair inquiry before dismissal.
- Poor Performance: Consistent failure to meet performance standards despite adequate training, guidance, and opportunities for improvement. Termination for poor performance typically requires a documented process, including performance reviews, warning letters, and potentially a Performance Improvement Plan (PIP).
Termination without Cause: This occurs for reasons not related to the employee's fault.
- Retrenchment/Redundancy: Termination due to business restructuring, downsizing, or closure where the employee's role is no longer required. This is the primary scenario where retrenchment benefits are applicable. Employers must notify MOM of retrenchments if they involve at least 5 employees within a 6-month period.
- Mutual Agreement: The employer and employee agree to end the employment relationship on mutually acceptable terms.
- Expiry of Fixed-Term Contract: The employment ends automatically upon the contract's specified end date.
Procedural Requirements for Lawful Termination
Regardless of the grounds, employers must follow fair procedures to avoid claims of wrongful dismissal. The specific steps vary depending on the reason for termination.
Procedure for Termination due to Misconduct:
- Conduct a thorough and impartial inquiry into the alleged misconduct.
- Give the employee an opportunity to be heard and present their case.
- Consider all evidence before making a decision.
- If dismissal is decided, issue a termination letter stating the reason and effective date.
Procedure for Termination due to Poor Performance:
- Clearly communicate performance expectations.
- Provide feedback and support for improvement.
- Issue warning letters (typically progressive, e.g., first, second, final warning) if performance does not improve.
- Implement a Performance Improvement Plan (PIP) with clear objectives and timelines.
- If performance still does not meet standards after the PIP period, issue a termination letter.
Procedure for Retrenchment:
- Identify the need for retrenchment based on objective business reasons.
- Apply fair and objective criteria for selecting employees to be retrenched (e.g., skills, productivity, length of service, rather than discriminatory factors).
- Communicate the retrenchment decision clearly and sensitively to affected employees.
- Provide the required notice or payment in lieu.
- Provide retrenchment benefits where applicable.
- Notify MOM of the retrenchment exercise (mandatory for 5 or more employees within 6 months).
- Offer assistance where possible (e.g., outplacement services).
Documentation is critical throughout any termination process. This includes employment contracts, performance reviews, warning letters, PIPs, investigation records, and the final termination letter.
Protection Against Wrongful Dismissal
Employees in Singapore are protected against wrongful dismissal. A dismissal can be deemed wrongful if it is:
- Without just cause or excuse (e.g., not due to misconduct, poor performance, or redundancy).
- Without following due process (e.g., dismissing for misconduct without a fair inquiry).
- For discriminatory reasons (e.g., based on age, race, gender, religion, disability, marital status, or family responsibilities).
- A dismissal to deprive an employee of benefits or entitlements.
- A dismissal for exercising employment rights (e.g., joining a union, reporting workplace safety issues).
Employees who believe they have been unfairly dismissed can seek assistance from the Tripartite Alliance for Dispute Management (TADM). TADM provides mediation services, and if mediation is unsuccessful, the case may be referred to the Employment Claims Tribunals (ECT) for adjudication. If a dismissal is found to be wrongful, the ECT can order the employer to reinstate the employee or pay compensation.
Common pitfalls for employers leading to wrongful dismissal claims include insufficient documentation, failure to conduct fair inquiries or follow progressive discipline for performance/misconduct issues, using discriminatory selection criteria during retrenchment, and terminating employment to avoid paying benefits. Adhering to fair procedures and maintaining clear records are essential safeguards.
