EMPLOYMENT LAW - AN OVERVIEW
BACKGROUND The law relating to employment in Singapore is largely based on English common law principles with some statutory protections. While sharing common roots, employment law in Singapore has developed separately since Singapore's independence in 1965. From the outset the government of independent Singapore sought to establish a pro-active and complementary relationship between labour, industry and government. Labour relations have generally been harmonious and constructive. The law has sought to strike a balance between providing appropriate protection for workers and keeping the economy agile so that it can respond quickly and flexibly to changes in conditions.
THE CONTRACT OF EMPLOYMENT The relationship between employer and employee is regulated largely by the contract of employment between them. Generally parties are free to contract as they choose but there are some limits. For example, there are statutory minimum periods of notice of termination which cannot be contracted out of, and under the common law certain contractual stipulations such as unreasonable restraints of trade are not enforceable.
STATUTE LAW The principal statutes regulating employment law are the Employment Act and the Industrial Relations Act. The Employment Act does not apply to all relationships of employer and employee because it applies only to "employees" as that term is defined in the Act. The definition includes workmen and certain government employees but it does not include seamen, domestic workers, persons employed in a managerial executive or confidential position or any other persons who may from time to time be declared by the Minister of Manpower not to be employees for this purpose. The term "workmen" includes manual labourers, drivers of commercial vehicles and certain other categories of workers. Part IV of the Employment Act which prescribes certain minimum requirements regarding rest days, hours of work, holidays, annual leave, sick leave, payment of retrenchment benefits, retirement benefits and certain other conditions of service, does not apply to employees who are paid a basic salary of S$1600 or more.
TERMINATION OF EMPLOYMENT Except to the extent that the Employment Act or a trade union collective agreement or an award of the Industrial Arbitration Court provides otherwise, termination will be governed by the terms of the employment contract. There are some statutory restrictions on the ability to terminate in accordance with the contract. These include:(i) (ii) termination by reason of an employee joining a trade union; termination by reason of an employee being called up for national service or being liable to be called up. (It is in fact a criminal offence to dismiss an employee for this reason);
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termination of a female employee's employment while she is on maternity leave. (Female employees are entitled to 8 weeks of paid maternity leave); termination on the ground of age of any employee who has not attained the minimum statutory retirement age (currently 62 years); termination without giving the minimum statutory period of notice or paying salary in lieu of notice. (The minimum period ranges between 1 day if the employee has been employed for less than 26 weeks to 4 weeks if he has been employed for 5 years or more).
(iv)
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TRANSFERS OF UNDERTAKING Section 18A of the Employment Act deals with transfer of employment where an undertaking or part of an undertaking is transferred from one person to another. These rules probably apply only to employees who fall within the definition of "employee" in the Employment Act. Section 18A provides that the transfer of an undertaking or part of it will not operate to terminate the contract of service of any employee employed by the transferor in the undertaking or the part of it which is transferred but that such contract of service will have effect after the transfer as if originally made between the employee and the transferee. Section 18A also imposes certain notification requirements on the transferor and the transferee and provides a procedure for dealing with disputes which arise in connection with such a transfer.
INCOME TAX Employees will be subject to Singapore income tax on the income which they derive from their employment in Singapore. Employees who are resident in Singapore will be entitled to various personal reliefs. The rate of tax will depend on the employee's chargeable income after allowable deductions and personal reliefs but the maximum rate is 28%. Income tax is not collected on a pay as you earn basis. It is paid annually in respect of each year of assessment. Tax returns must be filed annually and also when an employer is about to cease to employ an employee in Singapore. Income derived by Singapore employees from employee share options is subject to Singapore income tax.
CENTRAL PROVIDENT FUND CONTRIBUTIONS There are no compulsory contributions to any pension scheme or social security insurance scheme in Singapore. In the case of employees who are Singapore citizens or permanent residents, contributions must however be made to the Central Provident Fund ("CPF"). The employer must deduct and pay to the CPF Board a specified percentage of the employee's salary. In addition the employer must contribute to the employee's CPF account with the CPF Board a specified percentage of the employee's salary. The employee's rate of contribution (i.e the percentage deducted from the employee's salary) is currently 20%. The employer's rate of contribution was also 20% until it was recently reduced to 10% as one of the cost cutting responses to the South East Asian economic crisis. With signs of recovery in the Singapore economy, it is expected that starting from the beginning of next year, the employers' rate of contribution will be restored progressively to 20%.
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The CPF scheme is not a pension scheme. It is a compulsory savings scheme. The amount in each employee's CPF account belongs to him and can be withdrawn by him when he attains the age of 55. Prior to that, portions of the CPF account can be used for certain purposes such as purchasing a home or paying for medical expenses. A person who leaves Singapore permanently may withdraw the balance of his CPF account when he leaves.
(For more information on employment law in Singapore, please contact Gary Pryke or Rosabel Ng of Drew & Napier. Gary Pryke can be contacted in the first instance at (65) 531 4104 or via email: gary.pryke@drewnapier.com. Rosabel Ng can be contacted in the first instance at (65) 531 4112 or via email: rosabel.ng@drewnapier.com.)
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