Want to know more about firing in Singapore? Read this handy guide

Introduction

Terminating employees in Singapore requires a comprehensive understanding of the legal framework and strict adherence to local regulations. The Employment Act (EA) is the cornerstone of Singapore’s labour laws, governing the rights and obligations of both employers and employees. This legislation ensures that the termination process is conducted fairly and justly, protecting the interests of both parties involved.

In 2023, Singapore’s Ministry of Manpower (MOM) reported that 14,590 workers were retrenched. This high number of retrenchments highlights the dynamic nature of Singapore’s job market and the challenges businesses face amid economic changes. The primary cause of retrenchments in the first quarter of 2024 was business reorganisation or restructuring, as companies continued their transformation efforts to maintain competitiveness. Such trends make it essential for employers to handle terminations with a thorough understanding of the legal requirements to avoid disputes and ensure compliance with the law.

Employers must proactively understand the legal implications of termination and take steps to mitigate risks. This includes staying updated on changes to labour laws, seeking legal counsel when necessary, and implementing best practices in human resource management. By doing so, employers can protect themselves from legal repercussions, maintain a positive reputation, and foster a fair workplace environment.

Termination Process and Compensation in Singapore

The termination process in Singapore must be handled with care to avoid legal repercussions. Employers are required to follow specific guidelines as stipulated in the Employment Act. This includes providing clear reasons for termination, adhering to notice periods, and offering fair compensation. The Employment Act provides detailed procedures to ensure employers and employees are treated fairly during the termination process.

Fair Reasons for Firing in Singapore

Employers must ensure that the reasons for termination are fair and justifiable. Common valid reasons for termination include:

1. Poor Performance or Misconduct by the Employee
2. Redundancy Due to Business Restructuring or Economic Downturn
3. Expiry of a Fixed-Term Contract

Poor Performance or Misconduct by the Employee

Types of Misconduct

Misconduct can be classified into two categories: minor and major misconduct.

• Minor Misconduct: This includes less severe breaches of company policies, such as occasional tardiness, minor insubordination, or misuse of company property. Typically, minor misconduct is addressed through warnings and corrective actions.
• Major Misconduct: This involves serious breaches that justify immediate dismissal. Examples include theft, fraud, violence, harassment, or gross negligence. Major misconduct often leads to summary dismissal without notice or compensation.

Procedure for Addressing Misconduct

When terminating an employee for poor performance or misconduct, employers should follow a structured approach to ensure fairness and compliance with the law. This approach includes documenting performance issues, providing warnings, implementing performance improvement plans, conducting regular reviews, and holding a final meeting if necessary. Here is a detailed breakdown:

1. Document Performance Issues: Employers must maintain detailed records of the employee’s performance issues. This includes specific incidents, dates, and any feedback or warnings given to the employee. Documentation serves as evidence that the employer has addressed the performance issues appropriately and fairly.
2. Provide Warnings: Issue formal warnings to the employee, outlining the performance or behavioural issues and the required improvements. These warnings should be documented and communicated clearly. It is advisable to give the employee a reasonable opportunity to improve their performance.
3. Implement Performance Improvement Plans (PIP): Employers should develop a Performance Improvement Plan (PIP) with clear objectives, timelines, and the specific areas needing improvement. The PIP should be communicated to the employee, and both parties should agree on the plan.
4. Conduct Regular Reviews and Monitor Progress: Regularly monitor the employee’s progress and conduct performance reviews to discuss any improvements or continued issues. These reviews should be documented to track the employee’s progress against the PIP.
5. Hold a Final Meeting: If there is no improvement despite the PIP and regular reviews, hold a final meeting to discuss the failure to meet the PIP objectives. During this meeting, inform the employee of the termination decision, providing clear reasons supported by documented evidence.
6. Provide Notice or Compensation in Lieu: Adhere to the required notice period or provide compensation in lieu of notice, as stipulated in the employment contract and the Employment Act. This ensures the termination process complies with legal requirements.

By following these steps, employers can ensure that terminations for poor performance or misconduct are handled fairly and legally, thereby minimizing the risk of unfair dismissal claims and legal disputes. For more detailed information, employers can refer to the MOM guidelines on termination due to misconduct.

