Singapore Employment Law Update: September 2024

Introduction

This article summarises several important updates and announcements of upcoming changes to Singapore's employment laws across a variety of topics including:

1. Clarification that Employer of Record companies can no longer be used to employ foreign nationals in Singapore.
2. Enhanced family friendly benefits and retrenchment support announced at the Prime Minister's National Day Rally.
3. Changes to the salary criteria for Employment Pass applications, impacting both new applications and renewals.
4. Publication of the new Platform Workers Bill, which aims to introduce enhanced protections for platform workers who provide services for delivery and ride-hailing service businesses.
5. The decision of the General Division of the High Court of Singapore in BGC Partners (Singapore) Limited and GFI Group Pte Ltd v Sumit Grover [2024] SGHC 206, which considered the issue of whether a former employee was entitled to any bonuses from the former employer.

If you have any questions or need any support on how you can prepare for the upcoming changes, please contact David Smail or Michelle Chua.

(1) Overseas companies must consider alternatives to using an Employer of Record for employing a foreign national in Singapore

The Ministry of Manpower has clarified that non-Singaporean companies who want to employ an individual in Singapore who is not a Singapore national or permanent resident, can no longer use an Employer of Record (EOR) to sponsor the individual for a work pass.

Previously, it has been a common practice in Singapore to use an EOR in this scenario as it gives the overseas company flexibility to hire foreign talent and gain a presence in the market without incurring the time and cost of setting up a local entity. This is particularly useful if the overseas company is exploring Singapore as a potential target market and may only be hiring 1 or 2 employees in the short-medium term. However, there has always been some risk with this arrangement because, strictly speaking, a foreign employee should only be providing services to the entity which applies for their work pass ie the EOR and not the end user client. This clarification is intended to shut down a loophole which has not been actively policed before now. Going forwards, the position is clear that a work pass can only be issued to individuals who are employed by a Singapore based company.

Therefore, a foreign company who intends to employ a non-Singaporean in Singapore will need to consider alternatives. These may include:

• setting up a representative office;
• incorporating a local Singapore company with the Accounting and Corporate Regulatory Authority;
• arranging for a local Singapore entity who is not the employer to sponsor a work pass application (eg a customer / client / business partner);
• the employee applying for the Overseas Networks & Expertise Pass (ONE Pass), a relatively new type of work pass designed for high-earning employees which is not tied to the employer but to the employee themself; or
• the employee applying for permanent residency status.

Each of the above options has its respective advantages and disadvantages, and may or may not be suitable depending on the circumstances.

EORs who continue to apply for work passes for non-Singaporeans working for an overseas company, as well as the foreign employees themselves, would be committing an offence. The penalties for such offences are severe and can include monetary fines, imprisonment (generally for up to 2 years), debarment from working in Singapore and other reputational consequences (eg being publicly named by the Ministry of Manpower). It is also possible that the overseas company may be liable for abetment, and liable to the same punishment for the relevant offences.

Overseas companies who are currently using EORs to hire foreign employees in Singapore should urgently review their current practices and consider implementing alternative arrangements. As this may result in termination of employment for the impacted employees, this will also require a careful review of the terms of any service agreements to fully assess the extent of any liabilities, as well as developing a communication plan.

(2) Singapore National Day Rally: Employees to get enhanced family friendly benefits and retrenchment support

At the National Day Rally Speech on 18 August 2024, Singapore's Prime Minister announced important policy changes that will impact employers and employees in Singapore.

First, the government will enhance its parental leave offering. Eligible male employees will have a statutory right to 4 weeks' paternity leave (double the 2 weeks currently offered), and there will be an increase in the amount of maternity leave or adoption leave that an eligible wife can share with her eligible husband.

The changes are a welcome step in Singapore's promotion of family friendly benefits, and are aimed at removing the assumption that mothers should always be the primary caregiver. However, the added flexibility may cause disruption to employers and operational resourcing challenges. As well as reviewing current parental leave policies to ensure they are compliant with the changes when they come into effect, employers should have clear notification and approval processes in place.

Second, the government will provide limited financial support to lower paid workers who have been retrenched through a new SkillsFuture Jobseeker Support scheme.

Further details of the policy announcements are set out below.

4 weeks' Paternity Leave Mandatory

At present, working fathers have a statutory entitlement to 2 weeks of Government Paid Paternity Leave (GPPL) provided they meet certain eligibility criteria. Since 1 January 2024, employers have been encouraged to grant an additional 2 weeks of GPPL on a voluntary basis to working fathers, which will be reimbursed by the government. However, this is not mandatory – employers are able to choose whether or not to offer the additional 2 weeks on a voluntary opt-in basis.

