Logo L&E Global
Singapore

Opening Up Shop Singapore

1. Introduction

Employers dealing with operations in Singapore should be aware that labour relations are highly regulated in our country.

Clyde & Co provides an integrated service for local and international clients in Singapore through our Joint Law Venture, Clyde & Co Clasis Singapore. This offers clients seamless offshore and onshore advice, and draws together the global knowledge of Clyde & Co and the local knowledge of Clasis LLC. Our Singapore office focuses on sectors including aviation, marine, energy & natural resources, infrastructure, insurance & reinsurance and trade & commodities.

Our services include corporate and commercial, construction, dispute resolution (including mediation and international arbitration), employment, finance, governance, regulatory and compliance. We can provide clients with advice on Singapore law and representation in the Singapore courts via Clasis LLC, and, importantly, also with advice on multi-jurisdictional transactions involving English and Singapore law.

In Southeast Asia, we have established a network of affiliations with local and correspondent law firms, and market leading lawyers, who we work with regularly to support our clients’ growth strategies. These close relationships mean that we can provide an integrated and efficient service, both locally and internationally, to clients throughout Asia Pacific and worldwide. Through our firm’s global outlook, we have built a pragmatic and solutions focused team that is multi-lingual, speaking English, Mandarin, Cantonese, Malay, Bahasa Indonesia, Hokkien, Hindi, Tamil, Punjabi and German. Lawyers in the team are also dual qualified, serving clients in various jurisdictions including Singapore, Indonesia, Malaysia, Australia, New Zealand, England and Wales.

Below you will find a quick overview of the Singapore legal framework, which will allow your organisation to evaluate the implications and requirements of conducting business in our country.

2. Labour and Employment Law Requirements

a) Employer Policy Requirements

The Employment Act 1968 is the primary piece of legislation in Singapore which sets out certain minimum protection standards for employees. While employers and employees are generally free to contractually agree to the terms of employment, such terms would need to meet the minimum standards set out under the Employment Act 1968. A summary of the key local employment benefits under the Employment Act 1968 as follows:

Working hours, rest days and overtime

For starters, working hours, rest days and overtime are governed under the Employment Act 1968. However, they are only applicable to Part IV Employees (defined below).

Working hours

Contractual working hours should be agreed between the employee and employer pursuant to the employment contract. However, it should be noted that Part IV employees are not allowed to work:

  • more than 6 consecutive hours without a break – if the employee is required to work continuously for up to 8 hours, a break of at least 45 minutes must be provided; and
  • more than 8 hours in one day or more than 44 hours in one week.

Rest days

Part IV Employees must be provided with at least 1 rest day per week (i.e. 1 whole day, midnight to midnight).

Overtime pay

Overtime pay for Part IV employees is calculated as follows:

  • Hourly basic rate of pay × 1.5 × number of hours worked overtime

Employees are not allowed to work for more than 12 hours a day. If an employer requires employees to work more than 12 hours a day (up to a maximum of 14 hours), they must apply for an overtime exemption with the Ministry of Manpower of Singapore.

Employees are not allowed to work more than 72 overtime hours in a month unless exemption has been obtained from the Ministry of Manpower of Singapore.

Annual leave

An employee who has served an employer for a period of not less than 3 months is entitled to a minimum of 7 days of paid annual leave for the first 12 months of continuous service with the same employer and an additional one day of paid annual leave, for every subsequent 12 months of continuous service with the same employer, up to 14 days of paid annual leave.

It is common market practice for employees with more experience and seniority to be contractually provided with annual leave benefits above and beyond the statutory minimum.

Holidays

Employees are entitled to paid public holidays in accordance with section 88 of the Employment Act. There are 11 gazetted public holidays in Singapore.

Sick leave

Employees are entitled to paid sick leave if they have worked for at least 3 months with the employer. Where the employee is between 3 to 6 months of service, the sick leave entitlement is pro-rated as follows:

 

Months of completed service Days of paid sick leave (outpatient) Days of paid hospitalisation leave
3 5 15
4 8 30
5 11 45
6 and thereafter 14 60

 

It is common for employers to provide paid sick leave from the first day of employment (rather than for it to be prorated as above) and we have provided for this in the template.