Redundancy Due to Business Restructuring or Economic Downturn

Employers should follow a structured and fair process when terminating employees due to redundancy to ensure compliance with legal requirements and maintain a positive employer reputation. Below are the key steps and considerations:

1. Develop a Redundancy Plan: Create a detailed redundancy plan that outlines the business reasons for the redundancy, the number of affected employees, and the selection criteria. This plan should take into account the company’s long-term manpower needs, including maintaining a strong Singaporean core.
2. Consult with Employees: Inform and consult with the affected employees as early as possible about the redundancy situation and its reasons. If the company is unionised, consult with the union to ensure the process is conducted fairly and transparently.
3. Offer Alternatives: Where possible, offer affected employees alternative roles within the organisation. This may include transfers to other departments or subsidiaries. Employers should make reasonable efforts to find suitable alternative employment for redundant employees.
4. Provide Support: Offer support services such as career counselling, job placement assistance, or retraining opportunities. Collaborate with organisations such as Workforce Singapore (WSG), NTUC’s U PME Centre, and the Employment and Employability Institute (e2i) to help affected employees find new employment.
5. Issue Redundancy Notices: Provide formal redundancy notices to the affected employees, outlining the reasons for redundancy and the effective termination date. Ensure that the notice period complies with the employment contract terms or the guidelines set out by the Ministry of Manpower (MOM).
6. Calculate Redundancy Benefits: Ensure the payment of any redundancy benefits or severance pay as outlined in the employment contract or collective agreement. If there is no provision in the contract, negotiate the compensation amount with the employees or their union. The prevailing norm is to pay a retrenchment benefit of two weeks to one month’s salary per year of service, depending on the company’s financial position and industry standards.

Legal Obligations

Employers have several legal obligations when conducting a retrenchment exercise:

1. Notification to MOM: Employers with at least 10 employees who retrench any employee must notify MOM of the retrenchment exercise. This notification helps MOM monitor the labour market and support the affected employees.
2. Payment of Outstanding Salaries: Employers must pay all outstanding salaries, including unused annual leave, notice pay, and any other owed compensation on the employee’s last day of work.
3. Fair Selection Criteria: Ensure that the selection criteria for redundancy are based on factors such as the ability to contribute to the company’s future business needs and not on discriminatory grounds. Treat all affected employees with dignity and respect throughout the process.
4. Repatriation for Foreign Employees: Employers must also arrange and pay for foreign employees’ repatriation to their home country unless they secure a new job in Singapore.
5. Support and Assistance: Employers are encouraged to provide additional support to affected employees, such as extending the notice period to give them more time to find new jobs and offering outplacement assistance programs.

By adhering to these steps and legal obligations, employers can conduct redundancies responsibly and fairly, minimising the impact on affected employees and maintaining compliance with Singapore’s employment laws. For more detailed information, employers can refer to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment.

Expiry of a Fixed-Term Contract

When terminating employment due to the expiry of a fixed-term contract, employers should:

1. Review the Contract: Confirm the end date of the fixed-term contract and any clauses related to renewal or termination.
2. Provide Advance Notice: Inform the employee in advance of the contract’s expiry date if the contract will not be renewed, as per the notice period specified in the contract.
3. Conduct an Exit Interview: Optionally, conduct an exit interview to discuss the employee’s experience and any potential opportunities for future collaboration.
4. Settle Outstanding Entitlements: Ensure that all outstanding salary, unused annual leave, and any other contractual entitlements are paid up to the end date of the contract.

Unfair dismissal claims can arise if an employee believes they were terminated without a fair reason, leading to potential legal disputes and compensation claims. Therefore, employers must handle terminations with transparency, fairness, and in accordance with the Employment Act to mitigate risks and maintain a positive workplace environment.

Notice Periods

Employers must provide the appropriate notice period when terminating an employee. The length of the notice period is typically specified in the employment contract, but if not, it follows the minimum guidelines set out by the Employment Act:

• One day’s notice if the employee has been employed for less than 26 weeks.
• One week’s notice if the employee has been employed for 26 weeks to less than two years.
• Two weeks’ notice if the employee has been employed for two years to less than five years.
• Four weeks’ notice if the employee has been employed for five years or more.

Alternatively, either party may choose to waive the notice period by providing compensation in lieu of notice, equivalent to the employee’s salary for the notice period.

Compensation Entitlements

The Employment Act outlines the compensation entitlements for employees upon termination. This includes payment for:

• Salary up to the last day of employment.
• Any unused annual leave.
• Pro-rated annual wage supplement (AWS) if applicable.
• Any other contractual entitlements.

Employers must pay all due compensation promptly to avoid legal issues.

Calculating Salary for an Incomplete Month’s Work

In situations where a monthly-rated employee has not completed a full month of service due to various reasons, such as commencing employment after the first day of the month, termination before the end of the month, or taking unpaid leave, the salary for that month is calculated using a specific formula provided by the Employment Act.

The formula to calculate the salary for an incomplete month’s work is as follows:

Salary = [Monthly gross rate of pay / Number of days on which the employee is required to work in that month] x Number of days the employee actually worked in that month.

When determining the number of days an employee works in a month, any day in which the employee is obligated to work for five hours or less as per their employment agreement is considered half a day.

