Hiring Employees: All You Need to Know

Singapore has evolved into a global hotspot for talent, ranking #2 overall in the Global Talent Competitiveness Index 2021. Individual and foreign companies who have set up their offices on this island city will find themselves open to a pool of quality talents including professionals in multidisciplinary fields, skilled and semi-skilled labour to boost their business to the next level.

Hiring employees both local and foreign must be done in accordance with the Employment Act (EA) and Employment of Foreign Manpower Act (EFMA). This article is aimed at giving you a better understanding of these Acts as well as taking you through your legal obligations as an employer.

The Employment Act is Singapore’s prime labour law detailing the terms and conditions to be followed when hiring employees covered by the Act. While foreign employees are covered under this Act, they are also covered by the Employment of Foreign Manpower Act.

The following category of employees are not covered under the Employment Act:

  • Seamen
  • Domestic worker
  • Statutory board employee or civil servant

An employment contract is a signed agreement between an individual employee and an employer. It establishes both the rights and responsibilities of the two parties: the worker and the company. The key components that need to be included in such a contract are-

  • Commencement of employment – The commencement of employment is subject to an agreement between the employer and employee
  • Appointment – The employment contract must clearly specify the job scope, responsibilities, expectations, and other essential clauses pertaining to the job title.
  • Salary and payment of salary – Singapore does not have a minimum wage requirement; salaries are subject to negotiation between both parties. Employees covered under the Employment Act are to be paid their salaries at least once a month. This should be paid within 7 days after the end of the salary period.
  • Bonus and payment of bonus – Bonus refers to a one-time payment to employees made to congratulate them for their contributions to the company. Bonus payment is not mandatory and are usually offered to employees at the end of the year.
  • Working hours – The hours of work guidelines apply only for those covered under Part IV of the Employment Act as given below:
    • A workman (doing manual labour) earning a basic monthly salary of not more than $4,500.
    • An employee who is not a workman, but who is covered by the Employment Act and earns a monthly basic salary of not more than $2,600.
    • Part IV of the Employment act does not cover managers and executives.

Under these guidelines for common work arrangements, contractual hours of work can be for up to 9 hours per day or 44 hours per week, based on the contract of service. For those working for more than 5 days a week, this is capped at 8 hours a day or 44 hours a week. Employees under shift work can do so up to an average of 44 hours over a continuous 3-week period. For more details, click here.

  • Benefits – All employees covered under the Employment Act are entitled to have both paid outpatient sick leave (up to 14 days) and paid hospitalisation leave (up to 60 days) if you have worked for at least 3 months with your employer. Annual leave entitlement is calculated on the number of years of service. Other benefits that employees may be entitled to include maternity leave, childcare leave, paternity leave, adoption leave, subject to fulfilling the required eligibility criteria.
  • Probation period (if any) – Singapore does not have any clauses relating to a fixed probation period mentioned in the Employment Act. On a general basis, most employers set a probation period of 3-6 months to gauge the employee’s skill level.
  • Termination of contract – Termination of an employment contract may occur under the following 3 scenarios:
    • The employee decides to resign – Contracts that specify a notice period would require the employee to serve it prior to resigning. Else, he/she may be required to pay compensation in lieu of notice to the employer, depending on the terms of contract.
    • The employer dismisses an employee – An employer may decide to terminate an employee under three circumstances:
      • Termination due to misconduct: Termination based on misconduct should be carefully considered and the employer is legally obligated to conduct an inquiry before deciding upon the form of disciplinary action. If the inquiry establishes a case of misconduct, the employer can choose to terminate the employment without notice, and no salary in lieu of notice will be paid.
      • Termination due to breach of contract: An employer may terminate employment without notice when the terms of employment have been breached. The party that breached the terms of employment must pay compensation in lieu of notice.
      • Termination with notice: If the contract specifies a notice period, the employer must wait for the notice period to end. An employer is not required to give a reason for termination as long as due notice has been given. If an employer terminates a contract without waiting for the notice period to end, he/she will have the other party compensation in lieu of notice (“notice pay”). This is money equivalent to the salary that the employee would have earned during the required notice period.
    • If the contract of service has expired, an employer may proceed with termination in line with the terms and conditions stated under the Employment Act.
  • Code of conduct –This may vary from company to company based on work-place ethics and policies that are in line with the Employment Act.

The Central Provident Fund (CPF) contribution is a mandatory savings scheme applicable to all Singapore citizens and Permanent Residents. It acts as the social security scheme for the country that ensures that Singaporeans/PRs will have enough money for their future retirement, health, and housing requirements.

Under this scheme, a percentage of an employee’s salary is deducted every month and deposited into his/her CPF accounts. This is calculated as the employee’s contribution. In addition to this, employers are obligated to pay a portion into the employees’ CPF funds out of their own pocket that is added in as part of the employer’s contribution. The contribution rate depends on factors such as age and salary of the employee.

Key requirements for employers

  • Employers can submit their employees’ CPF contribution details and make payments electronically via CPF e-Submit@web.
  • Once registration has been completed, you will receive a CPF Submission Number that can be used to carry out payments and contact the CPF board if needed.
  • All CPF contributions are to be paid within 14 days after the end of the month when the contributions are due.

For more details on CPF contribution rates click here.

Companies looking to hire foreign talent can do so by applying for the relevant work visa permits on his/her behalf depending on the kind of job, salary, experience, and other provisions. The Employment of Foreign Manpower Act regulates the employment of foreign employees and ensures their well- being. It covers any person that has been issued with an Employment Pass, an S Pass or a Work Permit.

Some of the major work visa types available are:

Pass Type Eligible Candidates
Employment Pass Suitable for foreign professionals, managers, and executives earning a minimum salary of $4,500 a month. For financial sectors this is set at $5,000 per month.
S Pass Suitable for mid-level skilled staff earning a minimum salary of $2,500 a month.
Work Permit for foreign worker Directed towards semi-skilled foreign workers in construction, manufacturing, marine shipyard, process, or services sector.
Training Employment Pass Suitable for foreign professionals undergoing practical training and earning at least $3,000 a month

For a detailed guide on available work visas click here.

Companies hiring new employees for the first time should be aware of the key provision under the Singapore Employment Act to ensure a smooth process of recruitment.

To learn more about employment practices click here.

Whether you are a start-up looking to establish your first office, or a multinational corporation seeking to expand your presence in Singapore or the Asia Pacific region, our team of professional staff look forward to delivering service excellence that meet your expectations.

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All materials have been prepared for general information purposes only. The information presented in this document is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. Professional advisory should be sought before taking or refraining from any action as a result of the contents of this document.