Employment Act: What Singapore SME Owners Must Know

Singapore's Employment Act is the country's main labour law, and for the roughly 300,000 small and medium enterprises (SMEs) that make up the backbone of the economy, understanding it is not optional. Getting employment terms wrong can lead to disputes at the Tripartite Alliance for Dispute Management (TADM), claims at the Employment Claims Tribunals (ECT), and financial penalties. This guide breaks down what SME owners actually need to know to stay compliant and treat their staff fairly.

What Is the Employment Act?

The Employment Act (EA) is administered by the Ministry of Manpower (MOM) and sets out the basic terms and conditions of employment for most employees in Singapore. It covers things like salary payment, working hours, rest days, public holidays, annual leave, sick leave, and protection against wrongful dismissal.

A key point many SME owners miss: since April 2019, the Employment Act covers all employees under a contract of service, including managers and executives (PMEs), regardless of salary. Previously, PMEs earning above a salary threshold were excluded. That expansion means almost your entire workforce now enjoys core statutory protections.

However, the Act does not cover:

• Seafarers
• Domestic workers (foreign domestic workers are protected under separate regulations and their work permit conditions)
• Statutory board employees and civil servants (governed by separate schemes)

Independent contractors on a contract for service are also not covered — but be careful, because misclassifying an employee as a contractor to avoid obligations can backfire if MOM or the tribunal looks at the true nature of the relationship.

Part IV: The Extra Protections for Certain Workers

Beyond the general provisions, the Act contains Part IV, which provides additional protections relating to hours of work, overtime, rest days, and shift work. Part IV only applies to:

• Workmen (manual labour roles) earning a basic monthly salary of not more than $4,500, and
• Non-workmen (other rank-and-file employees) earning a basic monthly salary of not more than $2,600.

Part IV does not apply to managers or executives at all. This distinction matters enormously for SMEs in retail, F&B, manufacturing, and logistics, where many staff fall under Part IV and are therefore entitled to overtime pay and regulated working hours.

Key Statutory Entitlements SME Owners Must Provide

Salary Payment

Salary must be paid at least once a month, and within 7 days after the end of the salary period. For overtime work, payment must be made within 14 days. If you terminate an employee, their final salary is due on the last day of employment (or within three working days if you dismiss them).

Since 1 April 2016, employers are legally required to issue itemised payslips and Key Employment Terms (KETs) in writing to employees covered by the Act who are employed for 14 days or more. Failing to do so is a civil breach that can attract penalties. Payslips must include items such as basic salary, allowances, deductions, overtime hours and pay, and net salary.

Working Hours and Overtime (Part IV employees)

For Part IV employees, the general limit is 44 hours a week. Work beyond that is overtime, payable at 1.5 times the hourly basic rate. An employee cannot be required to work more than 12 hours a day except in specific circumstances (e.g. accidents, essential services), and overtime is capped at 72 hours a month.

Rest Days

Part IV employees are entitled to one rest day per week (unpaid), which is the longest possible without pay. This can be a Sunday or another day.

Public Holidays

Employees are entitled to 11 paid public holidays a year. If a public holiday falls on a rest day, the next working day becomes a paid holiday. If an employee is required to work on a public holiday, they should be paid an extra day's salary or granted time off in lieu (for managers and executives).

Annual Leave

Employees who have worked at least 3 months are entitled to paid annual leave. The statutory minimum starts at 7 days for the first year of service and increases by one day for each additional year, up to a maximum of 14 days. Many SMEs offer more than the minimum to stay competitive, but you cannot offer less.

Sick Leave

Employees who have served at least 3 months are entitled to paid sick leave, provided the illness is certified by a company-recognised doctor. The entitlement is:

• Up to 14 days of paid outpatient (non-hospitalisation) sick leave per year, and
• Up to 60 days of paid hospitalisation leave per year (inclusive of the 14 outpatient days).

The exact entitlement scales with length of service between 3 and 6 months.

Childcare, Maternity, and Paternity Leave

These are governed partly by the Employment Act and largely by the Child Development Co-Savings Act. Working mothers of Singaporean children are generally entitled to 16 weeks of paid maternity leave, and fathers to paid paternity leave (which has been progressively extended). Parents are also entitled to childcare leave. Government reimbursement schemes offset much of this cost for employers, so SMEs should familiarise themselves with the claims process to recover eligible amounts.

Termination and Wrongful Dismissal

Either party can terminate a contract by giving the notice period stated in the contract, or by paying salary in lieu of notice. If the contract is silent, the Act prescribes default notice periods based on length of service (from one day for under 26 weeks, up to four weeks for five years or more).