Maternity leave

Female employees may be entitled to either 16 weeks of maternity leave or 12 weeks of maternity leave, depending on which eligibility criteria (as set out below) is met.

16 weeks of paid maternity leave

To be entitled to 16 weeks of paid maternity leave, a female employee would have to meet the following requirements:

  • her child is a Singapore citizen;
  • the female employee has served the employer for a period of at least 3 months before the day of her confinement; and
  • has given the employer at least 1 week’s notice before going on maternity leave, and informed them as soon as possible of the delivery. Otherwise, the employee is only entitled to half the payment during maternity leave, unless the employee has a good enough reason for not giving the notice.

12 weeks of maternity leave

Female employees who do not meet the requirements of the 16 weeks of paid maternity leave may be entitled to 12 weeks of maternity leave, if she meets the following requirements:

  • the female employee has served the employer for a period of at least 3 months before the day of her confinement; and
  • has given the employer at least 1 week’s notice before going on maternity leave, and informed them as soon as possible of the delivery. Otherwise, the employee is only entitled to half the payment during maternity leave, unless the employee has a good enough reason for not giving the notice.

The first 8 weeks of maternity leave will be paid by the employer pursuant to section 76(1A) of the Employment Act while the remaining 4 weeks of maternity leave will be unpaid if the female employee has less than 2 living children or if the female employee has 2 or more children (i.e. twins or triplets etc) during the first pregnancy.

For the avoidance of doubt, if the female employee has 2 or more living children and the children were born during more than one previous confinement (i.e. not twins or triplets etc), the female employee’s 12 weeks of maternity leave will be unpaid.

Paternity leave

Male employees may be entitled to 2 weeks Government-paid paternity leave if the following requirements are met:

  • his child is a Singapore citizen at birth or a Singapore citizen within 12 months from the date of birth;
  • he is or had been lawfully married to the child’s mother between conception and birth; and
  • he has served the employer for a period of at least 3 months before the birth of his child.

Childcare leave

Employees may be entitled to either 6 days or 2 days of childcare leave, depending on which eligibility criteria (as set out below) is met.

6 days of government-paid childcare leave

To be entitled to 6 days of government-paid childcare leave per year, the following requirements must be met:

  • the employee’s youngest child is below 7 years old;
  • the employee’s child is a Singapore citizen; and
  • the employee has served the employer for a period of at least 3 months.

2 days childcare leave

Employees who do not meet the requirements of the 6 days government-paid childcare leave may be entitled to 2 days childcare leave per year, if the following requirements are met:

  • the employee’s youngest child is below 7 years old; and
  • the employee has served the employer for a period of at least 3 months.

For the avoidance of doubt, childcare leave is capped at 6 days/2 days (whichever is applicable) per year, regardless of the number of children the employee has.

Employees who have served the employer for a period of at least 3 months and whose youngest child is between 7 and 12 years old (inclusive) and is a Singapore citizen may be entitled to 2 days of extended childcare leave per year.

Infant care leave

In addition to childcare leave, employees may be entitled to 6 days of unpaid infant care leave a year if the following requirements are met:

  • the employee’s child is below 2 years old;
  • the employee’s child is a Singapore citizen; and
  • the employee has served the employer for a period of at least 3 months.

Similar to childcare leave, infant care leave is capped at 6 days per year, regardless of the number of children the employee has.

Additionally, employees may also be eligible for adoption leave and shared parental leave.

Central Provident Fund (“CPF”)

All companies (including foreign companies) are required to pay CPF contributions for Singapore citizen and Singapore permanent residents employees working in Singapore. As such, in the event that the Foreign Employee becomes a Singapore citizen or Singapore permanent resident, the company would need to pay CPF for the Foreign Employee.

Notice

Employers and employees may contractually agree to the length of the termination notice period, though such period must be identical for both employers and employees.

If the employment contract does not specify the notice period, the notice period will depend on the employee’s length of service as follows:

  • less than 26 weeks – 1 day’s notice
  • 26 weeks to less than 2 years – 1 week notice
  • 2 years to less than 5 years – 2 weeks’ notice
  • 5 years or more – 4 weeks’ notice

Severance benefits

Employees who have served the company for at least 2 years are eligible for retrenchment benefits.

