Ending an employment relationship is one of the most sensitive tasks an employer faces. Termination of employment in Singapore is governed by the contract of employment, the Employment Act 1968 and a set of tripartite guidelines issued by the Ministry of Manpower (MOM), and a misstep over notice, final pay or documentation can quickly turn into a claim. This article explains the procedure, notice and payment issues that employers and employees commonly encounter.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
Understanding termination of employment in Singapore starts with one principle: the way a contract ends matters as much as the reason it ends. A sound reason handled poorly can still expose a company to a wrongful dismissal claim.
Who this applies to
The Employment Act covers most employees working under a contract of service in Singapore, including managers and executives. Part of the Act, such as the rules on salary payment and wrongful dismissal, extends to all employees, while some provisions on rest days, hours of work and overtime apply only to specific categories. Public servants, domestic workers and seafarers are covered by separate rules.
- Employers who hold Employment Pass, S Pass or Work Permit holders must also follow work pass cancellation requirements.
- Employees on fixed-term contracts, part-time contracts and probation are covered, although their notice terms may differ.
- Directors who are also employees should check both their service agreement and their duties under the Companies Act 1967.
Key rules and requirements in Singapore
Notice of termination
Either party may end the contract by giving the notice stated in the employment contract. If the contract is silent, the Employment Act sets the following default notice periods, based on length of service:
- Less than 26 weeks: one day
- 26 weeks to less than two years: one week
- Two years to less than five years: two weeks
- Five years or more: four weeks
Notice must be given in writing or clearly communicated, and the period should be observed in full. Where the employer wishes the employee to leave immediately, it may pay salary in lieu of notice, which is generally the salary the employee would have earned during the notice period.
Dismissal for misconduct
An employer may dismiss an employee without notice on grounds of misconduct, but only after a due inquiry. The employee should be told of the allegations, given a fair chance to respond, and the findings should be recorded. Skipping this process is one of the most frequent reasons dismissals are found to be wrongful.
Final salary and other payments
When an employer terminates the contract, salary due must generally be paid on the day of termination, or if that is not possible, within three working days. Final pay normally covers outstanding salary, payment for unused annual leave where the contract provides for it, any salary in lieu of notice, and any contractual bonus that has accrued. Retrenchment benefits are a separate matter, covered below.
Wrongful dismissal
An employee who believes they were dismissed without just cause or excuse may file a claim with the Tripartite Alliance for Dispute Management (TADM) within strict time limits, typically one month from the last day of employment. Unresolved claims may proceed to the Employment Claims Tribunals. The Tripartite Guidelines on Wrongful Dismissal also make clear that dismissals motivated by discriminatory reasons, or imposed to deprive an employee of an entitlement, may be treated as wrongful.
Step-by-step process
- Confirm the grounds. Identify whether the exit is by resignation, mutual agreement, dismissal for misconduct, termination with notice, or retrenchment.
- Review the contract. Check the notice clause, probation terms, payment in lieu provisions and any restrictive covenants.
- Follow a fair process. For misconduct, hold a documented inquiry. For performance issues, show that the employee was warned and given time to improve.
- Issue the termination letter. State the last day of employment, the notice given or paid, and the basis for the decision in neutral language.
- Calculate final pay. Include salary, leave, notice pay and other entitlements, and pay on time.
- Handle statutory matters. Make CPF contributions on wages due, and update payroll records. Cancel the work pass of a foreign employee within the period required by MOM, and notify MOM where retrenchment rules apply.
- Keep records. Retain the letter, inquiry notes and payment evidence on file for the period required under employment and tax rules.
Common mistakes to avoid
- Dismissing for misconduct without a due inquiry, or without recording it.
- Relying on a verbal termination with no written confirmation of the last day.
- Paying final salary late, which may itself breach the Employment Act.
- Disguising a retrenchment as a performance issue, or the reverse.
- Forgetting to cancel the work pass of a departing foreign employee, which can lead to penalties.
- Terminating an employee on maternity or other protected leave, where specific statutory protections apply.
- Ignoring probation clauses that allow shorter notice, then applying the wrong notice period.
Practical examples
Example 1: Termination with notice
A company employs an executive who has served three years. The contract has no notice clause. Under the Employment Act default, two weeks’ notice applies. The employer gives written notice on the 1st, and the last day is the 15th. If it prefers the executive to leave on the 1st, it pays two weeks’ salary in lieu of notice together with final pay.
Example 2: Misconduct
An employee is accused of falsifying expense claims totalling SGD 2,400. The employer sets out the allegations in writing, meets the employee, considers the explanation, and records the outcome. Dismissal without notice follows. Because a proper inquiry took place, the company is far better placed if the employee later files a claim.
Example 3: Foreign employee
A Work Permit holder is terminated with notice. In addition to paying final salary, the employer must cancel the permit through the MOM system within the required timeframe, and arrange for the worker’s repatriation as the work pass conditions require.
How a corporate secretary can help
Termination often touches several compliance areas at once. A corporate secretary in Singapore can help confirm whether the termination of a director or officer needs board approval, and prepare the resolutions and ACRA BizFile+ filings for any change in appointment. Raffles Corporate Services can also support payroll processing for final pay and CPF contributions, work pass cancellations, and the accounting and tax treatment of termination payments, so that the employment, IRAS and corporate records all tell the same story.
Frequently Asked Questions
Can an employer terminate without giving a reason?
An employer may end a contract by giving the notice required under the contract, and the Employment Act does not oblige it to give reasons in that case. However, if the employee later claims wrongful dismissal, the employer may need to show that the termination was not unlawful.
Is salary in lieu of notice the same as retrenchment benefit?
No. Salary in lieu of notice replaces the notice period. Retrenchment benefit is a separate payment that depends on the contract and on the tripartite guidance, with employees who have at least two years of service typically considered eligible.
How soon must final salary be paid?
Where the employer terminates the contract, salary should generally be paid on the last day of employment or within three working days. Employers should check the contract and the latest MOM guidance for other situations, such as resignation.
What if the employee disputes the termination?
The employee may file a claim with TADM. Most disputes begin with mediation, and unresolved cases may go to the Employment Claims Tribunals. Good documentation is the best protection.
Key takeaways
- Follow the notice period in the contract, or the Employment Act default if the contract is silent.
- Conduct a due inquiry before dismissing for misconduct and keep written records.
- Pay final salary and other entitlements promptly and accurately.
- Complete work pass cancellations and statutory notifications on time.
- Seek tailored advice before acting on a difficult exit, because small procedural gaps can create large claims.
Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.