From 1 April 2025 onwards, the 2 weeks of voluntary GPPL will become mandatory. This means that eligible working fathers with Singapore citizen children born on or after 1 April 2025 will be entitled to a total of 4 weeks of GPPL. This will be paid by the government, up to the prevailing cap of SGD2,500 per week.

Employees must give a minimum notice of at least 4 weeks before consuming GPPL.

Increase to Shared Parental Leave

At present, a working father can apply to share up to 4 weeks of his wife’s 16 weeks' Government-Paid Maternity Leave (GPML) or 12 weeks' Government-Paid Adoption Leave (GPAL). The Government-Paid Shared Parental Leave (SPL) is subject to his wife’s agreement and provided the following eligibility criteria are met:

• his child is a Singapore citizen;
• his child's mother qualifies for GPML or GPAL and agrees to share her leave benefits with him; and
• he is/was lawfully married to the child's mother at the relevant dates.

The current SPL scheme will cease from 1 April 2025 onwards. A new SPL scheme will be implemented in 2 phases to provide additional paid parental leave to be shared between both parents:

• with effect from 1 April 2025, the statutory entitlement will be 6 weeks of SPL to be shared between both parents, and each parent will be entitled to 3 weeks by default; and
• with effect from 1 April 2026, the statutory entitlement will be 10 weeks of SPL to be shared between both parents, and each parent will be entitled to 5 weeks by default.

Employers should take note of the following additional requirements:

• The new SPL scheme will be in addition to GPML and GPPL.
• SPL should be consumed within the first 12 months of the child's birth.
• Employees must give a minimum notice of at least 4 weeks before consuming SPL.
• Parents have the flexibility of reallocating their share of the SPL to each other. Changes should be submitted via the LifeSG website or application within 4 weeks from the child's date of birth.
• Employers and employees are encouraged to mutually agree on leave plans, which should contain the following details:
• number of weeks of SPL to be taken;
• whether the SPL will be taken in 1 continuous block or in separate smaller blocks; and
• start and end dates of the SPL.
• If there is no mutual agreement, parents can take SPL in a continuous block (after GPML or GPPL) within the first 26 weeks of the child's birth.
• All SPL will be paid by the government, up to the prevailing cap of SGD2,500 per week.
• Employers can verify their employees' SPL sharing arrangement and submit leave reimbursement claims via the Government-Paid Leave Schemes portal.

Support for Retrenched Workers Through SkillsFuture Jobseeker Support scheme

A new SkillsFuture Jobseeker Support scheme will be implemented from 1 April 2025 to provide temporary financial support of up to SGD6,000 over 6 months to support involuntarily unemployed individuals. Involuntary reasons would include retrenchment, cessation of business, dismissals or termination due to illness, injury or accident.

To apply, employees must have earned an average monthly income of SGD5,000 or less (for the duration of their previous employment within the last 12 months), amongst other requirements. To qualify, employees must demonstrate that they have made an active job search to seek new employment and participated in related activities (such as attending career coaching and participating in eligible training courses). Further details on the application process will be made available closer to April 2025.

(3) Changes to Employment Pass salary criteria

The Ministry of Manpower has announced upcoming changes to salary criteria for Employment Pass (EP) applications. As the changes will impact both new applications and renewals, employers should consider carrying out an audit of the salaries currently being offered to existing EP holders to determine whether any steps need to be taken to ensure there will be no impact on renewal applications e.g. salary increments.

Increased EP minimum qualifying salary

The minimum qualifying monthly salary for an EP will be raised from the current salary threshold of SGD5,000 (for the non-financial services sector) and SGD5,500 (for the financial services sector) to SGD5,600 (non-financial services sector) and SGD6,200 (financial services sector) respectively for applicants aged 23 years old. The minimum qualifying monthly salary increases progressively with age, and will be raised from the current salary threshold of SGD10,500 (non-financial services sector) and SGD11,500 (financial services sector) to SGD10,700 (non-financial services sector) and SGD11,800 (financial services sector) respectively for applicants aged 45 years old and above.

The revised EP qualifying salary will take effect from 1 January 2025 for new EP applications, and from 1 January 2026 for EP renewal applications.

New salary benchmarks set for EP applications

The latest salary benchmarking table for the Complementary Assessment Framework (COMPASS) has been released by the Ministry of Manpower. COMPASS is a points-based system which is used for all EP applications. The updated table will apply to all new EP applications from 1 January 2025 and all renewals from 1 July 2025. However, any applications made until 31 December 2024, and renewals until 30 June 2025, will continue to use the current benchmarks table that was set in May 2023.