Those with less than 2 years’ service may be granted an ex-gratia payment out of goodwill.

While the amount of such retrenchment benefit is not prescribed at law, the Ministry of Manpower of Singapore generally recommends that employees be paid a retrenchment benefit of 2 weeks to 1 month’s salary per year of service, subject the prevailing norm of the industry and financial position of the company.

Apart from the above retrenchment benefit, there is no prescribed severance benefit under Singapore law, though employers are free to grant employees an ex-gratia payment out of goodwill.

Unfair dismissal

All employees covered by the Employment Act 1968 are able to file a wrongful dismissal claim within one month from the termination date. Wrongful dismissals include dismissals on discriminatory grounds, dismissals to deprive an employee of benefits or entitlements and dismissals to punish an employee for exercising an employment right. We would highlight that under Singapore law, it is not wrongful for an employer to terminate an employee with notice or payment in lieu of such notice in accordance with the contractual termination provisions of their employment agreement as long as there is no underlying wrongful reason.

Please note that the Employment Act 1968 does not apply to seafarers, domestic workers or employees of the Government of statutory boards and their rights can be determined from their employment agreements. Furthermore, Part IV of the Employment Act only applies to workmen earning a salary not exceeding S$4,500 a month and to every employee (other than executives or managers) earning a salary of not exceeding S$2,600 or less per month (“Part IV Employees”).

A workman is defined as:

  • any skilled or unskilled employee engaged in manual labour, including artisans and apprentices, but excluding seafarers and domestic workers;
  • any employee, other than clerical staff, employed in the operation or maintenance of mechanically propelled vehicles used for transport of passengers for hire or for other commercial purposes; and
  • any employee who both performs manual labour and supervises other workmen, provided that the employee spends more than half of their working time performing manual labour.

“Workmen” specifically include:

  • cleaners;
  • construction workers;
  • labourers;
  • machine operators or assembly workers;
  • metal and machinery workers;
  • train, bus, lorry and van drivers;
  • train and bus inspectors; and
  • workers employed on piece rates at the employer’s premises.

b) Employee Training Requirements

There is no general statutory obligation on employers to provide training for employees, and employees have no statutory entitlement to receive or request training. Nonetheless, employers may require employees to complete certain training activities.

Additionally, employers are obliged to pay a Skills Development Levy (“SDL”) in respect of all employees (including foreign nationals), save for certain employees who are exempted from the levy under the Skills Development Levy Act. The SDL is used to finance the Skills Development Fund (“SDF”). Employers can apply to the SDF for financial assistance to co-fund training programmes, though they are not obliged to do so. To be eligible for SDF assistance, training programmes must meet certain criteria in terms of content, objectives and duration. SDF assistance is available only for the training of citizens and permanent residents of Singapore, although the levy applies to the pay of all employees, including those who are not citizens or permanent residents. There is no link between the amount of an employer’s SDL contributions and the amount of SDF assistance it can receive.

The levy is set at 0.25% of each employee’s monthly pay, or S$2 per month, whichever is greater. The levy applies to monthly pay up to a ceiling of S$4,500.

c) Employment Agreements

A contract of employment may be oral or written. The existence of an employment contract can also be implied from the particular circumstances. However, to minimise disputes arising out of the agreed terms and conditions of the employment, it is recommended for the contract of employment to be in writing.

There is no statutory requirement for the employment contract to be in any particular language, but the most common language used is English. The Electronic Transactions Act 2010 recognises the use of digital and electronic signatures and they can be used to sign employment contracts.

