An employment contract refers to a formal agreement between two parties—an employer and an employee. A contract may be in written form, oral form, or a combination of both.
This arrangement governs the relationship of both parties, and is deemed enforceable under the law. For it to be enforceable, however, both parties must enter into the agreement voluntarily.
An employment contract is comprised of terms that echo the numerous facets of the agreement between the employer and employee. Thee terms may be either expressed (explicitly stated in the contract in writing or orally) or implied (not explicitly stated).
Singapore law generally upholds a “freedom-of-contract” approach, allowing both parties to incorporate their terms into the contract for as long as these terms are legal.
Of course, employment contracts are subject to laws like the Employment Act. This act states that specific workers must receive their salaries at least once a month, and that they must be given additional one day’s salary if they are being required to go to work on a public holiday.
An important thing to check when drafting an employment contract is whether that specific employment type is protected by the Employment Act. This piece of legislation governs employment contracts, and enumerates minimum requirements to be included in this agreement.
When it comes to writing up an employment contract, employers generally include terms associated with the commencement of work, the job scope and requirements, salaries and wages, and working hours. The contract also outlines terms for leaves—including medical leaves and benefits, notice periods for termination, and grounds for dismissal.
In Singapore, the Employment Act covers several areas. These include the following:
All individuals—including foreigners—that work under a contract of service in Singapore are covered by the Employment Act, except the following:
Part IV of the Employment Act also outlines provisions for conditions of service such as working hours and days of rest. These only apply to:
An employer will be found guilty of a criminal offence when:
This offence is punishable with either a fine amounting up to S$5,000, up to six months’ imprisonment, or both. Should the employer be a repeat offender, the fine may be up to S$10,000, imprisonment of up to 12 months, or both.
Though the law does not state that the employment contract necessarily has to be in writing, it is strongly recommended that a written contract be issued. With a written contract, both parties may be aware of their rights, responsibilities, and the other terms of their agreement.
Note that once the contracting party affixes his or her signature on a written contract, Singapore courts will assume that the party has agreed to all terms enumerated in the contract.
Employers must issue to the employee a list of key employment terms in writing if:
Depending on the nature of the breach, an employer’s failure to do so could result in a fine of S$100 to S$200 per incident, as well as an order from the Ministry of Manpower (MOM) to resolve or correct the breach.
If the employer fails to comply with the MOM’s order, such will be considered a criminal offence, which is punishable by fines amounting up to S$5,000, six months’ imprisonment, or both.
In some cases, an employer may wish to alter the terms of an employment contract with a specific employee. For example, the employer might want to include a new salary rate, enumerate new duties, or change one’s working hours.
Once an employment contract has been drafted and signed, however, its terms may only be altered if both parties are agreeable to the changes, whether in written or oral form.
If the employee is not agreeable to the changes but works under the new conditions, the Singapore court may conclude that he or she has agreed to the new terms set by the employer.
The terms stated in an employment contract are not timeless. Should either the employer or employee want to terminate an existing employment, they must either follow the terms of the contract or the minimum statutory period.
In most instances, employment contracts include a termination clause. This clause defines the notice period required for one party to give the other before terminating the existing contract.
If the employment contract does not contain a termination clause with a notice period, the Singapore court will instead imply a reasonable notice period. Unfortunately, this implied period may not necessarily suit the employer’s needs, so it is vital to include the desired notice period when the employment contract is first drafted.
In certain cases, an employment contract may also be terminated by expiry. This means that the contract ends as soon as a specific project or task is completed.
If the contract is governed by the Employment Act, then the other party may opt to terminate employment without having to give a reason, or provide notice or salary in the following situations:
Under Singapore law, a party may opt to file a civil lawsuit and sue for damages for breach of contract if the other party fails to perform his or her obligations as stated in their employment contract.
As an alternative, a well-drafted contract may include provisions that a certain amount of money, referred to as “liquidated damages,” be paid by the party that breaches the contract. Singapore court may compel the party breaching the contract to pay this amount as a form of compensation. The sum of money, however, must not be deemed to be a penalty completely disproportionate to the loss of the innocent party.
Under specific situations, an injunction may be obtained by the employer to prevent the employee from continually breaching the contract.
At times, employers include a term in the employment contract that prevents a former employee from opening a competing business, working for a competitor, or soliciting employees or clients from the employer’s business. While including such terms are possible, they may not be enforceable in court.
Also known as non-compete clauses, these terms may aim to prevent former employees from practicing their profession for a specific time period, or practicing within a specific geographic area.
Employers sometimes include non-solicitation clauses to deter former employers from soliciting employees or clients from the business of their employer. These clauses are part of a group of contractual clauses called “restraint of trade clauses.”
Since such restraint of trade clauses constrain or impede former employees’ abilities to practice their profession elsewhere, these clauses are unenforceable in nature—unless the employer can justify that they protect the parties’ legitimate interests, as well as the interests of the general public. Depending on the context, a non-compete clause may therefore be enforceable under Singapore law.
For a non-compete clause, it is important to include details such as the duration of the restriction, what area the restriction covers, and the explicit activities that are restricted. Singapore courts will also take into account how experienced the former employee is, which industry he or she works in, and how much access he or she had to confidential information.
Should the court find the restraint of trade clause to be excessive in scope, it may deem the entire clause unenforceable. In some instances, however, the court may also apply the “doctrine of discretionary severance,” which only enforces legitimate parts of the clause and removes portions of the clause that it finds to be excessive.
A non-disclosure agreement or NDA is a legally binding contract wherein one party agrees not to disclose specific information to others, which helps ensure that such valuable information remains confidential.
An NDA may be needed if an employee’s role gives him or her access to sensitive business-related information or trade secrets that would harm the business if revealed.
The party’s disclosure of this information will be deemed a breach of contract. The innocent party may therefore opt to claim damages or seek an injunction to prevent any breaches of contract in the future.
This contract is particularly important for businesses, as it enables businesses to outsource financing work to experts while ensuring that crucial business secrets remain private—and not shared with competitors with common interests.
In Singapore, no restrictions exist on the types of information that can be covered by an NDA. Common examples of areas covered by this contract include client databases, design specifications, financials, and sales plans.
When drafting an NDA, important factors to include are the specific information to be excluded or protected, the duration of the agreement, and the manner in which the receiving party is to destroy the information once the is complete.