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Terminations and Calculating Annual Leave Payout in Singapore

When you terminate employees in Singapore, you will need to follow statutory rules on required notice periods, justifiable reasons to terminate and paying out unused leave.  These labor laws emphasize Singapore’s policy of protecting employee rights all the way through termination, whether or not it is amicable.  However, employers also have termination/payment rights, when warranted by employee actions or unplanned resignations.

Companies that are new to hiring in Singapore will want to understand how to terminate an employee legally, and how to handle any potential conflicts.

Reasons for Termination in Singapore

Before you initiate any termination process overseas, you should be aware of which types of reasons will justify termination without statutory notice.  This may come as a surprise for foreign employers not used to any restrictions on firing an employee.

When you give an employee the proper notice, you don’t have to give them the specific reason for termination.  However, if the termination is without notice and no payment in lieu is offered, it must be for some type of employee misconduct.  If not, the employee might file a wrongful dismissal claim.

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Mandatory Notice Period 

For normal terminations (redundancy, poor performance, etc.), an employer still must give the employee adequate notice required by statute if there is no notice period stated in the employment contract.  Statutory notice periods depend on the length of service and range from one day (less than 26 weeks of service) to 4 weeks (5 years or more of service).

The notice of termination must be in writing, and notice periods can be altered if both employee and employer agree.  One interesting rule in Singapore is that the notice period must be served out by the employee, or the terminating party (employer firing or employee resigns) needs to pay the other party compensation in lieu of notice or ‘notice pay’.

Can There be a Termination Without Notice?

Employee Misconduct

Despite the employee statutory protections in place, there are situations where no notice is required for termination and it can be done immediately.  In the case of employee misconduct, termination can occur without notice and no salary in lieu of notice, following a formal inquiry.

Examples of employee misconduct include:

  • Theft, dishonesty
  • Disorderly conduct
  • Insubordination

Breach of Contract

Where there is no misconduct, the employment can still be ended without notice by either party, but there are payments required. This holds true for both employee and employer-initiated terminations.  The basic reason for this is that no-notice termination by either party is a breach of the employment contract.

The conditions for breach of the employment contract include:

  • Failure to pay employee salary within 7 days of due date (employer breach)
  • Employee absent from work 2 continuous days or more, without approval/valid excuse, or without informing employer (employee breach)

Client Case: Calculating Unused Leave

A separate issue from notice and salary payment in lieu is that of how to handle accrued, unused leave.  In general, unused leave must be paid out to the employee upon termination. 

We have a client with an employee in Singapore that was facing an unusual situation due to the COVID-19 virus.  The employee had 9 days of accrued annual leave but was under a reduced salary due to the virus’s effect on the business economy.

Our client wanted to know in case of termination if the leave would be calculated based on the reduced salary amount or the original full salary.  The formal rule affecting this situation is that the encashment of unused leave ‘should be calculated at the gross rate of pay based on your last drawn salary’.  In our client’s case, that would be the reduced salary amount.

Despite this, our local partner in Singapore suggested that because this was a special situation, that the employer and employee could agree in writing which salary amount would be used.

Do you need more information about Singapore?

If you are new to hiring in Singapore, you may have other questions such as:

Are there any restrictions on preventing employees from resigning with notice?

Can a terminated employee use their accrued annual leave during the notice period? 

How is a wrongful dismissal claim handled and what is the procedure to respond?

These are just the types of issues that our client’s employing abroad face every day, and we assist them with remaining in compliance with all employment, contractual and payroll rules.  We make international employment simple.

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The information in this article is subject to changes in local legislation.

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