CMS Expert Guide to employment termination law and legislation

The Employment Act (“EA”) is Singapore’s main labour law. The EA confers certain statutory protection(s) to local and foreign employees working under a contract of service in Singapore. Employees who are not covered under the EA are: (1) seafarers; (2) domestic workers; and (3) statutory board employees or civil servants in Singapore.

When dismissing an employee in Singapore, an employer needs to be mindful of:

1. the terms of the employment agreement;
2. the statutory protections conferred by the EA; and
3. the common law in Singapore.

The Employment Relationship Act (‘Zakon o delovnih razmerjih’ or ‘ZDR-1’) distinguishes between ordinary and extraordinary termination of the employment contract. Ordinary termination is termination with notice period, which is only possible due to a business reason, reason of fault, incapacity to work, inability to work due to disability, or the unsuccessful completion of a probationary period, any of which render continuation of the employment under the conditions of the existing employment contract impossible.

A business reason occurs when the performance of certain work is no longer required under the conditions of the current employment contract due to economic, organizational, technological, structural or similar reasons on the employer’s side.

Reasons of incapacity are: non-achievement of expected work results because the worker has failed to carry out the work in due time, professionally and with due quality, or non-fulfilment of the conditions for carrying out work as stipulated under the law and executive regulations issued on the basis of law due to which the worker fails to fulfil or cannot fulfil the contractual or other obligations arising out of the employment relationship.

Extraordinary termination is termination without notice period and is only possible if:

• it is based on one of the exhaustively provided reasons in ZDR-1; and
• taking into account all the circumstances and interests of employer and employee, continuation of the employment until the end of the notice period or until the expiry of the employment contract is considered impossible; and
• it is given within 30 days of establishing the reason for extraordinary termination, and within six months of the occurrence of that reason.

There are two broad regimes for dismissal:

1. termination without cause; and
2. summary dismissal for reason(s) attributable to the employee.

Where an employer wishes to terminate an employee’s contract without cause, he may do so by giving notice or by paying the employee his base salary in lieu of the notice period.

An employer can also, after due inquiry, summarily dismiss an employee for cause (e.g. as a result of employee misconduct) with immediate effect, i.e. without the stipulated notice period (referred to as “dismissal”). This results in immediate termination of the employment agreement. What amounts to misconduct is largely a question of fact, and generally the relevance and effect of the misconduct is judged with reference to its effect on the employer-employee relationship. The total accrued salary and any other sum due and payable to an employee who is dismissed must be paid either on the day of the dismissal or, if that is not possible, within three days, not including Sunday (or any such rest day as determined by the employer) or public holidays.

An employee who claims that he or she has been unfairly dismissed may file a wrongful dismissal claim (“dismissal claim”) with the Tripartite Alliance for Dispute Management ("TADM") within one month of his or her last day of employment. For managers and executives, a dismissal claim can only be made if they have worked for their employer for at least 6 months. There is no minimum service time period required for non-managers and non-executives filing dismissal claims. Dismissal claims will be referred to mediation at the TADM before adjudication by the Employment Claims Tribunal.

If a female employee has worked for an employer for at least three continuous months, the employee has statutory maternity protection against retrenchment and dismissal without sufficient cause.

Employers are not statutorily required to provide reasons for dismissal, in particular for dismissals with notice. If however the employer is terminating an employee for poor performance and dismisses the employee without notice, the failure to give reasons would amount to wrongful dismissal.

Termination notice must be given in writing, providing for an explanation of the reasons for termination and pointing out possible legal remedies available the employee and his rights regarding unemployment insurance.

In case of ordinary termination of an employment contract due to reason  of fault, the employer must, before serving the employee with termination notice, give the employee a written warning regarding fulfilment of his obligations and the possibility of termination if he fails to comply. Such a warning can be issued within 60 days of establishing the breach and within six months of the occurrence of the breach. If employee commits another breach of this or any other obligation from the employment, within a year after the warning and if such breach is serious enough, the employer may terminate the employment contract.

In case of ordinary termination given by employer due to reason of fault or incapacity (or in case of extraordinary termination), the employer must notify the employee in writing about the initiated proceeding before serving the employee with a termination notice. The notification must include details of the alleged violations of the employee’s obligations or his / her alleged incompetence and thus provide the employee the opportunity to defend him- / herself within a reasonable period. The notice must be given at least three business days prior to the date of the hearing during which the employee can present his / her defence. The employer is (in some exceptional cases) released from such duty if it would be unreasonable to expect it to provide the employee such an opportunity. The employee can also request that a representative of his trade union and / or his legal representative are / is present at the hearing.

