Recent changes to employment regime in Singapore

Tan Choon Leng, Vincent Tan and Prashaanth Rajandran on September 6, 2024

Introduction

There has been a suite of legislative changes to the Singapore employment landscape that were recently announced. These changes, together with the upcoming workplace discrimination law, mandatory flexible working arrangement guidelines and non-compete guidelines, are further evidence that Singapore is serious about improving the workplace environment and bringing its laws closer to global norms.

The recent changes can be surmised as follows: (1) a new shared parental leave scheme which allows eligible parents to enjoy an additional ten (10) weeks of paid leave when fully implemented; (2) a new SkillsFuture Jobseekers support scheme which grants eligible workers temporary financial assistance of up to S$6,000 over six (6) months; and (3) a new Platform Workers Bill was introduced in the Singapore parliament to provide enhanced rights and protections to platform workers, including representation through a union, financial protection and work safety.

(1) New shared parental leave scheme and mandatory four (4) weeks of paid paternity leave

At present, all working mothers are entitled to twelve (12) or sixteen (16) weeks of paid maternity leave, depending on several factors, including, but not limited to, whether the child is a Singaporean, and whether the mother has worked for an employer for at least three continuous months before the birth of the child, or if the mother is self-employed, whether she have been engaged for at least three continuous months and have lost income during the maternity leave period.

In his inaugural National Day Rally speech on 18 August 2024, the Prime Minister of Singapore Mr. Lawrence Wong announced that from 1 April 2025, eligible working fathers will be entitled to four (4) weeks of paid paternity leave which must be taken within twelve (12) months from the child’s date of birth. This is an increase from the existing two (2) weeks of mandatory paid paternity leave and two (2) weeks of discretionary paternity leave.

Significantly, Mr. Wong also announced that from 1 April 2025, eligible working parents will get an additional six (6) weeks of shared parental leave (“SPL“) which can be freely allocated between the spouses and used within twelve (12) months from the child’s date of birth. Employees are required to give a minimum of four (4) weeks’ notice to their employer before consuming any paid paternity, maternity or share parental leave. Employees are also encouraged to inform their employers as soon as possible when they are expecting a child, and mutually agree on leave plans with their employer. Details to be discussed and agreed on includes:

  • the number of weeks where the SPL is to be taken;
  • whether the leave taken is to be in continuous block or separate blocks; and
  • the start and end dates of the leave period(s).

(2) Support scheme for Jobseekers and Retrenched Workers

Historically, there has been little to no support for unemployed workers with the exception for low-income families that may apply for short to medium term assistance from social service agencies, and the one-off Job Support Scheme to safeguard livelihoods of local workers during the Covid-19 pandemic.

This new support scheme for jobseekers and retrenched workers was announced at the National Day Rally and represents a paradigm shift in the Singapore Government’s approach to unemployment. This scheme is aimed at supporting lower and middle-income individuals who are involuntarily unemployed and will provide them with interim financial support of up to $6,000 over six (6) months so that they can focus on upgrading their skills for a better long-term job. Eligible participants will receive S$1,500 in the first month and subsequently tapering down. Once the applicant successfully secures a new job during the six (6) months period, they will not be eligible for the subsequent monthly payouts.

This support scheme will receive applications starting in April 2025 and it comes with a list of qualifying criteria. For starters, applicants must be a Singapore citizen and aged 21 and above at the time of application (from April 2025) or a Singapore permanent resident and aged 21 and above at the time of application (from first quarter of 2026). The applicant must have earned an average monthly income of S$5,000 or less in the last twelve (12) months, reside in a property with annual value of S$25,000 or less, and became unemployed due to involuntary reasons such as retrenchment, cessation of business, dismissal or termination due to illness, injury or accident. In addition, applicants must show that they have been actively looking for employment through job applications and/or attending career workshops or trainings and have not received a job support payout in the past three (3) years.

