Key Upcoming Changes To The Singapore Employment Act.
Legal News & Analysis - Asia Pacific - Singapore - Labour & Employment
30 November, 2018
The much anticipated Employment Act Amendment Bill (“EA Amendment Bill”), which sets out the amendments to be made to the current Singapore Employment Act (“EA”), was passed on 20 November 2018. These changes will come into effect on 1 April 2019.
The EA Amendment Bill provides for six main key changes:
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There are other changes introduced by the EA Amendment Bill and this client alert does not attempt to provide an exhaustive summary of all such changes. Please do reach out if you have any further questions and we would be happy to comprehensively consider how the changes introduced by the EA Amendment Bill may affect your organisation.
All employees will be subject to the EA
Currently, the EA applies only to a subset of the workforce, namely employees in Singapore who are:
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Therefore, with regards to most employees, their employment rights and obligations are primarily set by reference to express terms and conditions in their employment contracts and any company handbook, policies and procedures, though implied terms (such as the implied duty of trust and confidence, good faith and fidelity, duty of care etc.) would also be relevant.
From 1 April 2019, the amended EA will remove the salary cap of S$4,500 so that the core EA provisions will cover all employees, including all professionals, managers, executives and technicians regardless of whether they are foreigners, Singaporeans or Singapore Permanent Residents. For completeness, public servants, domestic workers and seafarers will continue to be excluded from the EA’s ambit as they are covered separately by other legislations.
Accordingly, all existing “non-EA Employees” will be caught under the EA from 1 April 2019. This has significant implications, a few of which are highlighted below:
All employees (disregarding any salary thresholds) will enjoy the employee benefits under the core provisions of the EA, including:
- paid public holidays;
- paid sick and hospitalisation leave;
- maternity benefits and childcare leave1; and
- statutory protections relating to timely payment of salary, unauthorised deductions from salary, maternity protection and dismissal without just cause or excuse.
To the extent that any contractual employment terms are less favourable than the employees’ statutory rights, the latter will prevail.
Note also that under the amended EA, employees will be entitled to paid sick leave after examination by any medical practitioner (even if such medical practitioner was not appointed by the company).
An employer is required to conduct “due inquiry” before taking any disciplinary action, including dismissing an employee on the grounds of misconduct.
The EA Amendment Bill does not provide further detail on what constitutes “due inquiry” but based on recent case law, this would mean that employers would have to engage in some sort of process in which the employee concerned is informed about the allegation(s) and the evidence against him so that he has an opportunity to defend himself by presenting his position, with or without other evidence.
Automatic Transfer of Employment
The new change also means that the automatic transfer provisions in the EA will apply to all employees where a business or part thereof is transferred from one party to another. In such scenario:
- all employees of the transferor will automatically transfer to the transferee, with recognition of their length of service with the transferor and on the same terms and conditions of employment as those enjoyed by them immediately prior to the transfer; and
- an information and consultation process will have to be conducted with respect to the affected employees (and if applicable, any trade union recognised by the transferor) as soon as is reasonable before the transfer.
The amendments to the EA also means that employers must comply with the administrative obligations for all employees set out in the EA, including:
- the provision of certain prescribed key employment terms in writing to employees with continuous employment of at least 14 days;
- the maintenance of employment records in a manner as prescribed by the EA; and
- the provision of itemised pay slips to employees together with their salary payments.
Failure to comply with the above statutory obligations will attract administrative penalties in the form of fines.
Payment in Lieu of Notice
Under the amended EA, all employees will have the statutory right to terminate employment by making a payment of salary in lieu of notice to the employer. This means that, notwithstanding their existing contractual terms, employees will be entitled to resign from the business, buy themselves out of their contractual notice and leave immediately, potentially causing disruption to the business operationally.
Currently statutory minimum annual leave entitlement only applies to a subset of employees (“Part IV Employees”) who are subject to the EA (i.e. there is no statutory minimum leave entitlement for (i) non-EA Employees and (ii) employees who are currently covered under the EA but who are not Part IV Employees).
From 1 April 2019, annual leave entitlement, subject to the limits imposed under the EA, will apply to all employees (which, as mentioned above, would include any employees who are currently non-EA Employees).
Interestingly, even after 1 April 2019, only Part IV Employees are expressly permitted by law to carry over any unused statutory annual leave in any leave year for the next 12 months. This statutory right does not apply to any additional annual leave granted by the employer over the statutory minimum.
Check that existing contractual employment terms as well as any internal employee handbooks/policies are no less favourable than the employees’ statutory rights set out under the EA. Areas where we typically see the greatest variance between what different employers currently provide to their employees relate to childcare leave and PILONs.
- Check existing disciplinary policies and procedures as to whether it provides for “due inquiry”. Beware of undertaking disciplinary actions which do not satisfy the “due inquiry” test.
- The automatic transfer process regime has significant implications for mergers and acquisitions which complete after 1 April 2019. It would be advisable to seek further legal advice to ensure you are aware of any impact to employee numbers and costs especially if you are involved in any existing acquisitions which are targeted to complete after 1 April 2019.