For contractual termination (i.e. termination without cause), notice of termination has to be given in writing. There is no special formality required for summary dismissal of an employee.

Ordinary termination

The notice period depends on the length of service with the respective employer. As a general rule, the statutory minimum notice periods (unless otherwise determined by a collective bargaining agreement, employer's by-laws or an individual employment contract) are:

1. in case of unsuccessful completion of a trial period: seven days;
2. in case of ordinary termination by the employee:
   • 15 days for employees with less than one year of service and
   • 30 days for employees with more than one year of service;
3. due to ordinary termination by the employer due to business reasons or incapacity:
   • 15 days for employees with less than one year of service;
   • 30 days for employees with more than one year of service; and
   • for employees with two or more years of service, the 30-day notice period increases for two days for each year of employment with the employer but cannot exceed 60 days. For employees with 25 years or more years of service, the notice period is 80 days, unless otherwise provided by a collective bargaining agreement.      

If the employment contract is terminated due to employee fault, okthe statutory notice period is 15 days.

Extraordinary termination: there is no notice period.

Bankruptcy, liquidation proceeding, winding down of the employer or a compulsory settlement.

In a bankruptcy procedure, the bankruptcy administrator may terminate employment contracts of employees who have become redundant due to initiation of the bankruptcy procedure with a 15-day notice period.

In case of winding down of the employer for other reasons, the notice period is 30 days.

In the event of confirmed compulsory settlement, the employer may terminate the employment contracts of those employees who have been characterized as redundant in the redundancy programme with a 30-day notice period. Compulsory settlement (or compulsory composition) is a proceeding for an insolvent debtor which: (i) enables financial reorganisation of the debtor; and (ii) assures partial payment of the creditor’s claim, both aimed at ensuring the further operation of the debtor.

The EA provides for a statutory minimum period of notice of between one day and four weeks, depending on the employee's length of service.

The EA provides that the length of notice in an employment contract should be the same for both the employer and the employee.

The employer must inform and consult the works council or workers’ representative in relation to the collective dismissal of a large number of employees.

Save for exceptional cases, the employer cannot terminate the employment contract of a member of a works council or a workers’ representative without the prior consent of the works council. The immunity applies for the length of the appointment and a year after the lapse of the mandate.

If the employer intends to dismiss an employee who is not a trade union member, the employer must, at the employee’s request, notify the works council / works representative in writing of its intention to terminate (ordinary or extraordinary termination) the employee’s employment contract. The works council / works representative must give its opinion within six days. Silence is deemed to mean the works council / works representative does not oppose to the termination. It may oppose the termination if it considers there are no substantial reasons for the termination or the termination procedure has not been carried out in accordance with the ZDR-1. The employer is not bound by the opinion of the works council / works representative and can continue with the termination despite a negative opinion.

No involvement.

If the employer intends to dismiss an employee who is a trade union member, the employer must, at the employee’s request, notify the trade union in writing of its intention to terminate (ordinary or extraordinary termination) the employee’s employment contract. The trade union must give its opinion within six days. Silence is deemed to mean the union does not oppose to the termination. It may oppose the termination if it considers there are no substantial reasons for the termination or the termination procedure has not been carried out in accordance with the ZDR-1. The employer is not bound by the opinion of the trade union and can continue with the termination despite a negative opinion.

An employer cannot terminate an employment contract of an appointed
or elected trade union representative without the prior consent of the trade union. The immunity applies for the length of the appointment and a year after the lapse of the mandate.

The trade union is involved in mass redundancies (see below).

No involvement.

The employer may only dismiss an employee who is pregnant, during breastfeeding (one year after birth) or on parental leave, and for one month thereafter, only with the prior consent of the labour inspectorate, if there are reasons for extraordinary termination of the employment contract, or if proceedings for terminating the employer’s business have been initiated.

Not necessary.

The employer must prepare a redundancy programme if it is established that for business reasons, the work performed by a certain number of workers will become unnecessary in the next 30 days. The numbers of workers who need to be made redundant for this to apply are as follows: 

1. at least 10 workers where the employer employs more than 20 and fewer than 100 workers; or
2. at least 10% of workers where the employer employs at least 100 workers but fewer than 300 workers; or
3. at least 30 workers where the employer employs 300 workers or more.

In determining which workers are to be made redundant, the employer must take the following criteria into consideration: the employee’s qualifications, work experience, performance, length of service, medical health and social status, whether the employee is a parent of three or more minors, or if
the employee is the sole provider for a family with minors. The employer can determine his own criteria instead of those provided by the collective bargaining agreement if the trade union agrees with them.