For example, if an employee’s monthly gross rate of pay is SGD 3,000, they are required to work 22 days in that month, and they worked ten days, the calculation would be:

Salary = (3,000/22) x 10 = 1,363.64

Employers should use this formula to ensure that the salary calculations for incomplete months are fair and accurate, in compliance with the Employment Act.

Terminating Foreign Employees in Singapore

Terminating foreign employees in Singapore involves additional considerations and specific legal obligations. Employers must be diligent in adhering to these requirements to ensure compliance and avoid potential penalties. Understanding the nuances of terminating foreign workers is crucial for maintaining a fair and lawful workplace.

Cancelling the Work Pass

One of the primary steps when terminating a foreign employee is canceling their work pass. Employers must cancel the work pass within seven days of the termination date. This action is mandatory and helps ensure that the employee’s work status is accurately reflected in government records. The Ministry of Manpower (MOM) provides a straightforward online process for work pass cancellation, which employers must complete promptly.

Departure from Singapore

Following the cancellation of the work pass, the foreign employee must leave Singapore within 30 days unless they secure a new employment pass. This grace period allows the individual to make necessary arrangements for their departure or transition to a new job. Employers must communicate this requirement clearly to the terminated employee to avoid any legal complications.

Rights of Terminated Foreign Workers

Foreign workers in Singapore have specific protections under the Employment Act and the Employment of Foreign Manpower Act. These protections ensure that foreign employees are treated fairly and are entitled to the same notice periods and compensation as local employees. Key entitlements include:

• Notice Period: Foreign workers must be given the appropriate notice period as stipulated in their employment contract or, if not specified, according to the guidelines set out in the Employment Act.
• Compensation: They are entitled to salary up to the last day of employment, payment for any unused annual leave, pro-rated annual wage supplement (AWS) if applicable, and any other contractual entitlements.
• Repatriation: Employers must ensure that the foreign worker’s repatriation is arranged and paid for. This includes the cost of airfare and any other necessary travel expenses to their home country.

Legal Obligations for Terminating Foreign Employees

Employers have several legal obligations when terminating foreign employees. Failure to meet these obligations can result in significant penalties and damage to the company’s reputation. The primary legal responsibilities include:

1. Payment of Outstanding Salaries: Employers must pay all outstanding salaries and any other owed compensation promptly upon termination.
2. Cancellation of Work Pass: As previously mentioned, the employer must cancel the work pass within seven days of termination.
3. Repatriation Arrangements: Employers are responsible for arranging and covering the cost of the foreign employee’s return to their home country. This obligation ensures that the terminated employee can leave Singapore without undue financial burden.
4. Documentation and Compliance: Employers should maintain detailed records of the termination process, including the reasons for termination, notice provided, and payments made. This documentation is essential for demonstrating compliance with legal requirements.

Terminating foreign employees in Singapore requires careful attention to legal obligations and procedural requirements. Employers must ensure that they cancel the work pass, provide the appropriate notice and compensation, and arrange for the employee’s repatriation. Adhering to these guidelines not only ensures compliance with Singapore’s labour laws but also fosters a fair and respectful workplace environment.

Relevant Legal Basis for Firing in Singapore

The primary legal bases for termination in Singapore include:

• Employment Act: Governs the minimum terms and conditions of employment.
• Employment of Foreign Manpower Act: Regulates the employment of foreign workers and ensures their rights are protected.
• Tripartite Guidelines on Fair Employment Practices: Provides guidelines to promote fair and responsible employment practices.

Conclusion

Navigating the complexities of terminating employees in Singapore requires a comprehensive understanding of the legal framework and strict adherence to local regulations. By following the procedures outlined in the Employment Act and related guidelines, employers can ensure that terminations are conducted fairly and justly, protecting the rights of employees and the interests of the business.

Employers must diligently document performance issues, provide necessary warnings, and offer support to affected employees. Whether the termination is due to poor performance, misconduct, redundancy, or the expiry of a fixed-term contract, adhering to the stipulated processes helps mitigate the risk of legal disputes and fosters a fair workplace environment.

For businesses dealing with foreign employees, additional considerations such as work pass cancellation and repatriation arrangements are crucial to ensuring compliance with legal requirements and maintaining a positive reputation.

Partnering with an Employer of Record (EOR) like Eos Global Expansion can significantly ease the burden of managing employee terminations. Eos Global Expansion offers expert support in handling the complexities of offboarding employees, ensuring compliance with local regulations, and managing all administrative tasks related to termination. This partnership allows businesses to focus on their core operations while ensuring employee terminations are conducted smoothly and fairly.

For more information on how Eos Global Expansion can assist with employee terminations and other HR-related matters, visit our website or contact us today. Let us help you navigate the complexities of employment regulations and maintain a compliant and fair workplace.

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