Singapore: Singapore Proposes Significant Changes To Its Employment Act

Last Updated: 23 March 2018
Article by Dominic Wrench and Calvin Cheng

Earlier this month, Manpower Minister Lim Swee Say announced plans to amend the Employment Act ('EA') so that higher-paid employees, who have previously been outside the scope of the EA, could benefit from the protection of employment rights.

The status quo...

The EA, which gives entitlements such as paid sick leave and minimum days of annual leave, currently only applies to certain employees such as workmen and professionals, managers and executives ('PMEs') who earn less than SGD4,500 per month (approx. US$3,400).

Consequently, higher-paid employees, including Singaporean citizens and ex-patriates, have not received protection from the EA, and their employment terms and conditions have been dictated by their employment contracts.

So what's changing?

Following public consultation, the Minister has proposed removing the Act's SGD4,500 salary cap completely. This would allow an additional 430,000 PMEs to benefit from employment protection under the EA. These PMEs currently make up 56% of the workforce in Singapore, and with that figure set to increase to 65% by 2030, these new proposals are highly significant.

If implemented, the removal of the salary threshold would mark a definite shift in the government's approach. Traditionally, the government felt PMEs above the salary cap were sufficiently sophisticated to negotiate their own employment terms, and rely on those terms in the event of a dispute.

What could this mean for employees?

We should stress the proposals are presently based on the Minister's speech and a formal draft bill is yet to be introduced. However, if the proposals come to fruition, then considerably more employees, including PMEs of all seniority levels and pay brackets, would enjoy increased rights in the workplace. These would be likely to include guaranteed minimum annual leave, increased access to Employment Claims Tribunals and protections from wrongful dismissal.

How would the proposals impact employers?

It's likely most of the amended Act's additional rights for employees would have little everyday impact on employers, given that many PMEs' contractual benefits already exceed the statutory minimum.

Yet the proposed amendments could impact more isolated HR activities, such as:

  • Business Transfers and Outsourcing – PMEs could now benefit from having their employment contract (and its existing terms and conditions) automatically transferred to the new employer during a relevant business transfer. Previously this was the case only for those under the SGD4,500 salary threshold.
  • Termination of PMEs – This may mean employers will need to be more cautious when terminating higher-paid PMEs' employment, and possibly offer larger severance packages, to avoid the threat of a wrongful dismissal claim.
  • Large scale redundancies and restructurings – These too will need careful consideration, to accommodate the right to preserve terms and conditions and minimise the risk of wrongful dismissal claims.

What is the outlook?

We can't be sure precisely how these proposed changes will affect the balance of power between employees and employers, until we have a draft bill to consider.

Even after any amendments are implemented, it's difficult to predict employees' awareness of their new rights and their ability or appetite to enforce them. However, Singapore is still expected to be an employer-friendly jurisdiction.

What should businesses be doing now?

For the time being, watch this space! The Ministry will present a new bill in Parliament later in 2018, with implementation expected by 1 April 2019. It's important that MNCs keep track of the proposed changes and, when they come into force, consider how they might affect their employees and their relationship with them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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