Introduction
The Employment Act (EA) is Singapore’s primary labor law, governing the fundamental terms and conditions of employment. It protects employees by establishing minimum employment standards while ensuring that employers meet their legal obligations. For startups, understanding the EA is essential for fostering a compliant and productive work environment, preventing legal disputes, and maintaining a strong reputation in a competitive business landscape.
Startups often operate with limited resources, prioritizing growth and scalability. However, neglecting employment laws can lead to penalties, employee dissatisfaction, and business disruptions. This guide provides a clear overview of the Employment Act and how startups can effectively comply with its requirements.
Overview of the Employment Act
What is the Employment Act (EA)
The EA is Singapore’s main labour law which outlines the statutory benefits and protections for employees in Singapore. It governs areas such as payment of salary, working hours, leave entitlements, maternity protection, termination procedures, and procedure and regulations, ensuring fair employment practices.
Who is Covered Under the Employment Act?
The EA applies to all employees working under a contract of service, including both local and foreign workers. Employees can be engaged in various work arrangements, such as full-time, part-time, temporary, or contract-based employment, and may be compensated on an hourly, daily, monthly, or piece-rated basis.
Foreign employees with a valid work pass are also subject to the Employment of Foreign Manpower Act (EFMA), which sets out an employer’s responsibilities and obligations when hiring foreign workers.
Additionally, part-time employees—those working fewer than 35 hours per week—are protected under the Employment of Part-Time Employees Regulations, which govern their entitlements and working conditions.
Part IV of the Employment Act
Part IV of the EA, which provides for rest days, hours of work and other conditions of service, only applies to:
- Workmen: Employees engaged in manual labor, including machine operators, cleaners, and construction workers, earning a monthly basic salary of $4,500 or less.
- Non-workmen: Employees in clerical or administrative roles, earning a monthly basic salary of $2,600 or less.
Part IV of the Act does not cover Professional, Managers and Executives (PMEs).
Who is Excluded from the Employment Act?
The following groups are not covered under the Employment Act:
- Public sector employees (civil servants, government officers)
- Domestic workers (e.g., helpers, caregivers)
- Seafarers (covered under the Merchant Shipping Act)
Key Provisions of the Employment Act
The EA governs various aspects of employment, including:
- Employment Contracts: Employers must provide employees with a written contract stating key employment terms (KETs) such as job title and duties, salary, working hours, leave entitlements, termination clauses and others.
- Salary Payments: Salary must be paid within 7 days of the end of the salary period with itemized payslips issued.
- Working Hours & Overtime: This covers standard working hours and limits on overtime.
- Leave Entitlements: A list of paid holidays that covers the length of period and its right.
- Termination & Retrenchment: Clear notice periods apply, and retrenchment benefits must be provided for eligible employees.
- Protection against Wrongful Dismissal
Common Pitfalls for Startups
Many startups fail to comply with the EA due to resource constraints or lack of awareness. Here are some common compliance pitfalls:
- Importance of Maintaining Proper Employment Records
Startups must maintain accurate employee records to ensure compliance with employment laws. Records should include:
- Employment contracts
- Payslips and salary records
- Attendance and leave records
- CPF contribution and employee earning reporting
- Ensuring Compliance with CPF Contributions and Statutory Benefits
Employers are required to contribute to the Central Provident Fund (CPF) for all Singaporean and Permanent Resident employees. Failure to make timely CPF contributions can result in penalties and legal action.
- Common Mistakes Startups Make
- Misclassifying employees as contractors: Independent contractors do not receive EA protections, but misclassification can lead to disputes and legal risks.
- Neglecting written contracts: Verbal agreements are risky; always issue a written employment contract.
- Ignoring proper termination procedures: Startups must follow legal notice periods and provide retrenchment benefits when necessary.
How Startups Can Stay Compliant
- HR Best Practices for Ensuring Compliance
A startup-friendly approach to HR compliance includes:
- Creating employee handbooks outlining company policies.
- Establishing standardized hiring processes.
- Providing regular HR training for founders and managers.
- Leveraging HR Tech Tools for Payroll and Leave Management
Using HR software can simplify compliance.
- Payroll processing (ensuring correct salary payments & CPF contributions)
- Leave tracking (ensuring statutory leave entitlements are met)
- Employee records management
- Seeking Legal or HR Advisory Support
Startups unfamiliar with employment laws should consult HR professionals or legal advisors to ensure compliance. Organizations like the Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) provide valuable HR resources for startups.
Conclusion
Understanding and complying with the Employment Act of Singapore is essential for startups to avoid legal pitfalls and build a strong foundation for growth. Key takeaways include:
- The Employment Act applies to most employees, with some exceptions.
- Startups must comply with salary payments, leave entitlements, and termination guidelines.
- Common mistakes include misclassifying employees and neglecting written contracts.
- Leveraging HR tech tools and seeking legal advice can help ensure compliance.
By proactively adhering to the Employment Act, startups can create a fair and compliant workplace, attracting and retaining talent while focusing on business success.
References:
Any queries regarding HR in Singapore or HR services, feel free to contact Wei Xiang at [email protected]