There will be safeguards to prevent any abuse for this scheme and more details are expected to be available closer to April 2025.

(3) Upcoming enactment of the Platform Workers Bill

There have been increasing calls to strengthen protections for workers in the gig economy, especially with the surge in platform workers since the Covid-19 pandemic. An advisory committee was convened in September 2021 to look into the issue and the Singapore government accepted all 12 recommendations from the final report of the committee. Platform workers will be treated as a separate class of workers from employees and self-employed, and will include ride-hailing drivers, food delivery workers, on-demand delivery workers or any worker that relies on digital matching platforms that provide income to the worker.

The Platform Workers Bill was read for the first time in Singapore Parliament on 6 August 2024 and it seeks to provide protections and privileges for platform workers in the following areas, (a) platform operators will be expected to make contributions to the Central Provident Fund on behalf of the platform workers, (b) platform operators will be legally obligated to purchase work injury compensation insurance for platform workers which will allow them to make claims under the relevant workplace injury legislation, and (c) platform workers will have greater representation in the form of new union-like bodies to negotiate and advocate for better working conditions.

Conclusion

With the upcoming changes, it would be incumbent on companies to prepare, review and put in place appropriate measures and processes to comply with the legislative requirements and to handle the anticipated increase in employment inquiries at the workplace.

If you are concerned about how to prepare for the upcoming changes or would simply like to have a deeper conversation about the changes, please contact our Singapore-based colleagues Tan Choon Leng, Vincent Tan and Prashaanth Rajandran, working in the offices of JurisAsia LLC with whom Gowling WLG has an exclusive association.

Future of non-compete clauses in Singapore – through the lens of employers

Tan Choon Leng, Vincent Tan and Prashaanth Rajandran on August 2, 2024

Imagine the scene – a small but growing company, say Company A, secures a promising candidate (Employee Z) after several rounds of interviews. Employee Z steadily rises through the ranks to become a senior executive of Company A with access to important clients and even confidential information relating to its growth strategy. Employee Z eventually attracts the attention of a larger company, Company B who makes an enticing offer to lead the creation of a new business line which will offer the same products as Company A. Through the grapevine, the management of Company A finds out that Employee Z is about to join Company B and decided that they will try to stop Employee Z from joining Company B in order to protect its business and prevent the potential loss of clients and trade secrets to a competing firm. However, after consulting with several lawyers, they then realise to their dismay that the non-compete clauses in Employee Z’s contract were drafted in a vague manner and may not be enforceable.

A delicate balance – a need for legislative intervention?

The construct in the paragraph above is entirely fictional but many companies have faced similar situations when a key employee leaves the organisation. Companies have devised several ways to retain talent and protect their business interests, and a common method is using non-compete and non-solicitation clauses in employment contracts. Such restrictions could include the prohibition to join competing companies in the same industry, or a prohibition to entice their ex-colleagues or ex-clients to the new company, which may give the new company an unfair advantage.

However, non-compete clauses are also problematic as it may impede upon the ability of an individual such as Employee Z from making a living. If Employee Z is trained in a specialised field and is prevented from joining any competing company for a long period of time, the possible employment options would be narrowed significantly. Other criticisms of the implications of such clauses include disadvantaging retrenched employees who are looking for new jobs, suppressing innovation and keeping wages low.

Given the need to balance the protection of the business of companies against the protection of the livelihood of workers, some jurisdictions have introduced legislation to reform the use of non-compete clauses in employment contracts. For example, in the United States of America, the Federal Trade Commission has enacted a ban against all non-compete clauses for workers, though it must be noted that the legality of this ban is currently challenged in court. Whereas in the United Kingdom, the Government has announced that they will be introducing a new rule that limits non-compete clauses in employment contracts to a maximum of three months, aiming to boost competition and innovation. In Asia, countries such as Malaysia and India have legislated against the use of non-compete clauses, though non-solicitation and confidentiality clauses remain enforceable.

