Employment Contract in Singapore: Legal Guide & Key Terms

Did you know that a seemingly straightforward document like an employment contract can have significant implications for both your professional and personal life? An employment contract is a legally binding agreement that defines the relationship between an employer and an employee.

It specifies the rights, responsibilities, and obligations of each party, and any breach of its terms may lead to legal consequences.

In Singapore, the Contract of Service, commonly known as an employment contract, is governed by the Employment Act 1968. This law mandates certain requirements that must be included in such agreements. Therefore, it is essential to fully understand the terms and conditions outlined in your employment contract before signing, ensuring that you make an informed decision.

Contract of Service or Contract for Service

Not every working arrangement in Singapore is covered by the Employment Act, and the difference comes down to whether the agreement is a Contract of Service or a Contract for Service. This distinction affects CPF contributions, statutory leave, and who’s responsible for the work being done.

Key Difference	Contract of Service	Contract for Service
Relationship	Employer and employee	Client and independent contractor
Governed by	Employment Act 1968	Contract law, not the Employment Act
CPF contributions	Employer’s responsibility	Not applicable (self-employed pays own Medisave)
Statutory leave and benefits	Employee is entitled	Not entitled
Control over work	Employer directs how, when, and where work is done	Contractor controls how the work gets delivered

If you’re unsure which category applies to your working arrangement, this is worth checking early, since misclassification can create CPF liabilities or leave entitlement disputes down the line.

Is a Verbal Employment Contract Legally Binding in Singapore

Yes. A verbal agreement between an employer and employee can be legally binding in Singapore, provided the essential elements of a contract, offer, acceptance, and consideration, are present.

That said, MOM requires employers to issue Key Employment Terms (KETs) in writing within 14 days of employment starting, for any employee covered by the Employment Act and employed for 14 days or more.

In practice, a verbal contract is difficult to enforce and prove. If a dispute arises over salary, notice period, or job scope, whoever relies on a verbal understanding has a weaker position than someone with a signed written contract. Employers should always issue a written contract, both to comply with the KETs requirement and to protect themselves in the event of a dispute.

Also Read: PIP Singapore: Performance Improvement Plan & Employee Rights

Key Terms in an Employment Contract

1. Employment Details

Your employment contract should clearly outline:

• Employer and employee details
• Job title and job description
• Start date of employment
• End date (if it is a fixed-term contract)

2. Probation Period

Not all employment roles require a probationary period. However, if your role includes one, it should be explicitly stated in the contract, including:

• The specific duration of the probation period
• Whether the notice period during probation differs from the notice period after confirmation

Clarifying these details in writing can prevent misunderstandings.

3. Salary and Payment Terms

The salary clause is one of the most important aspects of any employment contract, as salary disputes are common. Your contract should specify:

• Basic salary and payment frequency (at least once a month, as per the Employment Act)
• Overtime pay arrangements
• Salary payment date (should be within seven days of the agreed date)
• Mode of salary payment (e.g., bank transfer, cheque)

Failure to pay an employee’s salary on time is an offence under the Employment Act. Additionally, overtime pay should be agreed upon and clearly stated in the contract.

4. Medical Leave and Benefits

If you are covered under the Employment Act and have worked for at least three months, you are entitled to paid medical leave, provided that:

• You notify your employer within 48 hours of your absence
• Your entitlement is calculated on a pro-rata basis, based on the number of months you have worked

Additionally, maternity leave and other medical benefits should be clearly outlined in the contract.

5. Public Holidays and Annual Leave

• Public holidays: Employees are entitled to paid public holidays. If you are required to work on a public holiday, your employer must compensate you with extra pay or time off in lieu.
• Annual leave: Employees who have worked for at least three months are entitled to annual leave. The minimum entitlement starts at seven days in the first year and increases with years of service.
• These entitlements should be clearly specified in your contract to prevent any misunderstandings regarding leave payment and eligibility.

Years of Service	Minimum Annual Leave
1st year	7 days
2nd year	8 days
3rd year	9 days
4th year	10 days
5th year	11 days
6th year	12 days
7th year	13 days
8th year and beyond	14 days

6. Transfer of Employment

Employment transfers often occur during company mergers or takeovers. In such cases, an employer has the right to transfer employees as long as the employment terms remain unchanged. If your employer is planning an expansion that may result in your transfer, it is advisable that your contract includes provisions addressing this possibility.

7. Termination of Employment

Termination refers to the ending of the employment contract between an employer and an employee. The termination clause should specify:

• Notice period requirements
• Whether compensation in lieu of notice is allowed
• The conditions under which termination without notice is permitted (e.g., misconduct)

A termination letter is mandatory and should always be in writing. If an employee believes they have been wrongfully dismissed, they have the right to seek legal assistance.

What Should Be Confirmed Before Signing

Before signing an employment contract, whether as an employer issuing it or an employee reviewing it, it helps to confirm the following:

• The job title, salary, and payment terms match what was discussed during negotiation.
• Probation duration and notice periods are clearly stated for both during and after probation.
• Leave entitlements, including annual and medical leave, are specified rather than left to “company policy.”
• Any restrictive covenants, non-compete, confidentiality, or IP clauses, are reasonable and clearly worded.
• The termination clause states the notice period and any conditions for termination without notice.

This isn’t a substitute for legal review, but it’s a useful starting point before either party puts pen to paper.

Drafting a Strong Employment Contract

A legally sound employment contract does more than tick the boxes required by the Employment Act. It should be specific enough to prevent disputes, written in plain language both parties actually understand, and consistent with any company handbook or policy the employee is also bound by.

Employers should review their contract templates periodically, particularly after any change in the Employment Act or MOM guidance, and avoid copying generic templates that don’t reflect the actual role or working arrangement.

Where a role involves sensitive information, client relationships, or specialised knowledge, it’s worth having a lawyer review the restrictive covenants specifically, since these are the clauses most likely to be challenged if a dispute reaches court.

Also Read: Can Employers Reject Annual Leave Requests in Singapore?

Staying Protected with RBN Chambers

An employment contract sets the terms for the entire working relationship, and the clauses that get glossed over at signing, probation, notice periods, restrictive covenants, are often the ones that matter most when something goes wrong. Reviewing a contract carefully before signing, or having one drafted properly from the outset, is far less costly than resolving a dispute after the fact.

RBN Chambers LLC advises both employers and employees on employment contracts, drafting, review, and disputes arising from wrongful dismissal or unclear contract terms.

If you have concerns about your employment contract or are facing an employment dispute, contact RBN Chambers today for legal support tailored to your situation.

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