Employers must provide employees covered by the Employment Act with a written statement (either in electronic or paper form) of the key terms of their employment within 14 days from the start of their employment. Seafarers, domestic workers and employees of the Government or statutory boards are not covered by the Employment Act 1968. Key terms include:

  1. Full name of employer;
  2. Full name of employee;
  3. Employee’s job title, main duties and responsibilities;
  4. Start date of employment;
  5. Duration of employment (if employee is on fixed-term contract);
  6. Working arrangements, such as daily working hours, number of working days per week and rest days;
  7. Salary period;
  8. Basis salary;
  9. Fixed allowances;
  10. Fixed deductions;
  11. Overtime payment period and overtime rate of pay;
  12. Other salary-related components such as bonuses and incentives;
  13. Types of leave such as annual leave, sick leave, maternity leave, paternity leave, childcare leave and infant care leave;
  14. Medical and dental benefits;
  15. Probation period;
  16. Notice period; and
  17. Place of work.

Employers and employees are generally free to negotiate the terms of the employment contract. While employers and employees are generally free to contractually agree to the terms of employment, such terms would need to meet the minimum standards set out under the Employment Act 1968. A summary of the key employment terms under the Employment Act 1968 can be found under paragraph A part II above (Employer Policy Requirements).

Another exception relates to restrictive covenants, such as a clause that seeks to prevent the employee from working for another employer after the employee ceases their current employment. Under Singapore law, such restrictive covenants are generally unenforceable unless they are reasonably required for the protection of the legitimate proprietary rights of the employer. The restrictions must therefore be reasonable in scope, geographical area and duration. Generally, such clauses would have to be specifically tailored, taking into account, inter alia, the nature of the employer’s business, the position/job scope of the employee and the extent of their access to and influence over customers, etc in order to be considered. Whether the restraint sought is reasonable in the circumstances is a question of fact. Additionally, the restrictive covenants should not be identical across the board for all employees as this gives rise to enforceability issues.

d) Foreign Employees

All foreigners who intend to work in Singapore must have a valid work pass before they start work in Singapore.

There are various types of work passes in Singapore – work permit, employment pass and S Pass.

The work permit is the lowest category and applies to unskilled workers, such as construction workers and cleaners. Employers hiring foreign workers on work permits must pay a monthly levy to the Government in respect of each foreign worker they hire on a work permit and must employ a certain number of local employees before they can hire an additional foreign worker on a work permit. In addition, employees must furnish a security bond in respect of all employees who are hired on work permits (with the exception of Malaysian nationals), to ensure that it is the employer (and not, for example, the Government) that is financially responsible for matters such as the worker’s eventual repatriation. From 1 July 2022, the mandatory Pre-Departure Preparatory Programme (PDPP) requirement will be phased out for Construction, Marine Shipyard and Process (CMP) Sectors Work Permit Holders.

The S pass is the middle category of work pass and covers “semi-skilled” employee, such as technicians and nurses. To be eligible for an S Pass, the employee must be paid at least a fixed monthly salary of SGD2,500 (more experienced candidates need higher salaries) and hold a degree, diploma or technical certificate. From 1 September 2022, all new S Pass applicants must be paid at least a fixed monthly salary of SGD3,000 (or SGD3,500 if they work in financial services) (more experienced candidates need higher salaries). The minimum fixed monthly salary to qualify for an S Pass will be further increased to SGD3,150 (or SGD3,650 if they work in financial services) (more experienced candidates need higher salaries) from 1 September 2023. Following which, the Government will further increase the minimum monthly salary to qualify for an S Pass to SGD3,330 (or SGD3,800 if they work in financial services) (more experienced candidates need higher salaries) from 1 September 2025. Similar to work permits, the employer must pay a monthly levy to the Government in respect of each foreign worker it hires on an S Pass and must employ a certain number of local workers before it can hire an additional foreign worker on an S Pass. However, the employer does not have to provide a security bond in relation to workers hired on an S Pass.

The employment pass is the highest category of work pass and covers skilled workers such as professionals. To be eligible for the employment pass, the foreign employee must possess suitable academic or professional qualifications and be paid a fixed monthly salary of at least SGD4,500 (or SGD5,000 if they work in financial services) (more experienced candidates need higher salaries). From 1 September 2022, all new employment pass applicants must be paid at least a fixed monthly salary of SGD5,000 (or SGD5,500 if they work in financial services) (more experienced candidates need higher salaries). In addition to the increase of qualifying salary for employment pass holders, the Ministry of Manpower will be introducing a points-based Complementarity Assessment Framework (from 1 September 2023) that employment pass applicant must pass in order to be eligible for an employment pass (subject to some exceptions). To pass the points-based Complementarity Assessment Framework, the employment pass application must be awarded at least 40 points. The points-based Complementarity Assessment Framework allows the Ministry of Manpower to evaluate employment pass applications based on the following criteria:

