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Reforms should prompt review of Singapore employment contracts

ANALYSIS: Businesses in Singapore should conduct a review of their existing employment contracts to ensure they comply with reforms due to take effect in April 2019.06 Dec 2018

The Employment (Amendment) Bill was approved by Singapore's parliament last month. Its provisions expand the scope of employment laws in Singapore to many more workers, give greater protections to vulnerable employees, and promote greater flexibility of employee rights in a way that could also benefit employers. The Bill will also see a new framework introduced for resolving employer-employee disputes.

It is important that organisations based in Singapore understand the changes that are coming and take actions necessary to ensure they comply.

Background to the reforms

The last changes to Singapore's Employment Act were made in 2015. In January this year, the Ministry of Manpower (MoM) consulted on reforms which it said would ensure the law "keep[s] pace with the changing labour force profile and employment landscape".

In March, following the end of its consultation, the government confirmed that it bring forward legislation to deliver the intended reforms, and in October the Employment (Amendment) Bill was tabled before Singapore's parliament. The Bill was read for the second time by legislators on 19 November and was approved. The amendments contained in the legislation will take effect on 1 April 2019.

There are four central threads to the reforms.

Broader scope of employees covered

While many workers in Singapore current enjoy statutory rights to public holidays, sick leave entitlements, payment of salary and allowable deductions, and to redress for wrongful dismissal under Singapore' Employment Act, others fall outside the scope of those provisions. Those workers include managers and executives that earn more than SIN€4,500 ($3,300) a month, as well as seafarers, domestic workers and public officers. 

Under the new legislation, all managerial and executive employees will benefit from the core rights and protections provided for in the Employment Act, regardless of their salary. The core rights include:

  • paid annual leave entitlement of at least seven-14 days, depending on the employee's length of service;
  • paid public holiday entitlement;
  • paid sick leave entitlements of at most 14 days, or 60 days if hospitalisation is required;
  • restrictions on authorised deductions from the employee's salary; and
  • compensation for wrongful dismissal.

The MoM has estimated that this expansion of the Employment Act's scope of coverage will benefit an additional 430,000 managerial or executive employees in Singapore's workforce.

Seafarers, domestic workers and public officers will remain protected by their respective statutes.

Greater protection for vulnerable employees

Part four of the Employment Act provides for additional protections for certain classes of vulnerable employees. These include workmen – those involved in manual labour – earning a basic monthly salary of up to SIN$4,500 ($3,300), and non-workmen – white collar employees not involved in manual labour – earning up to SIN$2,500 ($1,800).

When the amendments come into force in April 2019, more non-workmen will benefit from the protections given to vulnerable employees. This is because the salary cap below which the protections apply is increasing to SIN$2,600 ($1,900) per month.

The MoM has estimated that an additional 100,000 employees will benefit from this amendment. Managerial or executive employees remain excluded from the provisions.

Protections for vulnerable employees include

  • restrictions on working hours – up to a maximum of eight hours of work per day or 44 hours of work per week;
  • mandatory rest days;
  • overtime pay.

More flexibility for employers and employees

To promote flexibility for both employers and employees, the reforms allow employers to provide time off-in-lieu for all employees who do not qualify for the vulnerable employee protections and who have worked on public holidays.

In Singapore, the law allows employers to make deductions from employees' salaries in certain circumstances. The list of authorised salary deductions is to be expanded under the new legislation to include all salary deductions that the employee willingly consents to in writing, on the condition that the employee must be allowed to withdraw such consent at any time without penalty from the employer.

Changes will also be made to the treatment of paid sick leave under the Employment Act. Currently, the Act provides that medical certificates issued by government or company-appointed doctors will be recognised. After the amendments come into force, employers will be statutorily required to recognise medical certificates from all registered doctors in Singapore for the purpose of granting paid sick leave.

Enhanced employment dispute resolution framework

Reforms relating to cases considered by employment tribunals in Singapore will also be introduced.

At the moment the Employment Claims Tribunal (ECT) hear statutory and contractual salary-related disputes, whereas the MoM hears claims for wrongful dismissal. After the amendments take effect, all employment-related disputes will be handled by the ECT, ensuring a 'one-stop service' for the resolution of both salary-related disputes and wrongful dismissal claims.

To ensure that the principles used by the ECT reflect the position that has been taken by the MoM over the years, the MOM will publish a set of guidelines with case studies to illustrate what constitutes wrongful dismissal. The ECT will be required to take into account the principles set out in the guidelines when adjudicating a wrongful dismissal claim.

In line with the move to deem executives and managers as employees under the Employment Act, the employment dispute resolution framework will also be expanded. Through the reforms, the minimum service period for all executives and managers to seek redress for wrongful dismissal at the ECT will be reduced to six months instead of the current 12 months. The remedies available to employees who have been wrongfully dismissed remain the same.

Actions for employers

The Employment (Amendment) Bill represents a significant expansion of Singapore's employment law regime. It is vital that employers consider the changes being introduced and make any changes necessary to comply with the updated legislation.

The first step for employers should be to conduct a review of the employment contracts they have with their employees to ensure that the agreements conform to the minimum standards set out in the Employment Act.

Bryan Tan and Bernice Tian are experts in contracts at Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com.

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