The employer must inform and consult trade unions, the works council and the National Employment Office (‘Zavod za zaposlovanje Republike Slovenije’) regarding its intention to institute mass redundancies and a redundancy programme for business reasons. The employer cannot terminate employment contracts until 30 days after the National Employment Office has been informed in detail of the mass redundancy. The National Employment Office may increase this period to 60 days.

Employers who employ at least ten (10) employees are required to notify the Ministry of Manpower if five (5) or more employees are retrenched within any 6-month period within five (5) working days after the affected employees are notified of their retrenchment.

Not applicable.

Allowed. See Section 1.1. "Reasons for dismissal" for further elaboration.

If the court finds that the employer has failed to comply with statutory requirements, it will declare the employment termination unlawful and reinstate the employee with retroactive effect (ex tunc), recognizing the employee’s period of service and other rights arising from the employment relationship.

Instead of reinstatement, the court may, at employer’s or employee’s proposal:

1. determine that the termination was invalid and that the employment relationship lasted until the first instance judgment was issued; or
2. recognise the employee’s period of service and other rights arising out of the employment relationship – the employee is then given the rights arising out of the employment relationship as if the employment contract had not been terminated; or
3. award appropriate monetary compensation of a maximum of 18 months’ salary, calculated on the basis of the average monthly salary received in the final three months preceding the termination.

The employee may seek legal protection due to unlawfulness of termination within 30 days from the service of the termination notice.

An employee may lodge a dismissal claim seeking to be reinstated to his previous position and for any loss of income due to the wrongful dismissal, and/or for compensation. Employees have to engage in mandatory mediation with their employers at the TADM followed by adjudication at the Employment Claims Tribunal if a mediated resolution cannot be reached. The EA defines the term 'dismiss' to also include resignation of an employee if the employee can show, on the balance of probabilities, that he did not resign voluntarily but was forced to do so because of any conduct or omission on the part of the employer. Employers should be mindful that such employees can also lodge a dismissal claim.

An employee whose employment contract has been terminated for a business reason or reason of incapacity, is entitled to a severance payment. The amount depends on the number of (full) years of service with the employer (including the employment with the employer’s legal predecessors). The basis for calculation is the average monthly salary, which the employee has received or would have received if working in the last three months prior to the end of employment.

Severance pay is calculated as follows:

• 1/5 of the average monthly salary for each year of employment with the employer if the duration of the employment is between one and ten years; or
• 1/4 of the average monthly salary for each year of employment with the employer if the duration of the employment is between ten and 20 years; or
• 1/3 of the average monthly salary for each year of employment with the employer if the duration of the employment exceeds 20 years.

The amount of the severance payment may not exceed ten times of the average monthly salary received in the final three months preceding the termination unless an applicable collective bargaining agreement stipulates otherwise.

In the event of termination of the employment contract for a fixed period concluded for one year or less, generally with few exemptions, the employee is entitled to severance pay in the amount of 1 / 5 of the base (base being the employee’s average monthly salary for full-time in the last three months, or during the working period prior to the termination). If the contract is concluded for a period longer than one year, the severance pay increases proportionally.

The same provisions regarding severance payment as above apply to workers whose employment contract has been terminated in a bankruptcy / liquidation / winding down of the employer or compulsory settlement proceeding. In a compulsory settlement proceeding, however, the employer and worker may stipulate in writing the manner, form or reduction of the severance payment if a greater number of jobs with the employer would be jeopardised by a full payment.

Under the EA, employees who have served the company for at least two (2) years are eligible for retrenchment benefits. Those with less than two (2) years’ service could be granted an ex-gratia payment out of goodwill.

The EA does not dictate the nature or amount of severance pay and leaves it to the mutual agreement between the employee and the employer. In the absence of a contractual agreement, the prevailing norm is to pay between two weeks’ to one month’s salary per year of service, depending on the company’s financial position and industry.

A non-competition clause is only valid if agreed upon in writing in the employment contract. ZDR-1 allows the use of this clause for employment contracts for indefinite term as well as for fixed term employment contracts for managerial workers. The clause can last only up to two years following termination. The clause must provide for a method of calculating the compensation to be given to the employee, otherwise it is invalid. The employee must receive at least one-third of his average monthly salary (calculated over the three months immediately preceding termination) for each month of
the restricted period. If the clause prevents the employee from gaining a comparable salary, the employee is entitled to compensation during the restricted period.

