What Severance Pay Rules Must Employers Follow in Singapore?

Which Employees Qualify for Severance Pay?

• Employees retrenched due to redundancy, business reorganization, or downturn, rather than for misconduct or poor performance.
• Employees who are covered by the Employment Act and have at least 2 years of continuous service with your company.
• Employees on permanent or long-term contracts, including full-time and eligible part-time staff, where retrenchment is genuine.
• Employees whose contracts or collective agreements expressly provide for retrenchment or severance benefits.
• Employees who are not offered suitable alternative employment on comparable terms within your group.
• Employees in practice may also receive ex gratia severance where there is an established company or industry norm, even if not strictly contractual.

What Are the Legal Timelines for Paying Severance?

In Singapore, there is no single statutory deadline for paying retrenchment benefits, but you are expected to pay them promptly when employment ends. In practice, employers usually pay severance together with the final salary, unused annual leave encashment, and any other termination payments on or before the last working day or within a few days after. For larger retrenchment exercises, you should communicate the payment date clearly in writing to affected employees. MOM and tripartite guidelines expect timely payment as part of fair retrenchment practices, and delays can trigger employee complaints. Align your internal payroll cutoffs so that severance is processed in the same cycle as the final paycheck.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay agreed or contractually required retrenchment benefits, you risk breach-of-contract claims and regulatory scrutiny. While the Employment Act does not fix a statutory severance formula, MOM can intervene where employers ignore contractual obligations or tripartite guidelines, especially in larger retrenchments.

• Employees may file salary-related claims with TADM and escalate to the Employment Claims Tribunals.
• Courts or tribunals can order payment of outstanding severance plus contractual interest where applicable.
• MOM may issue directions, require corrective action, and take a dim view of repeat non-compliance.
• Public disclosure and union or media attention can damage your employer brand and hiring pipeline.
• Non-compliance with notification and fair retrenchment practices can affect future work pass and regulatory assessments.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Singapore retrenchment norms for employees based there. Legally, the EOR is the employer of record and is responsible for issuing notices, calculating final pay, and administering any contractual severance. However, your company, as the client, typically funds all termination and severance costs under the commercial agreement. You should ensure your EOR contract clearly allocates who decides on redundancies, how severance is calculated, and when it is paid. Regulators and employees will look at the substance of the arrangement, so both you and the EOR must align with the Employment Act and tripartite guidelines.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your team navigate Singapore retrenchment rules by standardizing how severance terms are documented, calculated, and approved. We map each worker to the correct legal framework, track length of service, and surface when tripartite guidelines or contractual clauses make severance appropriate. Your HR and finance teams get clear breakdowns of final pay, leave encashment, and any retrenchment benefits before you confirm a termination.

With Playroll as your global employment partner, you can also rely on local expertise when planning restructures or cross-border redundancies. Our platform and in-country specialists help you choose fair, market-aligned severance formulas, time payments correctly, and coordinate communications so you reduce the risk of disputes, complaints to MOM, or reputational fallout.