  • Foundational criteria:
    • Individual attributes such as meeting the qualifying salary based on sector-specific benchmarks (which increases with age) and the applicant’s qualifications.
    • Firm related attributes such as the diversity of the firm and the firm’s support for local employment.
  • Bonus criteria:
    • Skills bonus (i.e. whether the shortage occupation list recognises employment pass holders in occupations requiring highly specialised skills that are currently in shortage in the local workforce).
    • Strategic economic priorities bonus (i.e. recognising firms that undertake ambitious innovation, or internationalisation activities in partnership with the Government, in line with Singapore’s economic priorities).

Before submitting an employment pass or S pass application, companies are required to advertise the job vacancies on the MyCareersFuture portal administered by the Singapore Workforce Development Agency for at least 28 days and in accordance with certain prescribed requirements. Companies may be exempt from this advertising requirements if it falls within certain exemptions. During the period of the advertisement on the MyCareersFuture portal, companies should interview and consider locals (i.e. Singapore citizens and Singapore permanent residents).

3. Corporate Law Requirements

a) Compliance for Incorporation

There are seven types of companies that can be incorporated in Singapore – exempt private company, private company limited by shares, public company limited by shares, public company limited by guarantee, unlimited private company, unlimited exempt private company and unlimited public company. The most common company type in Singapore is a private company limited by shares.

The incorporation of a company is governed by Part 3, Division 1 of the Companies Act 1967. The following steps are necessary for the incorporation of a company in Singapore:

  • Apply for the reservation of the company’s name with the Accounting and Corporate Regulatory Authority (“ACRA”) which acts as the Company Registrar. The name reservation fee payable to ACRA is SGD 15.
  • Once the name reservation is approved, register the company with ACRA. The name is generally reserved for 120 calendar days and no extensions is provided by ACRA.
  • For the purposes of registration, the constitution of the proposed company, the particulars of shareholders, directors and company secretary, registered address of the company, paid-up capital, principal business activities etc. as may be prescribed must be provided to the ACRA.
  • Pay ACRA the prescribed fee. The incorporation fee payable to ACRA is SGD 300.
  • Either a registered qualified individual engaged in the formation of the proposed company or a person named in the constitution as a director or the secretary of the proposed company, must make a declaration to the Registrar that all of the requirements of the Companies Act relating to the formation of the company have been complied with and that he or she has verified the identities of the subscribers to the constitution, and of the persons named in the constitution as officers of the proposed company.
  • Subsequently, ACRA may accept such declaration as sufficient evidence of those matters.

Certain key requirements for private company limited by shares that need to be fulfilled include:

  • The company needs at least one director who is ordinarily resident in Singapore.
  • There must be a minimum of one shareholder and up to 50 shareholders.
  • A local registered address for the company’s office in Singapore.
  • At least one company secretary must be appointed.
  • The initial paid-up capital must be a minimum of S$1.

Pursuant to s 20 of the Companies Act 1967, ACRA has the power to refuse the registration of the company. ACRA must firstly be satisfied that all requirements prescribed in the Companies Act in respect of the registration of the company and of all matters precedent and incidental thereto have been complied with before approving the registration.

In the event where ACRA is satisfied that the proposed company is likely to be used for an unlawful purpose or for purposes prejudicial to public peace, welfare or good order in Singapore or it would be contrary to the national security or interest for the proposed company to be registered, ACRA must refuse to register the constitution of the company.

Nonetheless, ACRA’s refusal to register the company may be subject to an appeal to the Minister within 30 days of the date of decision.

b) Post Incorporation Registrations

Upon successful registration of the company, a free business profile and a special Unique Entity Number (UEN) are available to the company.

The Company is required to appoint auditors within 3 months of its incorporation unless exempted from such audit requirements (i.e. if fall under the exceptions of “dormant companies” and “small companies”).