SME owners must understand the concept of wrongful dismissal. Under the Tripartite Guidelines on Wrongful Dismissal, dismissal is wrongful if it is done without just cause — for example, dismissal based on discrimination, to deprive an employee of benefits, or in retaliation for exercising a statutory right. Dismissing an employee "with notice" does not automatically make it lawful if the underlying reason is discriminatory or in bad faith.

Employees who feel wrongfully dismissed can file a claim with TADM for mediation, and if unresolved, escalate to the Employment Claims Tribunals. Keep proper documentation of performance issues, warnings, and the reasons for any dismissal.

Salary and Wrongful Dismissal Disputes: The ECT Route

The Employment Claims Tribunals handle statutory and contractual salary-related claims. There are claim limits (generally up to $20,000, or $30,000 if the parties went through TADM-assisted mediation via a union). Mediation at TADM is a mandatory first step before a claim reaches the ECT. As an SME owner, resolving matters early and fairly at mediation is almost always cheaper and less disruptive than a tribunal hearing.

Common Compliance Mistakes SMEs Make

• Not issuing itemised payslips or KETs. This is one of the most common breaches and is easily avoided with proper payroll software.
• Misclassifying employees as contractors to sidestep CPF and leave obligations.
• Failing to pay overtime to Part IV employees, or wrongly assuming all salaried staff are exempt.
• Poor record-keeping. Employers must keep employee records (including salary and employment records) for a specified period — generally the latest two years for current employees, and, for ex-employees, one year after they leave.
• Ignoring CPF obligations. While CPF is governed by the separate CPF Act, not the Employment Act, contributions for Singaporean and PR employees are mandatory and enforced strictly.
• Not updating contracts after the 2019 expansion of coverage to all PMEs.

Practical Tips for Staying Compliant

1. Use proper payroll software that automatically generates itemised payslips and tracks leave and overtime.
2. Put everything in writing. Issue KETs within 14 days of employment. Clear contracts prevent most disputes.
3. Classify staff correctly. Know who is a Part IV employee, a PME, or a genuine contractor, and apply the right rules.
4. Keep records for the required period. Good documentation is your best defence in any dispute.
5. Handle terminations carefully. Document performance issues, follow due process, and never dismiss on discriminatory grounds.
6. Stay updated. MOM and the Tripartite partners periodically revise guidelines and thresholds — for example, the Part IV salary caps and leave entitlements have changed over the years.
7. When in doubt, consult. MOM's website, the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP), and employment lawyers are valuable resources.

Frequently Asked Questions

Does the Employment Act apply to my foreign employees on work passes? Yes. The Act applies based on whether someone is an employee under a contract of service, regardless of nationality, with the main exceptions being seafarers and domestic workers. Work pass holders are also subject to additional Employment of Foreign Manpower Act rules.

Are managers and executives covered by the Employment Act? Yes, since April 2019 all PMEs are covered by the general provisions of the Act. However, they are not covered by Part IV (hours of work, overtime, and rest day protections).

Do I have to pay overtime to all my staff? No. Only Part IV employees — workmen earning up to $4,500 and non-workmen earning up to $2,600 in basic monthly salary — are entitled to statutory overtime pay at 1.5 times the hourly rate.

How many days of annual leave must I give? The statutory minimum is 7 days in the first year, rising by one day per additional year of service up to a maximum of 14 days, for employees with at least 3 months of service. You may offer more, but not less.

What happens if an employee files a claim against my company? The claim generally starts with mandatory mediation at TADM. If mediation fails, it may proceed to the Employment Claims Tribunals. Keeping thorough records and acting fairly greatly improves your position.

Is CPF part of the Employment Act? No. CPF contributions are governed by the separate Central Provident Fund Act, but they are mandatory for Singaporean and PR employees and are enforced independently.

Where can I get authoritative, up-to-date information? The Ministry of Manpower website (mom.gov.sg) is the definitive source, along with TAFEP and TADM. Because thresholds and entitlements are periodically revised, always verify current figures before making decisions.

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This article is a general guide for informational purposes and does not constitute legal advice. For specific situations, consult MOM or a qualified employment lawyer.

Sources

• Ministry of Manpower — Employment Act overview
• Ministry of Manpower — Leave entitlements (annual leave, sick leave, childcare leave)
• Ministry of Manpower — Salary, payslips and Key Employment Terms
• Tripartite Alliance for Dispute Management (TADM)
• Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP)