How to Terminate Employees in Singapore: A Practical Guide
Key Takeaways:
- Legal reasons for termination in Singapore
- Notice periods and severance pay
- How to avoid wrongful dismissal claims
Introduction
In Singapore, termination must comply with the Employment Act and other legal frameworks. This guide walks employers through the termination process.
Types of Termination Scenarios
Employers in Singapore can terminate employees for a variety of reasons. The three most common scenarios include redundancy, misconduct, and poor performance, each of which requires specific documentation and adherence to the Employment Act.
1. Redundancy:
Redundancy arises when a job role becomes unnecessary due to business restructuring, cost-saving measures, or automation. Redundancy is a “no-fault” termination, meaning that the decision is not based on the employee’s conduct or performance but rather a shift in company operations. Employers must ensure that redundancy is justifiable, and proper documentation is maintained to avoid potential disputes.
2. Misconduct:
Misconduct refers to serious violations of company policies, including dishonesty, theft, harassment, or insubordination. In cases of serious misconduct, employers may terminate the employee without notice. However, to avoid wrongful dismissal claims, employers must conduct an investigation, gather evidence, and provide the employee with an opportunity to respond before terminating their employment.
3. Poor Performance:
If an employee consistently fails to meet job expectations, termination due to poor performance may be considered. However, before proceeding with dismissal, employers must first provide feedback, set performance improvement goals, and document the steps taken to support the employee. Only after these efforts have failed should termination be considered.
Each of these termination scenarios requires careful documentation, proper communication, and compliance with legal standards to avoid disputes and legal challenges.
Grounds for Lawful Termination
Singapore’s Employment Act outlines the legal framework for terminating employees. Employers must ensure that they provide a valid reason for termination, which falls under one of the following recognized grounds:
- Redundancy: When the role is no longer needed due to restructuring or cost-saving measures.
- Serious Misconduct: Gross violations of workplace conduct, such as theft, fraud, or other illegal activities.
- Incapacity: If an employee is unable to perform their job due to illness or injury.
- Poor Performance: Documented failure to meet job expectations despite efforts to improve.
To protect against claims of wrongful dismissal, employers must clearly document the reasons for termination and follow all legal procedures outlined in the employment contract and the Employment Act.
We’re here to help you on your journey to hire, manage and pay.
Wrongful Dismissal Avoidance
Wrongful dismissal claims can arise if an employer terminates an employee without valid reasons or fails to follow proper procedures. These claims can result in legal disputes, reputational damage, and financial penalties.
Steps to Avoid Wrongful Dismissal:
1. Provide Clear and Documented Reasons:
Ensure that there is clear documentation supporting the reason for termination, whether it’s redundancy, misconduct, or performance-related issues.
2. Follow the Employment Act:
Employers must follow all legal procedures, including providing sufficient notice, offering pay in lieu of notice when required, and ensuring all severance payments are made according to law.
3. Offer a Fair Opportunity for Defense:
For cases involving misconduct or poor performance, employers must allow the employee to respond to allegations or receive support to improve their performance before taking action.
4. Maintain Transparent Communication:
Throughout the termination process, employers must maintain transparent and fair communication with the employee to minimize the risk of disputes.
By taking these steps, employers can avoid wrongful dismissal claims and ensure a fair and lawful termination process.
Notice Periods and Pay in Lieu
In Singapore, the required notice period for termination depends on the employee’s length of service and the terms outlined in the employment contract. Employers must comply with the notice period requirements to ensure that terminations are carried out lawfully.
Standard Notice Periods Based on Length of Service:
- Less than 26 weeks: 1 day
- 26 weeks to 2 years: 1 week
- 2 to 5 years: 2 weeks
- 5 years or more: 4 weeks
If immediate termination is necessary, employers can provide pay in lieu of notice, which compensates the employee for the notice period they would have worked. The amount of pay in lieu is equivalent to the salary the employee would have earned during the notice period.
It’s essential for employers to review the employment contract and adhere to the notice periods outlined in the agreement. Failing to provide the appropriate notice or pay in lieu can result in claims for wrongful dismissal.
Severance Pay and Long Service Payment
Severance pay is not a mandatory requirement under Singapore law unless stated in the employment contract. However, in certain situations, such as redundancy, employers may offer severance pay as part of an agreement with the employee.
When Severance Pay May Be Required:
- Redundancy: If the termination is due to redundancy, employers may negotiate severance pay to assist the employee during their job transition.
- Employment Contract: If the employment contract specifies that severance pay is required upon termination, the employer must honor this obligation.
Long service payment is typically offered to employees who have served the company for a considerable number of years and are being terminated for reasons other than misconduct. Employers should calculate severance and long service payments based on the employee’s tenure and terms outlined in the employment contract.
Steps in the Termination Process
To ensure compliance with Singapore’s Employment Act and to avoid any legal repercussions, employers must follow a structured termination process. Below are the essential steps to follow:
1. Document the Reason for Termination:
Before taking any action, employers must clearly document the reason for termination, whether it’s redundancy, misconduct, or performance-related. Proper documentation ensures that the decision is legally defensible.
2. Provide Formal Notice:
Issue a formal notice to the employee, either in writing or electronically, outlining the reason for termination and the effective date. This notice should comply with the required notice period or include pay in lieu of notice if immediate termination is preferred.
3. Conduct an Exit Interview:
While not mandatory, conducting an exit interview allows the employer to gather feedback and address any concerns the employee may have. This step also helps to maintain a professional and transparent relationship during the termination process.
4. Calculate Final Compensation and Severance:
Employers must calculate any outstanding wages, unused leave, and severance pay, if applicable. These payments should be provided promptly upon termination to avoid disputes.
5. Ensure Compliance with Legal Obligations:
Throughout the termination process, employers must ensure compliance with the Employment Act, including adhering to notice periods, issuing severance payments where applicable, and following due process for dismissal.
By following these steps, employers can ensure that the termination process is carried out smoothly and in full compliance with Singapore’s legal framework.
How AYP Can Help
Terminating employees in Singapore can be a complex and sensitive process, particularly when ensuring compliance with the Employment Act. AYP’s Professional Employer Organisation (PEO) and Employer of Record (EOR) services help employers navigate the challenges of employee terminations with ease. We offer expert support in:
- Managing Terminations: From providing notice to calculating severance, AYP ensures that the termination process is conducted in full compliance with Singapore’s labor laws.
- Handling Employment Contracts: Our team ensures that employment contracts are aligned with legal requirements and clearly outline termination procedures.
- Minimizing Legal Risks: We help employers avoid wrongful dismissal claims by ensuring that all terminations follow due process and are supported by valid reasons.
With AYP’s support, businesses can confidently manage employee terminations, knowing that they are compliant with Singapore’s legal framework. Contact us today for expert guidance on managing your workforce in Singapore.