Singapore’s position on non-compete clauses and recent developments in case law

In Singapore, non-compete clauses can be enforceable in certain situations (see paragraphs below). The Singapore government has also announced that the Minister of Manpower (“MOM”) and its tripartite partners are developing guidelines to assist employers in integrating non-compete clauses into their employment contracts. In the meantime, the enforceability of these clauses remains subject to the courts’ discretion.

Singapore’s position on this debate, as mentioned by the MOM’s written answer to MP Mr. Desmond Choo’s question in Parliament on 5 February 2024 on non-compete clauses in employment contracts is neatly summarised as follows:

“The tripartite partners’ position is that employers should only include restraint of trade clauses (also known as non-compete clauses) in their employees’ employment contracts if there is a genuine need for such clauses to protect legitimate business interests. Restraint of trade clauses must be reasonable in terms of scope, geographical area, and duration – they must balance employers’ needs to safeguard their businesses and employees’ ability to earn a living and should not be used to provide an unfair advantage. The courts have established clear principles on when such clauses are unreasonable, unjustified, and unenforceable.”

The Singapore Court of Appeal in the case of Man Financial (S) Pte Ltd (formerly known as E D & F International (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR(R) 663 (“Man Financial”) sets out a two-step test for determining whether a restraint of trade clause (which includes a non-compete clause) is enforceable. The test comprises the following:

  • the court will first consider whether the restraint of trade clause protects a legitimate interest of the employer, AND
  • if the answer to (a) is yes, then the restraint of trade clause will be enforceable if it is reasonable in the interests of the parties, and reasonable in the public interest.

To satisfy the test as enumerated, both limbs must be satisfied. Further, where the protection of confidential information or trade secrets is already covered by another contractual clause (such as a confidentiality clause), the covenantee will have to demonstrate that the restraint of trade clause covers a legitimate proprietary interest over and above the protection of confidential information or trade secrets.

In two recent judgements released in 2024, namely Shopee Singapore Private Limited v Lim Teck Yong [2024] SGHC 29 (“Shopee”) and MoneySmart Singapore Pte Ltd v Artem Musienko [2024] SGHC 94 (“MoneySmart”), the Singapore courts found that the employer in each case had failed to show that there was a legitimate proprietary interest to be protected. In Shopee’s case, the court held that the confidential information was set out along generic categories and was already protected by a confidentiality clause. Also, the employer failed to prove its assertion that there was a risk that the ex-employee would breach the confidentiality and non-solicitation restrictions. Similarly, in MoneySmart, the employer failed to prove that the non-compete clause was meant to protect a legitimate proprietary interest that is over and above the protections afforded by the confidentiality clause. The court also rejected the employer’s assertion that the industry is a small and specialised one and that the employee had received training in this specialised field which would bring this case within the legitimate proprietary interest of maintaining a stable and trained workforce, as espoused by the court in PH Hydraulics & Engineering Pte Ltd v Intrepid Offshore Construction Pte Ltd and another [2012] 4 SLR 36.

Relevance of restraint of trade clauses after Shopee and MoneySmart

From an employer’s perspective, it may be slightly disconcerting to read the facts and outcome of the case in Shopee and MoneySmart. From a simple overview of the facts, both employees in those cases were senior executives, had access to confidential information belonging to the employers, and are joining direct competitors to their former employers, and yet the courts declined to recognise that there was a legitimate proprietary interest of the employer to be protected. If the business interests of the company cannot be protected through non-compete clauses, does it mean that employers are powerless to prevent competition from swooping in to gain an advantage by enticing its staff?

However, the devil is always in the detail, and it should be noted that the courts in Shopee and MoneySmart declined to recognise a legitimate proprietary interest in relation to the non-compete restrictions only. In relation to the non-solicitation restrictions, the court in Shopee commented that it was not disputed that the employer has a legitimate proprietary interest, but there was no evidence that the non-solicitation restrictions were breached or that there was a risk of breach.

