Understanding Salary and Payment in Lieu of Notice in Singapore

Introduction

The landscape of employment laws can often appear intricate and bewildering. An important facet of these laws is the concept of 'salary in lieu of notice' or 'payment in lieu of notice'. In the context of Singapore, let's take a comprehensive journey through this topic.

The Concept of Salary In Lieu of Notice

The Legal Basis in Singapore

Singapore's Employment Act provides legal coverage for the concept of payment in lieu of notice. If a termination of the employment contract happens without serving the agreed notice period, the initiating party (be it the employee or the employer) is legally obliged to pay the other party an amount equivalent to the salary for the notice period.

The Calculation Method

The calculation for this payment is quite simple. Assume that an employee's notice period is one month and their monthly salary is $4000. Then the payment in lieu of notice is exactly $4000.

Mandatory Termination Letter

In Singapore, it is obligatory to provide a written termination letter when ending an employment contract, whether you're the employer or the employee. If you're an employee who didn't receive a termination letter, it's imperative that you request one from your employer. Until you receive it, you are still considered an employee of the company.

Serving the Notice Period

Scenario with Notice Period in Contract

If your employment contract specifies a notice period, upon your resignation, you must either serve the notice period or pay compensation to your employer in lieu of notice. This notice period can be waived through mutual consent between the employer and the employee. The length of this period must be identical for both parties and should be as agreed upon in the employment contract.

Scenario without Notice Period in Contract

If your contract doesn't mention a notice period, the required notice period depends on your length of service. For instance, a tenure of less than 26 weeks requires a 1-day notice, while a period of 2 years to less than 5 years demands a 2-week notice.

Various Scenarios of Serving Notice

Let's imagine a few situations. Say an employee resigns today, giving 1 day's notice. Their last day of work will be today, including the day when they served notice.

Alternatively, an employee providing 1 month's notice on 15 July will have their last day of work on 14 August, as the notice period encompasses public holidays and weekends.

Furthermore, if an employee submits their resignation on 29 January, their last day of work will be 28 February. However, due to February having only 28 days, if an employee resigns on 30 or 31 January, or even 1 February, their last day of work will still be 28 February.

Potential Compensation Upon Termination

Legal Framework

Besides payment in lieu of notice, there are other forms of compensation that a terminated employee in Singapore may be eligible for. The conditions of their termination and the terms of their employment contract determine these.

Types of Compensation

Severance pay is an example of such compensation. This is the remuneration an employee receives when they are laid off or their job is made redundant. Unless the employment contract states it explicitly, severance pay is not mandatory according to Singaporean law.

If an employee feels they've been unfairly dismissed, they can seek recourse through Singapore's Tripartite Alliance for Dispute Management (TADM) and could potentially be awarded compensation.

Notice Period and Annual Leave

Offsetting Notice Period with Annual Leave

With your employer's agreement, you can use your annual leave to offset the notice period. This will bring your last day of work forward, and you will only be paid up until this day. The annual leave that has been used to offset the remaining notice period will not be compensated for by the employer.

Taking Annual Leave During Notice Period

On the other hand, if you take approved annual leave during your notice period, you will be paid for the full notice period. There will be no bringing forward of the last day of work, and you are considered an employee until the last day of the notice period.

Impact of Unpaid Leave and Reservist Training

If you apply for unpaid leave while serving notice, your employer can extend the notice period, but only with your agreement. This is subject to your employer's discretion. Similarly, any reservist training is not included as part of the notice period. For example, if you undertake a week of reservist training while serving notice, your notice period will be extended by a week.

How to Handle Payment in Lieu of Notice and Compensation

Knowing your rights and obligations as an employee or employer is crucial. Always seek legal advice when in doubt, and ensure all dealings comply with Singapore's laws and regulations.

Conclusion

Understanding the concept of salary in lieu of notice, payment in lieu of notice, and compensation upon termination of employment are key aspects of Singapore's employment landscape. This understanding can lead to a more equitable and respectful workplace environment.