Under COMPASS, an EP applicant can obtain between 10-20 points depending on their salary level. However, if a salary does not meet the requirements set under COMPASS, then an applicant would have to earn points through under other criteria to either apply for an EP or renew an EP. It is the employer's responsibility to ensure that a foreign employee's salary meets the minimum salary requirements outlined in the COMPASS benchmarking table, which can be found here.

Updates to the salary benchmarking table take place annually, and consequently, employers should be aware of the changes as they come into effect.

(4) New Platform Workers Bill introduced

On 6 August 2024, the Platform Workers Bill (Bill) was introduced in the Singapore Parliament. The Bill aims to introduce rights and protections to platform workers in the form of financial security, representation and workplace safety. A second reading of the Bill can be expected in September 2024.

The Bill will apply to on-demand delivery and ride-hailing services and will create a third class of workers for businesses providing platform services. These platforms workers will be designated as a distinct category, separate from employees and the self-employed. Importantly, the rights and protections are conditional on the worker being under management control by a "platform service" (amongst other requirements), and this is narrowly defined as either a delivery service or a ride-hail service that is provided in Singapore via a digital or other platform. This is a welcome development as there has been some concern that the scope of the Bill may have been too broad and could in principle capture businesses and workers in other industries.

One of the key reforms in the Bill will introduce secure adequate retirement funds for platform workers through aligning their contributions to the CPF, Singapore’s national pension savings plan. Currently, platform workers, like other self-employed individuals, contribute up to 10.5% of their income to the CPF, with no obligation for platform service providers to contribute. However, if the Bill is passed, both platforms and their workers will need to contribute to the CPF at the same rate as other businesses.

Additionally, the Bill also makes provisions for work injury compensation, and strengthens the responsibilities of platform workers and operators to prevent injuries. This will require amendments to the Work Injury Compensation Act 2019 and the Workplace Safety and Health Act 2006.

Amendments to the Industrial Relations Act 1960 and the Trade Disputes Act 1941 are also proposed under the Bill to empower platform workers by permitting them to join representative bodies which act in a similar manner to trade unions. While platform workers will still not be permitted to form trade unions as they will not be recognised as employees, it should be noted that the National Trades Union Congress (NTUC) announced on 29 August 2024 that it will form new union-like bodies, Platform Work Associations, to enhance representation for platform workers if the Bill is passed. These new entities will be able to sign legally binding collective agreements with platform operators on behalf of workers.

If the Bill is passed, there will also be a formal process to resolve collective disputes, with the Ministry of Manpower being the first port of call for conciliation before the matter is brought before the Industrial Arbitration Court.

If passed, the Bill will likely result in higher operating and compliance costs for platforms operators due to the new statutory obligations imposed, and has been described as a significant step forward for platform workers. Platform operators should therefore make the necessary preparations if the Bill is passed in the Singapore Parliament.

It remains to be seen whether the Bill might pave the way for the expansion of the new third category of "worker" to other industries which are not delivery or ride-hailing services, or to capture other types of "consultants" and "independent contractors" in those industries. This has been a trend in other parts of the world including the United Kingdom and Mainland Europe, but the drafting of the Bill is relatively narrow in this respect and suggests Singapore will be slow to follow suit.

The full text of the Bill can be found here.

(5) Singapore case update: Singapore High Court upholds discretionary bonus clause to withhold bonus from a former employee

In the recent decision of BGC Partners (Singapore) Limited and GFI Group Pte Ltd v Sumit Grover [2024] SGHC 206, the General Division of the High Court of Singapore considered the issue of whether a former employee was entitled to any bonuses from the former employer. While the decision does not represent a change in the law, it serves as a timely reminder of the importance of having carefully drafted bonus clauses in the employment agreement which make crystal clear that a bonus is discretionary in nature and not a contractual entitlement.

Facts

The defendant, Mr Sumit Grover (Grover), was a former employee of the plaintiffs, consisting of BGC Partners Singapore Ltd and GIFT Group Pte Ltd (collectively, BGC). BGC had commenced proceedings against Grover after his employment was terminated to claim sums owed under a loan given by BGC to him. In response, Grover counterclaimed for damages for unlawful termination of his employment and unpaid bonuses.

In this case, the employment agreement contained a bonus clause, with the relevant parts set out below:

5. Bonuses
5.1 Individual bonus (1)
You will be eligible for an individual bonus which shall be calculated as follows
[The Payout Rate x Individual Net Revenue] LESS Expenses.
…
If awarded, the individual bonus will be paid six monthly, 90 days in arrears, that is in September each year for the bonus period 1 January to 30 June inclusive …
…
5.2 For the avoidance of doubt, the entitlement to the bonus will only arise, when and if a bonus is paid to you.

