Best practices for lawful termination in Singapore

Employee terminations are a crucial part of business operations, requiring care and precision to avoid complications.

When done thoughtfully, terminations can protect the company’s reputation, maintain employee trust, and ensure legal compliance. However, if handled poorly, they may lead to disputes, disrupt morale, and create unnecessary legal risks. 

Achieving the right balance calls for a combination of clear communication, well-documented processes, and a focus on fairness.

Ian Lim, disputes partner at TSMP Law Corporation and head of the firm’s employment and labour team, emphasizes the importance of early legal consultation, transparent policies, and empathetic handling of sensitive cases to foster smoother transitions. 

Common causes of termination disputes 

Lim explains that while Singapore operates on an at-will employment basis, disputes arise when employees expect more from the process. 

“You can still let someone go with notice or payment in lieu of notice without mandatorily needing to state a reason,” he says.  However, problems arise when employees feel they were treated unfairly.

“They may still think it’s unfair and press for a reason,” Lim explains. “Offering a separation agreement with an ex-gratia payment in return for a release and discharge can help reduce dissatisfaction, especially with long-serving employees.” 

He adds that disputes often involve employees who feel mistreated.

“Sometimes, employees believe they’ve raised a grievance, but instead of it being properly looked into, they’re terminated. They see it as retaliation.” 

Mitigating legal risks during retrenchments 

Lim advises that employers offer compensation that reflects years of service to avoid disputes in cases of redundancy.

“The retrenchment guidelines in Singapore suggest two weeks’ to a month’s salary per year of service, but it also depends on industry norms and the company’s financial position. Offering sums towards the upper end of the range helps avoid issues.” 

He clarifies that retrenchment benefits and severance pay are different.

“Retrenchment benefits apply when a role is made redundant and not replaced. Severance is more common overseas, where payment is linked to years of service for any termination. In Singapore, there’s no requirement for severance, unless it’s a retrenchment – in which case there should be a retrenchment benefit.” 

Lim also highlights the importance of timing with foreign employees.

“If they lose their job, they’ll have to leave Singapore unless they can quickly find another one. Allowing them to serve their notice, even on garden leave, can give them time to find a new role.”

Handling performance-based terminations effectively 

Lim explains that performance dismissals often result in disputes when feedback is withheld until termination.

“A common issue is when employers avoid giving critical feedback. They rate the employee as meeting expectations and then suddenly fire them for poor performance. The employee feels blindsided, wondering, ‘What happened?’” 

He advises against using Performance Improvement Plans (PIPs) without a clear goal.

“If you put an employee on a PIP, carry through with it. If it works out, great. If it doesn't, you may terminate for poor performance. But if you’ve already decided from the outset not to keep the person, then don’t waste time with a PIP, which can drag on for three months or more and not change the outcome.” 

Consistent documentation is essential for these terminations, Lim says.

“If you’re citing poor performance, you need clear evidence. Otherwise, the employee may challenge the decision, saying, ‘For the last few years, I’ve consistently met expectations—what suddenly changed?’”

Managing sensitive terminations with care 

Lim stresses the importance of handling terminations in person whenever possible.

“It’s better to avoid terminating someone remotely unless absolutely necessary. If they’re on leave or overseas, wait until they return. I’ve seen cases where employees were terminated during a family holiday, and they were understandably upset.” 

He also recommends having two company representatives present during termination meetings.

“This helps in the event of disputes, as both representatives can serve as witnesses. Otherwise, it becomes a 'he said/she said' situation.” Even if part of the termination has to be conducted remotely, at least one company representative should be present, "as human interaction is still essential."

"Proper documentation is critical, but face-to-face conversations demonstrate professionalism and empathy,” Lim adds.

In unionized workplaces, Lim advises early engagement with unions to prevent disputes.

“Unions don’t appreciate being kept in the dark. If they find out too late or not at all, the case may hit the press, and government authorities could get involved.”

Leveraging documentation and technology

Lim highlights that documentation plays a crucial role in reducing legal risks.

“Make sure all your records are kept properly—especially when terminating for poor performance or misconduct. You need clear documentation of performance issues or misconduct, and [the latter] additionally requires a due inquiry.” 

While technology supports performance tracking, Lim cautions against relying solely on it.

“Employee monitoring can help build a case, but technology should support, not define, the process – and employee monitoring can create other issues as well, such as in respect of data protection and privacy.” 

Consulting legal counsel to prevent escalation 

Lim warns that companies often try to manage terminations without consulting legal experts, which can lead to costly mistakes.

“Some companies think they can handle it internally or rely on in-house lawyers without relevant employment expertise. But employment law is nuanced, it’s always on a case-to-case basis. When things go wrong, you can face a tribunal or court claim.” 

He advises seeking legal counsel early, especially for complex cases.

“Legal oversight helps prevent mistakes and ensures compliance. When disputes arise, it’s important to have well-documented evidence and processes in place.”

Ultimately, employers who communicate clearly, document thoroughly, and seek legal advice early are better equipped to mitigate risks, resolve disputes efficiently, and foster smoother transitions.

A well-executed termination process not only protects the company’s reputation but also preserves morale and lays the foundation for future trust—helping organizations maintain positive relationships with both departing employees and those who remain.