- Ensure that operationally, your internal systems and controls are prepared to administer the EA changes from 1 April 2019. This could mean liaising with internal stakeholders, e.g. payroll and HR teams, to ensure that they are aware of the above changes.
- To consider the impact of a two-way PILON, especially in the context of “team moves”. Whilst a company may be adversely affected if an employee chooses to exercise his/her right to PILON, we would be happy to advise on other protections you can put in place to protect your business against such event.
Increase of salary threshold of Part IV Employees
This will be S$2,600 per month (instead of S$2,500). Only Part IV Employees are afforded the additional statutory protections set out in Part IV of the EA, which regulate working hours, overtime pay, rest days, annual leave, retrenchment and retirement benefits and certain other conditions of service. From 1 April 2019, Part IV provisions will remain largely the same, save that (i) the statutory right to annual leave will be moved to Part X so that it applies to all employees and (ii) the pool of Part IV Employees will be larger due to the salary threshold increase.
Please check if any of your employees will be classified as Part IV Employees once the changes in the EA Amendment Bill come into force. If so, the statutory provisions relating to working hours, overtime pay, rest days, retrenchment and retirement benefits and certain other conditions of service will apply to them.
Failure to provide statutory rights to Part IV Employees has serious consequences under the EA.
Recognition of constructive dismissal
The EA Amendment Bill provides for a new definition of “dismiss” which will include the resignation of an employee if the employee can show, on a balance of probabilities, that the employee did not resign voluntarily but was forced to do so because of any conduct or omission of the employer. Accordingly, an EA Employee who considers that he/she has been dismissed without just cause or excuse (which would include circumstances where the employee was forced to resign) may lodge a claim to the Employment Claims Tribunal.
This represents a fairly significant shift in Singapore employment law by recognising constructive dismissal as a ground to bring a statutory unfair/wrongful dismissal claim. Tripartite guidelines will be published in due course which we expect will provide more clarity on the scope of unfair/wrongful dismissal claims.
An employee in a managerial or executive position will have had to have served the employer for at least 6 months (as opposed to 12 months at present) before he/she can file a wrongful dismissal claim against termination that was effected with prior notice or payment in lieu of notice. No such limits apply to non-managers or non-executives or in respect of claims without prior notice or payment in lieu of notice.
Consider updating your training requirements and course contents to ensure that managers do not inadvertently take actions which may result in a constructive dismissal claim.
Something to watch out for as an employer because the Singapore courts have expressed openness to consider any claim for damages over and above notice pay if the employee is able to establish that he/she has suffered any additional forms of damage or loss (e.g. psychiatric illness).
Consent driven approach for permitted salary deductions
Currently, only certain deductions can be made from employees’ salary unless otherwise approved by the MOM. MOM approval is required even if an employee had provided consent. From 1 April 2019, an employer will generally be allowed to carry out any salary deductions provided that written consent is obtained from the employee and MOM approval will no longer be available as an alternative means of implementing salary deductions. However, written consent of the employee for such deduction may be withdrawn by the employee at any time and the employee cannot be penalised for such withdrawal.
Note that consent will not be required in respect of matters which fall under the list of permitted salary deductions expressly set out in the EA (e.g. CPF contributions, deductions for absence etc).
Ensure that employee consent is obtained to the extent salary deductions which are not expressly set out in the EA need to be made. A simple way to do this would be to update your employment contracts, promotion letters or other employee communications.
This is a welcomed practical change, especially in respect of employee share incentive schemes though the consequences of withdrawing consent will have to be set out clearly to avoid amounting to unlawful penalisation.
Wider powers for the employment claims tribunal
The Employment Claims Tribunal will be empowered to hear salary-related disputes as well as wrongful dismissal cases where an employee alleges that he has been dismissed without just cause or excuse.
Currently, there are multiple routes for dispute resolutions as salary related disputes are heard by the Tripartite Alliance for Dispute Management before being escalated to the Employment Claims Tribunal and wrongful dismissal claims are adjudicated by the MOM so this change will be a welcome rationalisation, in particular for disputes that cover pay as well as dismissal-related matters.
A more empowered ECT as well as a “one stop service” to handle disputes will streamline the process.
New retrenchment notification obligations
A new provision which imposes an obligation on the employer to, if so requested, furnish such information to the Commissioner of Labour as it may request on the retrenchment of any employee. This is consistent with the more interventionist approach taken by the authorities lately on accountability for fair HR practices. Note that a failure to comply with this new provision may result in an administrative penalty being imposed.
Careful consideration will need to be had to the extent your organisation is considering conducting a retrenchment/redundancy exercise or is potentially undergoing a sale and acquisition which may bring about potential retrenchments/redundancies, in particular in ensuring that the guidelines issued by the Tripartite Parties are borne in mind, to the extent appropriate.
For further information, please contact:
Laure de Panafieu , Counsel, Head of Employment & Incentives, Asia , Linklaters