The High Court's decision

Grover's claims were all dismissed. In relation to the unpaid bonus, the Court held that Grover was not entitled to any bonuses from BGC. The bonuses were not guaranteed as of right, and BGC’s decision to withhold them was lawful.

Whether bonuses were guaranteed as of right

As a starting point, the High Court reiterated that whether an employee is entitled to bonus under an employment agreement turns on the construction of the bonus clause in question, and there is no absolute rule that all contractual bonuses are discretionary in nature. Even where the contract expressly states that bonus is “discretionary” or that the employer reserves an “absolute right” to declare bonuses, Singapore courts will look at all relevant circumstances to ascertain the parties’ true intention. This means that how the parties label the nature of a bonus is not definitive. The court will take a contextual approach in interpreting a bonus clause.

Based on a holistic reading of the bonus clause, the High Court found that the entitlement to bonus payment was discretionary for the following reasons:

• Clause 5.1 stated that Grover "will be eligible" for a bonus, not that he will be "entitle[d]" to it as stated in clause 5.2;
• Clause 5.1 stated that “If awarded, the individual bonus will be paid six monthly, 90 days in arrears”, specifying when the bonus payment would be made in the hypothetical event that the bonus is awarded; and
• Clause 5.2 expressly clarified that the “entitlement” to a bonus would only arise “when and if a bonus is paid”. The High Court opined that it could not be clearer that bonus payment was conditional and not as of right.

In its defence, Grover attempted to rely on extrinsic evidence in the form of pre-contractual negotiations to aid in contractual interpretation of the bonus clause. In particular, he highlighted that it was subjectively agreed that he would get a "guaranteed bonus". However, the High Court found this to be irrelevant, and affirmed the principles in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27 that "in interpreting a contract, extrinsic evidence is only employed to illuminate the contractual language and not as a pretext to contradict or vary it". Therefore, the High Court found that Grover and BCG's objective intention was for bonuses to be awarded on a discretionary basis.

Whether BGC's decision to withhold the bonuses was lawful

The High Court also reaffirmed that there is an implied duty to exercise contractual discretion reasonably. In the employment context, courts have held that the employer's discretion must not be exercised arbitrarily, capriciously or irrationally. However, courts will not intervene in the exercise of such discretion lightly, and judicial intervention would only be warranted if the exercise of contractual discretion is “so outrageous in its defiance of reason that it can be properly categorised as perverse”.

In this case, BGC pleaded several allegations of misconduct by Grover as reasons for withholding the bonuses. While evidence in support of some allegations were ruled to be inadmissible hearsay evidence, the High Court accepted two reasons that made it reasonable for BGC to withhold the bonuses:

• Unwillingness to share customer lines: Grover was unwilling to share customer lines within his team such that prices could be disseminated to all clients in a timely manner at the same time. From BGC's perspective, this behaviour would have been perceived as a potential jeopardy to equal client treatment, and a failure to demonstrate teamwork reasonably expected of him. The High Court opined that Grover's preferred way of working could not be aligned with BGC’s plans and strategies, and his behaviour was a legitimate concern for a brokerage firm like BGC.
• Unapproved absence: Grover was absent from work without valid reasons despite his employment agreement containing a clear contractual obligation regarding physical attendance. It was accepted that Grover did not tap in with his access card at BGC's physical office for at least 27 days over a period of approximately six months (until on or around the bonus payment date) without providing any legitimate reasons.

Therefore, the High Court held that Grover was not entitled to unpaid bonuses for the relevant period. In obiter, the High Court also noted that there was no contractual obligation for BGC to provide reasons for withholding discretionary bonuses to the ex-employee.

Practical takeaways

This decision highlights the importance of a carefully drafted bonus clause in the employment agreement. Employers should review their existing bonus clauses to ensure that such clauses accurately reflect parties' intention as regards whether the bonus clause is discretionary. While the High Court stated that there is no absolute rule that all contractual clauses are discretionary in nature, courts can also take a contextual approach to ascertain the objective intention of parties. Further, even where the intention was for the employer to award bonuses on a discretionary basis, there is an implied duty to exercise this discretion reasonably. While courts would not lightly interfere with the employer's discretion – employers should bear in mind the question of whether any reasonable employer would have exercised their discretion in the same way to avoid breaching their implied duty.

DLA Piper is restricted for regulatory reasons from practising local law in Singapore. This article is not intended to constitute the general dispensation of advice on Singapore law.