A non-competition clause may be agreed only when the employment contract is terminated by mutual agreement, due to ordinary termination of the contract by the employee, ordinary termination by the employer due to reason of fault, or extraordinary termination of the contract by the employer and if the employee has gained technical, production or business know-how and business connections while carrying out work or in connection to
his / her work. However, the non-competition clause must not prevent the employee from obtaining appropriate employment. 

The parties can mutually agree to waive the enforcement of the clause if they wish to do so.

Restrictive covenants (including non-competition clauses) are not valid and will be void unless:

1. they are deemed by the Singapore Courts to be reasonable between the parties and in the interests of the public;
2. they seek to protect legitimate proprietary interests; and
3. are not more extensive than is reasonably necessary to protect such interests.

The burden of proof is on the employer to show that the covenant is reasonable between the parties, whilst the employee bears the burden of proof to show that the covenant is against the public’s interests.

The employer cannot, without the prior consent of the relevant organization, terminate the employment contracts of works council members or supervisory boards representing workers, workers’ representatives (including those on the council of an institution), or appointed or elected trade union representatives.

Other categories of protected workers include older workers, parents and disabled persons.

The employer may not terminate the employment contract of an older employee, who has reached the age of 58 or of an employee, who has less than five years until qualifying for an old-age pension due to a business reason without his written consent.

This protection does not apply if:

1. the employee is assured a right to unemployment benefit until he fulfils the minimum conditions for receiving an old-age pension; or
2. appropriate new employment is offered to the employee; or
3. in the event the employee has already fulfilled the above conditions for protection against the termination of the employment contract when he concluded the respective contract, unless the contract was concluded according to item (ii); or
4. proceedings have been initiated for terminating the business of the employer.

The employer is not allowed to terminate the employment contract of mothers during their pregnancy, while breastfeeding of children up to the age of one, or the contracts of parents during their parental leave in the form of full absence from work, and for one month thereafter. This notwithstanding, the written employment contract can be terminated with the prior consent of the labour inspectorate, if there are reasons for extraordinary termination of the employment contract, or if proceedings for terminating the employer’s business have been initiated.

The employer may terminate the employment contract of a disabled person:

1. due to his incapacity to perform work subject to the conditions set out in the employment contract; or
2. due to business-related reasons;
3. but both are subject to the conditions set out in legislation governing pension and disability insurance or work rehabilitation, and the employment of disabled persons.

This does not apply if proceedings have been initiated for terminating the business of the employer.

The Tripartite Guidelines on Wrongful Dismissal were published on 1 April 2019 to illustrate what is considered wrongful dismissal. Employers are reminded to be mindful of the examples in these guidelines as these are matters that TADM mediators and Employment Claims Tribunal adjudicators are likely to take into account when mediating and/or adjudicating wrongful dismissal claims.

For the latest updates and developments on wrongful dismissal claims, please contact CMS Holborn Asia’s employment law team.

Under Slovenian law, the managing director, that is a legal representative of the company does not need to have an employment agreement with the company, or any other type of agreement, in order to be able to represent the company.

The table below sets out the position under Slovenian law in respect to a ‘managing director’, who has been appointed for the term of office in accordance with the Slovenian Companies Act, with or without a management agreement (civil).

If the ‘managing director’ is in an employment relationship with the company, both corporate and employment aspects must be taken into account. From the employment perspective, the employer and managing director can agree to regulate their employment relationship differently than prescribed by law regarding:

1. the conditions and limitations of fixed-term employment,
2. working time,
3. provision of breaks and rest periods,
4. the remuneration,
5. disciplinary responsibility, and
6. termination of the employment contract.

If the parties do not agree to regulate their relationship differently, the statutory provisions apply (please see the general section above).

There is no distinction between the duties and liabilities of a “director” and a “managing director” save as otherwise provided for in the constitution of the company.

The table below focuses on the removal of a managing director from his or her office as director. This is separate and different from the termination of a director’s contract of employment and/or other related employment issues, which are covered in Section 1 “Dismissal of employees” as that relates to the director’s role as an employee of the company.

The managing director of a limited liability company may be recalled at any time by a resolution of a general assembly, irrespective of whether the managing director has been appointed for a fixed or indefinite period. The conditions for the recall of the managing director are to be determined in the contract concluded between the managing director and the company (management agreement). If the company has a supervisory board, then the supervisory board appoints and recalls (dismisses) the managing director.

At joint stock companies, the supervisory board may (prior to the end of a manager’s term of office) recall (dismiss) members of the management board for the following reasons:

1. if the member is in serious breach of his obligations; or
2. if the member is not able to manage the operations; or
3. if the general assembly passes a vote of no confidence in him (unless the vote of no confidence has been passed based on clearly unsubstantiated reasons); or
4. if other economic and business reasons exist (e.g. significant changes in shareholder structure, reorganisation, etc.)