As shown in Shopee and MoneySmart, it is insufficient for an employer to make a general assertion that the ex-employee has access to trade secrets and confidential information and if there is also a confidentiality clause in the employment contract that protects the trade secrets and confidential information, the employer will also need to demonstrate that the clause covers a legitimate proprietary interest that is over and above the protection provided by a confidentiality clause.

In practice, we observed that non-compete clauses are often inserted into employment contracts as a default, and it is not unusual that only the time period of restrictions and the applicable jurisdictions are adjusted each time a new employee is onboarded. In the case of an employer who experiences a large volume of employee turnover, it would be impractical for the internal human resources or the legal team to revisit and tailor the template clauses to suit the individual circumstances for each new employee. A further difficulty is that unless the non-compete clauses are regularly updated to account for a change in job scope and responsibilities, there may be a risk that what was previously drafted may not be deemed reasonable later. In the absence of clearly defined proprietary interests in the employment contracts, the question is whether non-compete clauses are still relevant in employment contracts.

Takeaways

While non-compete clauses still have a deterrent effect on employees, it may be less relevant as a tool to prevent potential breaches. However, it may be advisable for employers to wait for the MOM guidelines which are expected in the latter part of 2024 before making changes to their template contracts. In the meantime, employers should ensure that detailed and contemporaneous employment records should be maintained, and confidential information and documents should be clearly marked. There are other mechanisms which may be helpful to protect the company and give the company some time to adjust in case their employees leave the company, such as garden leave and conducting exit interviews.

For the termination of a senior executive, it may also be prudent to enter into a separation agreement to restate and remind them of their confidentiality and non-solicitation obligations.

If you are considering a change to your template employment contracts or facing a potential issue with the enforcement of a non-compete clause, or would like to have a chat to find out more, please contact our Singapore-based colleagues Tan Choon Leng, Vincent Tan and Prashaanth Rajandran.

A guide to the upcoming flexible work arrangements in Singapore

Vincent Tan and Prashaanth Rajandran on June 11, 2024

Flexible working arrangements in Singapore: Are you ready for the new mandatory guidelines?

The global trend in supporting flexible working arrangements remains strong in a post-COVID-19 world, as regulators and employers address challenges in the form of workforce transformation and advances in digital technology. Increasingly, employers are realising key benefits from allowing this greater flexibility; such as cost-savings due to the need for less office space and gaining access to a wider talent pool, which is important in a tight labour market. These positive impacts are seeing employers be more receptive to giving their employees flexibility in choosing where and when to work.

Singapore’s Ministry of Manpower announced in April 2024 the implementation of the Tripartite Guidelines on Flexible Work Arrangement Requests (the Guidelines), which will be effective from 1 December 2024. The Guidelines set out how employees should make a formal request for flexible work arrangements (FWAs), how employers and supervisors should handle those requests, and the minimum requirements employers must abide by to remain compliant with the mandatory Guidelines. 

What is a flexible working arrangement?

FWAs are work arrangements where employers and employees both agree to a variation from the standard work arrangement. The Guidelines set out the following three broad categories of FWAs:

  • Flexi-Place – where employees work flexibly from locations outside of the office.
  • Flexi-Time – where employees work flexibly at different timings, with no changes to total work hours and workload.
  • Flexi-Load – where employees work flexibly with different workloads and with commensurate remuneration.

How to request flexible working arrangements – key steps

  • The employee submits a formal FWA request – at a minimum, the formal FWA request must state, in writing, each of the following four requirements:
    • the date of the request;
    • the FWA requested (including its expected frequency and duration);
    • the reason for the request; and
    • the requested start and end date (if relevant).

    If the employer has instituted a process for employees to make a FWA request (for example, through a HR or company portal), the employee must follow that process in order for their request to be classified as a formal FWA request.

