SINGAPORE LAW AND PRACTICE Contributed by: Jeffrey Lim, Daniel Lim, Frederick Tay, Genevi Lim, Lakshmanan Anbarazan, Sarah Lai, Stephanie Goh and Tobias Andreas Satria, Joyce A. Tan & Partners LLC
10.2 Employee Compensation Save for retirement benefits and the requirement to contribute to the Central Provident Fund (a nation - al pension scheme), there are generally no restric - tions on the types of employee compensation. More often than not, the types of compensation offered to employees will depend on the tax implications that a company may wish to consider and also the role of the employee, which can determine the nature of the remuneration. However, if there is an intention to offer shares to employees under an employee share option plan (ESOP), it is important to conduct a review to ensure that the offer of such shares to employees under the ESOP does not trigger any requirement to make an offer of shares under the Securities and Futures Act 2001. Refer to 5.2 Securities Regulation for more information. In relation to retirement compensation, the Retirement and Re-employment Act 1993 of Singapore (RRA) mandates that when an employee is about to reach the prescribed minimum retirement age as set out in the RRA, the employer is encouraged to start discus - sions with the employee on possible re-employment as early as possible (but preferably not less than six months as recommended by the Tripartite Guidelines on Re-employment of Older Employees (TROE)) prior to re-employment or extension of re-employment. Currently, the prescribed minimum retirement age is 63 years old. Where, following discussions, the employer deter - mines that the employee’s work performance is at least satisfactory and that the employee is medical - ly fit to continue working (unless the employer can demonstrate otherwise), the employer is required to re-employ the employee up to the prescribed maxi - mum retirement age of 68 years old. If the employer is unable to employ the eligible employee because there is no vacancy suitable for the eligible employ - ee despite making reasonable attempts to do so in accordance with the TROE, the employer is required to offer an employment assistance payment to the eli - gible employee and the computation of such amount should consider the TROE. Currently, the TROE rec - ommends that for non-low-wage workers, the amount of employment assistance payment could be three
and a half months of the last drawn gross rate of pay of the employee. With respect to the contributions to the Central Provi - dent Fund, this is regulated under the Central Provi - dent Fund Act 1953 of Singapore (“CPF Act”). Under the CPF Act, both the employer and the employee (who is a citizen or a permanent resident of Singapore) will have to contribute to the Central Provident Fund and the amount of contributions by both employer and employee will vary based on the amount of sal - ary of the employee and the age of the employee. There is also a cap on the total amount of salary to be deducted for the purpose of contributing to the CPF. 10.3 Employment Protection Generally, in the event of an acquisition that involves the transfer of an undertaking or part of an undertak - ing, the Employment Act 1968 of Singapore (EA) man - dates that such transfer does not operate to terminate the employment contract of the employees who are part of the undertaking and such transfer does not break the period of continuity of the employment of such employees such that any statutory benefits and/ or contractual benefits that are calculated based on the period of services shall include the period of ser - vices rendered by the employees in the transferring entity. Further, all rights, powers, duties, and liabilities of the transferring entity shall be transferred statu - torily under the relevant provisions of the EA. Whilst the EA does not define what is meant by “transfer of undertaking”, the provisions of this EA usually apply where there is an amalgamation or during the sale of an entire business or parts thereof. If the employees to be transferred are unionised, as soon as reasonable and before the transfer, there must be consultations between the transferring entity and the affected employees as well as the union repre - senting the affected employees. If there is a collec - tive agreement in place between the transferring entity and the affected employees prior to the transfer taking place, the collective agreement shall continue in force between the entity to which the undertaking is trans - ferred and the trade union of the affected employees for a period of 18 months after the date of transfer or until the date of its expiry as specified in the collective agreement, whichever is later.
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