Employment Termination in Singapore

Termination Process in Singapore

• Both employer and employee have the power to terminate a contract of service. The termination can take place due to:
  • Employee resignation
  • Employer dismissal
  • Contract expiration (such as when a project or contract period has been completed)

Both parties must follow the terms and conditions for termination as stated in the contract of service. It is an offence for employers to disallow employees to leave their job. Employees have the right to resign at any time, serving the required notice or by paying compensation to the employer in lieu of notice.

Termination with Notice:

• The length of notice period must be the same for the employer and the employee and as agreed according to the employment contract.
• The notice can be waived by mutual consent between employee and employer.
• If employment contract didn’t specify the notice period, the notice period required will depend on employee’s length of service.

Termination without Notice:

• Termination without notice can happen in situations such as breaking the terms of the contract, failure to pay salary and absence without cause.
• Either employee or employer may terminate a contract without waiting for the notice period to end.
• Either party can do so by paying the other party compensation in lieu of notice (“notice pay”). This is money equivalent to the salary that employee would have earned during the required notice period.

• Tax:
  • When a non-Singapore Citizen employee ceases employment in Singapore or Permanent Residence (PR) plans to leave Singapore for more than three months, the employer is responsible to ensure that he/she pays all taxes. Applies to all work pass holders including Personalised Employment Pass (PEP) holders.
  • Filed IR21 at least one month before the employee ceases employment in Singapore and withhold any monies due to the employee at this time.
  • There will be a Late Filing Fee penalty if the employer files Form IR21 late or fail to file. The employer may even be summoned to Court.
  • Once IR21 has been processed, a tax bill will be sent to the employee. He/she will need to pay the difference if the amount withheld by the employer is insufficient to pay his/her taxes.

Please obtain a Letter of Undertaking (LOU)from the PR employee stating that he will not leave Singapore permanently. With the LOU, you are not required to file the Form IR21 for the employee.

• Severance Payment & Long Service Payment:
  • Employees who serve the company for at least 2 years are eligible for retrenchment benefits. Those with less than 2 years’ service could be granted an ex-gratia payment out of goodwill.
  • The amount of retrenchment benefit will depend on the employment contract or collective agreement (for unionised companies). If there is no provision, it will have to be negotiated between the employees (or their union) and the employer.
  • The prevailing norm in Singapore is to pay a retrenchment benefit of between 2 weeks to 1 month salary per year of service, depending on the company’s financials.
  • If the retrenchment comes shortly after a salary cut, the salary before the cut should be used to determine the amount of compensation.

Both employee and employer don’t have to pay CPF contributions for retrenchment benefits.

Reasons for Termination

Employers must have valid reasons for termination, such as misconduct or redundancy. It is essential to document these reasons and provide the employee with an opportunity for improvement before proceeding with termination.

Employee Rights During Termination

Employees have certain rights that must be respected during the termination process. These include the right to notice, fair treatment, and compensation where applicable.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Singapore employment laws and regulations, please visit the official governmental websites.

Updated on: June 2025