In Singapore, employers have several key legal obligations when it comes to employment matters. These include paying the agreed-upon salary or wages, as outlined in the Employment Act 1968 (the “Act“), which also governs salary payments, deductions, and variable wages. Employment contracts often include provisions for discretionary bonuses. The National Wages Council issues annual wage adjustment recommendations. Employers must also understand payroll processing methods, the types of payroll deductions allowed, and the formulas for calculating termination and leave payments. Additionally, laws regulate compensation for employees on annual or reservist leave, as well as health and safety responsibilities under the Workplace Safety and Health Act 2006 (“WSHA“). Employers are also required to comply with the Work Injury Compensation Act (“WICA“), which mandates compensation for employees injured at work, regardless of fault. Employers are also subject to privacy regulations under the Personal Data Protection Act 2012 (“PDPA“).

What are the methods of payment?

In Singapore, salaries or wages must be paid through cash, cheque, or direct transfer to an employee’s nominated bank account. The Act explicitly prohibits paying workers in kind, tokens, or credits, requiring payment in legal tender as per Section 54. Any contract stipulating otherwise is deemed void. The Currency Act 1967 sets legal tender limits, with amounts ranging from SGD 1 to SGD 20 depending on coin denominations. Employers can supplement monetary wages with additional benefits, such as food or housing, but not as substitutes for monetary payment.

What are the types of payroll deductions allowed under the Act?

Payroll deductions in Singapore are regulated under the Act, ensuring only authorised deductions are permissible. These include deductions for work absences, employee consented amenities, housing, cooperative payments, Central Provident Fund contributions, and recovery of loans or overpayments. The total deductions must not exceed 50% of an employee’s monthly salary, except for termination settlements or specific exclusions like co-operative payments.

For absences, salary deductions follow formulas based on the employee’s pay rate and work schedule. Deductions for damage or loss caused by negligence are capped at 25% of one month’s salary unless further approved by the Commissioner of Labour. Employers must conduct a fair inquiry and allow employees to provide their perspective before imposing such deductions. All deductions must be accurately recorded.

What is the formula for calculating termination/leave payments?

In Singapore, the Act outlines formulae for calculating termination and leave payments for monthly-rated employees (separate provisions apply to piece-rated employees). These calculations determine the gross rate of pay for one day’s work, which excludes specific payments like overtime, bonuses, and allowances. Three key formulae apply:

• Formula 1: For employees working the same number of days weekly, the Daily Rate = (12 × Monthly Pay) / (52 × Weekly Working Days)
• Formula 2: For employees with alternating workweeks (e.g., 5 days one week, 6 days the next), the Daily Rate = (12 × Monthly Pay) / (52 × Average Weekly Working Days over 2 Weeks)
• Formula 3: For employees with varying weekly schedules, theDaily Rate = (12 × Monthly Pay) / (52 × Average Working Days over Relevant Period)

What is the gross rate of pay applicable for payment during annual leave?

In Singapore, payment for annual leave is calculated at the gross rate of pay, ensuring monthly-rated employees receive their usual pay during leave. If an employer dismisses an employee for reasons other than misconduct, the gross rate of pay must be paid for any unused accrued leave.

• Formula: Payment for accrued leave = (12 × Monthly Salary × Days of Accrued Leave) / (52 × Average Working Days per Week)

Who are piece-rated employees and How is piece-rated employees’ pay structured?

Piece-rated employees are those who are paid based on the number of items they produce, rather than by hour or fixed monthly salary. In Singapore, when calculating payments for work done on a rest day, public holiday, or for leave encashment, the employer will apply either the basic or gross rate of pay depending on the type of payment being made. The gross rate of pay excludes overtime, bonuses, reimbursements, and certain allowances, while the basic rate of pay excludes these same payments but includes wage adjustments or increments.

• Formula for calculating one day’s pay for piece-rated employees: One day’s pay = Total earnings for the 14 days immediately preceding the leave period / Number of days actually worked during the same 14 days period.

How companies deal with payment during reservist leave?

In Singapore, employees called up for reservist leave are entitled to service pay (equivalent to their national service pay) and make-up pay (“MUP“) for the difference between their civilian income and service pay. There are two MUP payment methods:

• Direct Scheme: Employers continue to pay the employee, and Ministry of Defence (“MINDEF“)/Ministry of Home Affairs (“MHA“) reimburses the employer. A “MUP Claim” form must be submitted to MINDEF 21 days before reservist service.
• Non-Direct Scheme: Employers deduct the employee’s salary for the reservist period, and MINDEF/MHA reimburses the employee directly.

