SOME COMMONLY ASKED QUESTIONS ON CONTRACT OF SERVICE AND
TERMINATION OF CONTRACT
The Employment Act covers all employees except those employed in a
managerial and executive position, seaman, domestic worker and employees of
statutory board or the government.
CONTRACT OF SERVICE AND TERMINATION OF CONTRACT
1. What is a “Contract of Service”?
A “Contract of Service” creates the relationship of employer and employee. It is a
written or oral agreement on the terms and conditions of employment. The agreed
terms and conditions of employment cannot be less favourable than the
2. How can a contract of service be terminated?
Either party can terminate the contract by giving notice or by paying salary in lieu of
notice to the other party. Such notice of termination must be given in writing. The
notice period to be given depends on what is agreed upon and shall be the same for
both employees and employers. In the event that there is no such period previously
agreed upon, the following shall apply:
Length of Service 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 and above 4 weeks
The day on which the notice is given shall be included in the notice period.
3. Can an employee take his annual leave during the notice period?
Yes, if his leave is approved by his employer. An employer cannot direct his
employee to go on leave during the notice period unless the employee consents to
it. Any unconsumed annual leave should be en-cashed and paid to the employee.
4. Can a contract of service be terminated without notice or without paying
salary in lieu of notice?
Yes, if there is breach of contract as follows:
By Employer - Failure to pay salary within 7 days after salary is due.
By Employee - Absence from work for more than 2 days continuously without
approval from employer.
The party who breaks the contract shall be liable pay to the other party salary-in-lieu
of notice. (Salary-in-lieu of notice does not attract CPF contribution.)
5. An employer may after due inquiry, dismiss an employee without notice when
the employee is found to be guilty of misconduct. What is misconduct?
Misconduct refers to a breach of duty or discipline that is inconsistent with the express
or implied conditions of an employee’s contract of service. Examples of misconduct
are theft or dishonesty, disorderly or immoral conduct at work, willful insubordination
etc. During an inquiry, the employer may suspend the employee from work for a
period not exceeding 1 week and shall pay him not less than half his salary for the
suspended period. If the inquiry does not disclose any misconduct on the part of the
employee, the employer must restore to the employee the full amount of salary that
was withheld. In the case of dismissal due to misconduct, an employee can seek
redress by appealing in writing to the Minister for Manpower for reinstatement within 1
month of dismissal.
The information provided in this fact sheet is accurate at time of printing and has no legal standing. In any
case of doubt, reference should be made to the Employment Act itself. [ MOM lrd 2005 (3 Edition)]