  • The employer should properly consider the FWA based on business needs (set out below).
  • The employer should communicate its decision within a timely manner in writing; at most, within two months. Any clarifications and discussions concerning the request should also be made within the two months.
  • If the FWA request is rejected, the employer should include the reason for doing so in writing and is encouraged to engage the employee on other alternatives.

    The employer may refer to Annex B of the Guidelines for how a formal FWA request could be responded to.

Scope:

The Guidelines only extend to:

  • Employees who have completed probation. However, employers can consider FWA requests from employees on probation.
  • Employees who have made a formal FWA request. Hence, if the employee does not satisfy the requirements for a FWA, it will be considered a non-formal FWA request and will not be covered by the Guidelines.

Factors for employers to consider:

When considering FWA requests, employers should consider factors pertinent to the employee’s role and the potential impact of the requested FWA on both the business and the employee’s job performance. Rejection of FWA requests should be grounded solely on reasonable business considerations, such as cost implications, productivity or output concerns, or practical feasibility, rather than personal biases against flexible working practices. Decisions that are influenced by a preference for traditional working arrangements, or a reluctance to depart from established customs, would be considered unreasonable grounds for rejecting a FWA request. 

How to prepare for the implementation of flexible working arrangements in Singapore?

  • Employers should start to devise a process for eligible employees to submit formal FWA requests and inform their workforce of the same.
  • Employers may consider implementing a formal policy for FWAs to streamline FWA requests or enquiries, detailing:
    • the types of FWAs available;
    • the guidelines for stakeholders (i.e. senior management, employees, supervisors and human resources) to consider in ensuring the successful implementation of FWAs; and
    • a code of conduct or expectation for the effective implementation of FWAs.
    • As far as reasonably practical, employers should explore ways to accommodate FWA requests, such as reviewing work processes or re-assigning work across team members, so that the company remains productive.

Are you ready for the new flexible working arrangements?

In introducing the new flexible working arrangements, the Singapore Government has purposefully chosen the route of mandatory guidelines, rather than enforcing the arrangements through legislation. Ms Gan Siow Huang, the co-chair of the tripartite workgroup, who made the recommendations to the Government and also the Minister of State for Manpower, said that a decision was made to introduce mandatory guidelines instead of legislation because of the need to be “administratively light”. She reiterates that the focus is on enabling and equipping workplaces, employers and employees, so that flexible working arrangements can be implemented in a sustainable way.

While the Guidelines are not law, and employers are permitted to reject (with reasons) FWA requests, employers who do not follow the Guidelines may be issued with a warning by the Ministry of Manpower and errant employers required to attend corrective workshops.

If you are wondering how to effectively implement the FWAs for your workplace or would like to have a chat to find out more, please contact our Singapore-based colleagues Vincent Tan and Prashaanth Rajandran, working in the offices of JurisAsia LLC with whom Gowling WLG has an exclusive association. We acknowledge, with thanks, the contributions of Ashley Tok, practice trainee to this article.

Practical challenges in implementing a successful equity incentive plan in Singapore

Vincent Tan on August 30, 2022

There are cogent reasons why organisations should establish an equity incentive plan or scheme to achieve its aims of attracting, retaining and rewarding its employees and contractors. In theory, it is an effective method to align the objectives of employees with those of the organisation, and has an added benefit of being a cost efficient way to augment the remuneration packages of senior employees and new hires. However, less discussed are the practical difficulties to establish a successful equity incentive plan, and in this article, we will discuss some of the common issues that a Singapore-based company may encounter.

Difficulties in administering the incentive plan

For large multinational conglomerates or publicly-listed companies, a remuneration committee of directors or senior management usually oversees the remuneration schemes, including equity incentive plans, of the organisation. Such committees often comprises seasoned professionals who are familiar with equity reward schemes, and comfortable in making decisions relating to such schemes. However, smaller private companies which are running on a much leaner scale may not have sufficient manpower to monitor and operate an equity incentive scheme effectively, and may also suffer from a lack of expertise at the management level. This will likely culminate in poorer decisions being made and a poorer outcome for all stakeholders of the scheme.