MUP is calculated based on the employee’s usual remuneration over the 6 months prior to reservist service, including allowances. Employers must also continue Central Provident Fund contributions for employees on reservist leave.

What are the sources of an employer’s legal liability for the health and safety of their employees?

In Singapore, an employer’s legal liability for the health and safety of their employees arises from various sources, primarily involving both statutory and common law duties.

Under the WICA, employers are legally required to obtain work injury compensation insurance for their employees, particularly for those engaged in manual work or non-manual work earning SGD 2,600 or less monthly. This insurance provides compensation for work-related injuries and illnesses, such as medical expenses, wages during recovery, and lump-sum compensation for permanent incapacity or death. It also mandates employers to cover medical leave wages and treatment expenses. Failure to provide the requisite insurance may result in fines or imprisonment.

The WSHA places additional legal responsibilities on employers to reduce risks and ensure workplace safety. It mandates proactive risk management measures, requiring employers to eliminate or minimise risks at the source. The WSHA covers all types of workplaces in Singapore and encourages greater industry ownership of safety and health standards. Failure to comply with these safety practices can result in penalties.

Employers also owe a common law duty to ensure the safety and well-being of their employees while at work. This includes:

• ensuring safe and proper facilities, equipment, and systems;
• taking reasonable care to prevent workplace accidents;
• providing a safe working environment;
• supervising workers to prevent foreseeable risks. Employers can be held liable for negligence if they breach this duty, and injured employees may seek compensation for pain, suffering, or permanent disability via civil suits. Employers may also face vicarious liability for the actions of their employees in the course of employment that cause harm to other workers or third parties.

What is the compensation limit under the WICA?

The WICA provides a framework to ensure fair and efficient compensation for employees who suffer work-related injuries or illnesses. Under the WICA, employers are required to provide compensation insurance for employees engaged in manual work, regardless of salary, and for employees performing non-manual work who earn a salary of SGD 2,600 or less per month (excluding overtime, bonuses, annual wage supplements, and other allowances).

Compensation under WICA is categorised into three main types: medical leave wages, medical expenses, and lump sum payments for permanent incapacity, current incapacity, or death. Employers are obligated to report all work-related injuries or medical leave to the Ministry of Manpower and to ensure compliance with the compensation framework, even for injuries sustained during work-from-home arrangements. To expedite claims, provisions are made for early compensation assessments, particularly in cases of current incapacity, with permanent incapacity evaluations conducted later for more complex injuries.

Employers are required to purchase work injury compensation insurance that adheres to WICA’s standard terms to guarantee adequate employee protection. While insurers can offer additional benefits, they cannot dilute the mandated terms. The WICA establishes specific limits on compensation, which were last revised in 2020 and are set to increase from 1 November 2025 to reflect rising wages and healthcare costs.

• For cases of death, the maximum compensation will rise from SGD 225,000 to SGD 269,000, and the minimum will increase from SGD 76,000 to SGD 91,000;
• For permanent incapacity, the maximum compensation will increase from SGD 289,000 to SGD 346,000, and the minimum from SGD 97,000 to SGD 116,000;
• Medical expenses will be capped at SGD 53,000 or the expenses incurred within one year of the accident, whichever comes first, up from the current limit of SGD 45,000.

These limits are prorated for partial permanent incapacity and exclude an additional 25% compensation for total incapacity to account for care costs. Failure to comply may result in fines of up to SGD 80,000 for unauthorised policy offerings.

What is the WSHA?

The WSHA mandates that employers, employees, and other stakeholders ensure safety and health at the workplace. The WSHA requires proactive risk management, where stakeholders must identify hazards, assess risks, and implement safety measures. It covers all workplaces in Singapore and sets out specific duties for employers to provide safe environments, employees to follow safety protocols, and occupiers to maintain safe premises. The WSHA imposes severe penalties for non-compliance, including fines and imprisonment, with higher penalties for repeat offenders and incidents causing death.

What is the main privacy law pertaining to employee’s personal data?

The main privacy law in Singapore is the PDPA, which governs the collection, use, and disclosure of personal data. Employers must obtain consent from employees unless exceptions apply, ensure data accuracy, and provide transparency about data practices. Employers are also required to appoint a Data Protection Officer, implement security measures, and notify the Personal Data Protection Commission (“PDPC“) and affected individuals in the event of a data breach.

For more information on this article, please contact Jennifer Chih or Lareina Wang.

“The information provided in this page is for general informational purposes only and is not intended to constitute legal advice. We do not warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon. While we strive to provide accurate and up-to-date information, the legal landscape is constantly evolving, and the details of any given case may change over time.”