Employment contracts form the backbone of any working relationship. In Singapore, employers are required to include specific Key Employment Terms (KETs) and adhere to statutory employment laws. Whether hiring a local or a foreign employee, understanding common employment contract clauses — and their legal implications — is vital to maintaining compliance and protecting your business interests.
1. Key Employment Terms (KETs) and Statutory Compliance
Since 1 April 2016, all employers must issue written Key Employment Terms (KETs) to employees who enter into a contract of service for a prescribed minimum period. These terms include critical details such as the job title, scope of work, salary structure, working hours, leave entitlements, and termination notice period.
Under the Employment Act (EA), any contractual term that provides a condition less favourable to the employee than what the law prescribes is deemed illegal and void. The Act protects employees regardless of nationality, except for specific categories like senior managers earning above SGD 4,500 per month, domestic workers, seafarers, and government or statutory board employees.
Employers should therefore ensure that all employment contracts — whether standard or executive — meet statutory standards to avoid disputes and penalties.
2. Compensation, CPF, and Foreign Employee Fees
CPF Contributions
Employers must make Central Provident Fund (CPF) contributions for all Singapore citizens and permanent residents. Foreign employees holding work passes are exempt from CPF contributions. However, the employer must ensure all necessary levies, security bonds, and insurance policies are fulfilled for foreign manpower.
Deductions from Salary
Salary deductions are tightly regulated under the EA. Only specific deductions — such as recovery of loans or overpayments — are allowed, and these typically cannot exceed 25% of one month’s salary. For damages or losses, employers must prove negligence or default on the employee’s part, and even then, deductions are limited.
Prohibition on Charging Fees to Foreign Employees
It is illegal for an employer to deduct or demand fees from a foreign employee as a condition for employment or continued employment. The employer is solely responsible for costs related to work pass applications, security deposits, medical insurance, training, and repatriation. Any breach of these obligations may attract penalties of up to SGD 20,000.
Ensuring full compliance with foreign employment regulations protects not only the employee’s rights but also the employer’s reputation and operating license.
3. Termination and Restrictive Covenants
Termination Notice Period
Ensure termination terms to align with the employment contract. Where the contract is silent, the EA prescribes notice periods based on the employee’s length of service.
Dismissal for Misconduct
An employer can dismiss an employee without notice only after conducting a fair inquiry that establishes gross misconduct. If the employee believe the dismissal is without just cause, he or she can file claims for reinstatement or compensation with the Ministry of Manpower.
Termination Due to Work Pass Revocation
For foreign employees, if the Controller of Work Passes revokes or suspends a pass, the employer must terminate the employment within seven days. This is a statutory requirement and cannot be subject to negotiation or dispute.
Restraint of Trade / Non-Compete Clauses
Non-compete clauses are enforceable only if they are reasonable and designed to protect legitimate business interests such as trade secrets or client relationships. Clauses that merely prevent competition, without justification, are likely to be deemed unenforceable.
Non-Solicitation Clauses
Employers often include non-solicitation clauses to prevent employees from poaching clients or colleagues after leaving the company. Such clauses help safeguard intellectual property and maintain business continuity.
4. Data Protection and Confidentiality
Under the Personal Data Protection Act (PDPA), employment contracts should clearly define how personal data is collected, used, and disclosed. Employees must be informed of these purposes, and employers should implement reasonable security measures to protect such data.
If an employee’s personal data is transferred overseas, the contract must require that the recipient country offers a comparable level of protection. Employers should identify these countries in writing to ensure compliance with the PDPA and maintain transparency.
Incorporating clear data protection clauses reinforces trust and demonstrates accountability in HR practices.
5. Workplace Safety and Liability
Protection under the Work Injury Compensation Act (WICA)
Employees cannot waive their right to compensation for work-related injuries. Any contract attempting to remove or limit this right is void under WICA.
Payment for Safety Gear
Employers cannot deduct costs of safety equipment or related compliance expenses from an employee’s salary. Providing a safe working environment is a non-negotiable statutory obligation under the Workplace Safety and Health Act (WSHA).
Ensuring workplace safety compliance not only reduces legal risk but also enhances staff morale and productivity.
Conclusion: Protecting Your Business Through Compliance
A well-drafted employment contract is both a legal safeguard and a reflection of responsible business practice. Employers in Singapore must ensure their employment agreements comply with statutory requirements under the Employment Act, PDPA, WICA, and related regulations.
If you like to submit a question, or would like us to touch on certain topics, you may email us at [email protected]. When in doubt, seek legal advice or consult an experienced licensed Employment Agency with the Ministry of Manpower.
Yours Sincerely,
The editorial team at Singapore Employment Agency
Little Big Employment Agency Pte. Ltd. is a licensed Employment Agency with the Ministry of Manpower with license number 19C9790.