In addition, it is common for well-funded companies to engage external professionals or hire an experienced scheme administrator to perform administrative tasks including preparing corporate documents, making filings with government authorities, or keeping track of awards granted under the incentive plans. On the other hand, private companies that do not enjoy the same level of resources may instead rely on inexperienced staff who have to juggle the additional responsibilities that come with the administration of the incentive schemes with their day to day work responsibilities. For an incentive scheme to succeed in achieving its objectives, it is vitally important that the incentive rules are properly administered and followed, so as to retain the trust and confidence of the recipients of the awards.

Complex plan rules

For private companies in Singapore, there are little specific regulations or restrictions on the terms of the incentive plan rules, save for certain provisions relating to the issuance or buy back of shares. Given the regulatory flexibility, companies may decide to include innovative provisions or provisions that were lifted from incentive plans used in other jurisdictions which were only included to satisfy the regulatory requirements of that jurisdiction.

Unfortunately, if such terms are not well drafted or tailored to comply with Singapore law, it may cause confusion in interpretation and could negatively impact upon the motivation of employees and / or contractors.

Imbalance of power for plan managers

It is also common for companies to reserve certain powers or discretion to the incentive plan managers so as to allow the company to have the flexibility to make amendments to the incentive plan rules where there are changes in the circumstances of the company. However, it is a delicate balancing act to ensure that the company retain sufficient power to make reasonable amendments where warranted, while keeping in mind that recipients of the awards may feel alienated if their award grants or performance targets are regularly subject to change, no matter how reasonable the changes are. Since the scheme is usually overseen by the senior management of the company, recipients of awards granted under such incentive plans may, with good reason, have reservations on whether their plan managers would favour the interests of the company before the award holders. Given the growing demands on employers to act ethically and responsibly, plan managers will need to take care to ensure that any decision in relation to the equity incentive plans is taken with the interests of employees at its core. It is also inappropriate for plan managers to abuse their power and “punish” award holders by withholding or cancelling awards without justification.

Failure to consider applicable regulations in other jurisdictions

One of the emerging trends from the global pandemic is that organisations have an increasingly geographically diverse and mobile workforce, especially organisations in the new, technology-enabled industries. It is now possible for such workers to be physically located outside of the jurisdiction of their employer and this presents a formidable challenge to the scheme designers since they will then need to consider the laws of other jurisdictions. Prior to implementation, it is important that the scheme designers have a clear understanding of where the potential recipients of awards would be located so that they can take into consideration the relevant regulatory or tax impact that would be applicable to such awards. In certain circumstances, it may also necessitate a change in the underlying structure of the scheme. For example, if potential recipients are based in China, which has a strict foreign exchange controls regime, granting options for shares in a foreign company may not be feasible for such recipients.

Furthermore, while companies may feel that income tax issues are personal to the employee and do not concern the employer, it is not unusual that many of such compliance requirements actually apply to employers as well. Taking Singapore as an example, employers are required to prepare tax filings for employee earnings and may be required to withhold monies for tax clearance purposes. Companies should ensure that all applicable compliance requirements in respect of the incentive schemes are met.

Key takeaways for businesses

There are a myriad of challenges to implement an equity incentive plan but once the plan is implemented successfully, the rewards can be significant. Many challenges can be overcome by having an experienced team, and by consulting the subject matter experts who are able to anticipate potential issues and provide practical solutions. Regardless of the size of your organisation, it is also possible to encounter unforeseen problems such as the ones highlighted in this article.

If you are encountering any issues with the structuring and implementation of an equity incentive plan, or would like to have a chat to find out more, please contact our Singapore-based colleague Vincent Tan, working in the offices of JurisAsia LLC with whom Gowling WLG has an exclusive association.