The Company is also required to appoint a data protection officer to oversee the data protection responsibilities within the organisation and ensure compliance with the Personal Data Protection Act of Singapore.

Additionally, depending on the business activity of the company, it may need to apply for licences and permits with the respective statutory bodies. If such licences and permits are not required, the company can commence the business immediately.

4. Payroll and Benefits Providers

Currently, there is no legislation governing or regulating outsourcing transactions in Singapore. Nonetheless, the Monetary Authority of Singapore Guidelines on Outsourcing (“Guidelines”) sets out guidelines with respect to the outsourcing of a financial institution. According to Annex 1 of the Guidelines, outsourcing includes middle and back-office operations such as payroll processing as well as manpower management such as benefits and compensation administration, etc.

The Guidelines laid out the roles and responsibilities of the board and senior management. The board is responsible for:

  • approving a framework to evaluate the risks and materiality of all existing and prospective outsourcing arrangements and the policies that apply to such arrangements;
  • setting a suitable risk appetite to define the nature and extent of risks that the institution is willing and able to assume from its outsourcing arrangements;
  • laying down appropriate approval authorities for outsourcing arrangements consistent with its established strategy and risk appetite;
  • assessing management competencies for developing sound and responsive outsourcing risk management policies and procedures that are commensurate with the nature, scope and complexity of the outsourcing arrangements;
  • ensuring that senior management establishes appropriate governance structures and processes for sound and prudent risk management, such as a management body that reviews controls for consistency and alignment with a comprehensive institution-wide view of risk; and
  • undertaking regular reviews of these outsourcing strategies and arrangements for their continued relevance, and safety and soundness.

The senior management is responsible for:

  • evaluating the materiality and risks from all existing and prospective outsourcing arrangements, based on the framework approved by the board;
  • developing sound and prudent outsourcing policies and procedures that are commensurate with the nature, scope and complexity of the outsourcing arrangements as well as ensuring that such policies and procedures are implemented effectively;
  • reviewing regularly the effectiveness of, and appropriately adjusting, policies, standards and procedures to reflect changes in the institution’s overall risk profile and risk environment;
  • monitoring and maintaining effective control of all risks from its material outsourcing arrangements on an institution-wide basis;
  • ensuring that contingency plans, based on realistic and probable disruptive scenarios, are in place and tested;
  • ensuring that there is independent review and audit for compliance with outsourcing policies and procedures;
  • ensuring that appropriate and timely remedial actions are taken to address audit findings; and
  • communicating information pertaining to risks arising from its material outsourcing arrangements to the board in a timely manner.

Further, before entering into an outsourcing arrangement, the Guidelines require institutions to establish a risk evaluation framework which includes:

  • identifying the role of outsourcing in the overall business strategy and objectives of the institution;
  • performing comprehensive due diligence on the nature, scope and complexity of the outsourcing arrangement to identify and mitigate key risks;
  • assessing the service provider’s ability to employ a high standard of care in performing the outsourced service and meet regulatory standards as expected of the institution, as if the outsourcing arrangement is performed by the institution;
  • analysing the impact of the outsourcing arrangement on the overall risk profile of the institution, and whether there are adequate internal expertise and resources to mitigate the risks identified;
  • analysing the institution’s as well as the institution’s group aggregate exposure to the outsourcing arrangement, to manage concentration risk; and
  • analysing the benefits of outsourcing against the risks that may arise, ranging from the impact of temporary disruption to service to that of a breach in security and confidentiality, and unexpected termination in the outsourcing arrangement, and whether for strategic and internal control reasons, the institution should not enter into the outsourcing arrangement.

Generally, some of the guidelines requires an institution to:

  1. engage in due diligence to assess the risks involved with the outsourcing agreements as well as the service provider;
  2. have a competent authority to review the terms of the contractual outsourcing agreement;
  3. ensure that the service provider’s security policies will uphold confidentiality and security of customer information;
  4. ensure that the service provider’s security policies will not compromise business continuity;
  5. establish a structure for the management and control of its outsourcing agreements; and
  6. ensure that its business activities or MAS’ supervisory functions and objectives are not impeded.
Any questions

Ask our member firm Clyde & Co Clasis in Singapore