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Employment Contracts in Singapore

What is an Employment Contract?

An employment contract is in essence, an agreement of a contract of service between a company and its potential employee. This agreement can be made in writing or verbally. The terms of the agreement may also be express or implied. Both parties must enter into the contract voluntarily.

Whilst Singaporean law follows a freedom-of-contract approach where both parties are at liberty to include whatever legal terms they please, contracts must still adhere to the Employment Act. The Employment Act covers all persons including foreigners who work in Singapore with the exception of seamen, domestic workers and Government and statutory board employees.

 

Drafting an Employment Contract

When drafting an employment contract employers must take care to ensure that in the scenario the position is covered by the Employment Act, all required terms stipulated in the Act are included in the employment contract. These terms may include salary, overtime, maternity, paternity, annual and medical leave as well as childcare. The Employment Act also sets out specific mandatory guidelines for employment contracts which include stipulations that salary payments be made at the minimum of once a month and that holiday in lieu are given should work on a public holiday be required.

If an employment contract does not follow the Employment Act in Singapore even though the said employee is covered by the Act, the employer will be found guilty of a criminal offence which is punishable with a fine of up to $5000, up to six months in prison, or both. Repeat offenders could face fines of up to $10 000, up to 12 months in prison, or both.

It is important to note that whilst it is not mandatory for employment contracts to be in writing, it is advisable so that both parties are fully informed of their respective obligations and rights. Furthermore, employers must note that if the position in question falls under the Employment Act, and the employment is for 14 days or more, the Employment Act mandates that employers must disseminate a written list stipulating key employment terms. Failure to do so could lead to a fine of $100-$200 per incident and/or a an order from the Ministry of Manpower to rectify the breach. Failure to comply with a MOM order will constitute a criminal offence punishable by fines up to $5000, imprisonment of up to 6 months, or both.

Altering an Employment Contract


Terms of a contract can only be varied once a contract is formed if both parties agree to the changes.

Whilst there are many reasons why the terms of an employment contract may be altered (the most common being a change in salary or role), for the sake of clarity and fairness, these amendments should be made in writing and signed off by both the employee and employer.

 

Terminating an Employment Contract


If either party to an employment contract wishes to terminate an employment, terms stipulated in the employment contract must be followed. In the case an employment contract does not have a termination clause, the courts will imply a reasonable notice period instead. It is therefore important as an employer to include your desired notice period when drafting an employment contract.

For contracts that fall under the purview of the Employment Act, either party to the contract may terminate the contract without reason or notice if either party has breached a term of the contract. In lieu of notice, contracts under the Employment Act may be terminated by payment of salary.

Breach of Employment Contract by an Employee

In the event an employee does not perform the duties he or she is obligated to under their contract, an employee may file a civil suit to sue for breach of contract and obtain damages. Competently drafted contracts would include provisions that stipulate “liquidated damages” that a party that breaches a contract will have to pay. Compensation clauses must be well drafted as in recent years courts have held such compensation clauses to be unenforceable as they were disproportionate to the amount of loss actually suffered by the employer.

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Non-compete and Non-solicitation clauses

Many employers include non-compete clauses in employment contracts in a bid to prevent former employees from opening competing business or working for competitors. These clauses typically prevent employees from working in the same field for a stipulated period of time or within a certain area. Non-solicitation clauses serve to prevent ex-employees from soliciting clients or employees from the employer’s business.

These clauses are also known as restraint of trade clauses and are only enforceable in Singapore if:

(a)        The non-complete clause protects a “legitimate proprietary interest” of the employer

(b)        The scope of the non-compete clause is reasonable

It is thus essential that when a contract includes a non-compete clause, the employer should ensure that the clause is well drafted so that it meets enforceability requirements and it will, accordingly, be enforceable in court should there be a violation of the clause.

Non-disclosure Agreements

Non-disclosure agreements (NDA) are legally binding contracts in which one party undertakes a responsibility not to disclose information that has been deemed as confidential. This is especially important when an employee’s role allows for him to have access to trade secrets, personal information, or proprietary information that may harm business should it be leaked.

There are no restrictions as to the types of confidential information that is protected under an NDA.

In the event an employee breaches their NDA, the employer will then be allowed to claim damages or seek an injunction to prevent future breaches of contract.

How We Can Help You

At Emerald Law, we have lawyers who are experienced in handling employment related matters in Singapore. Contact us so that we can schedule a free consultation for you in order to advise you on your matter.

Speak to a lawyer now

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Our specialised lawyers and their team are standing by to assist you. Our first consultation is free.

The information contained within this website contains general information about our lawyers, Law Firm and procedures and is not intended to constitute legal advice.
Any person viewing or receiving information from this Website should not act or refrain from acting, on the basis of any such information without first seeking appropriate legal advice.
Please consult a lawyer for specific review of your case and advise. 

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