It is not a strict legal requirement for reasons to be provided when a director is being removed. This will ultimately be subject to the constitution of the company in question.

In limited liability companies, managing directors are recalled by shareholders’ resolution. In joint-stock companies, members of the management board are recalled by the supervisory board. In a one-tier system, the board of directors recalls the executive directors (if appointed). The manager / managing director must be notified in writing about the recall.

Public Company

• A public company may, by ordinary resolution (i. e. a vote by a simple majority at a general meeting), remove a director before the expiration of his period of office, notwithstanding anything in its constitution or in any agreement between the public company and the director.
• However, if the director was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove him will be ineffective until a replacement director is appointed.
• Special notice must be given of a resolution to remove a director or to appoint a replacement director at the meeting at which the incumbent director is removed. The company is required to send a copy of the notice to the director concerned and at the meeting, the director is entitled to be heard. The director is also entitled to make written representations (of a reasonable length) and to request that a copy of those representations be sent to every member of the company. The company is entitled to apply to the Singapore Court for the director to be denied the right to send out representations or to have his or her representations read at the meeting.
• Public listed companies in Singapore are subject to additional obligations under the law, including the obligation to make an immediate announcement to the Singapore Exchange (“SGX”) upon the cessation of the director’s services.

Private Company

• A director must be removed in accordance with the company’s constitution. Where the constitution is silent on the removal of a director, it may be amended in accordance with the required procedure on the removal of directors. Subject to any provision to the contrary in the constitution, a private company may remove a director by ordinary resolution before the expiration of his or her term, notwithstanding anything in any agreement between the company and the director.
• However, if the company also wishes to remove the director as an employee of the company, this must be in accordance with the termination provisions of his or her employment contract with the company.
• The removal of a director will be deemed invalid unless at least one director who is ordinarily resident in Singapore (who may be the sole director) remains on the board.
• The Accounting and Corporate Regulatory Authority of Singapore (ACRA) should be notified that a director has ceased to hold office within 14 days of said action having taken place.

No statutory notice period. The notice period depends on the provisions of the management contract or other contract setting out the legal basis for the (contract / letter of) appointment of the manager.

No statutory minimum notice period for the removal of directors. Dependent on terms of resolution and can be immediate.

The termination of the director’s employment contract will be in accordance with what is stipulated in the director’s employment contract.

The EA provides that the length of notice in an employment contract should be the same for both the employer and the employee.

No involvement.

No involvement.

No involvement.

No involvement.

The recall resolution must be registered in the court/business register. The registration has a declaratory effect.

Not necessary.

Not applicable.

Not applicable.

Not applicable.

No special rules apply.

The managing director cannot be reinstated (even if the recall was unjustified). However, the managing director has the right to compensation or reimbursement for damages in accordance with the general principles of civil law. There is no statutory compensation. Compensation is based on income, and provisions for its calculation are to be set out in the management contract or other contract setting out the legal basis for the appointment of the manager.

The removal of the director is invalid and / or ineffective.

In the case of public companies, non-compliance with the announcement obligations referred to above could result in a reprimand and / or sanctions from SGX.

Even if the requirements above are met, a director may sue for damages and compensation for breach of his or her contract of service (i. e. his or her employment agreement with the company) if the provisions for termination as set out in the same are not complied with.

The amount of severance pay is not regulated by the Companies Act. According to the Companies Act, however, in joint stock companies the severance pay may be paid out only in case of early termination (and only due to specific reasons), whereby the general assembly may determine the highest amount. Severance pay is set out in the articles of association of the company or in (the managing director’s) contract.

Any severance pay will be made in accordance with what is provided for in the director’s employment contract. See section 1.10 “Severance pay” for more details.

The articles of association of the company may provide a non-competition clause. To be valid, the prohibition on competition cannot be longer than two years, unless the member of the management board has been recalled (for the reasons set out above) by the supervisory board, or the managing director has been recalled by the general assembly. In these circumstances, the prohibition cannot be longer than six months.

Restrictive covenants (including a non-competition clause) are not valid and will be void unless:

1. they are deemed by the Singapore Courts to be reasonable between the parties and in the interests of the public;
2. they seek to protect legitimate proprietary interests; and
3. are not more extensive than is reasonably necessary to protect such interests.

The burden of proof is on the employer to show that the covenant is reasonable between the parties, whilst the employee bears the burden of proof to show that the covenant is against the public’s interests.

Not applicable.

Not applicable.